How to model downsizing contributions to superannuation (a workaround)

Make sure the individuals are eligible to use the scheme.

Go to the the Australian Tax Office website www.ato.gov.au and search for 'Downsizing contributions'.

Decide which super fund should receive the funds

This workaround only works if the contributions are made to a retail or industry super fund. If the contributions will be made to an SMSF, please submit the case to the Optimo Financial SDS, where we will be able to control in whose name the contribution is made.

Set-up and run a scenario without the downsizing contributions

1. Set up your scenario, including the home sale and the new home purchase or rental expense (for more, see Family home)

2. Solve the scenario and check the results

3. Later, you can compare these results with the scenario that uses the downsizer scheme to quantify its benefit

Work out how much to contribute

The results of the scenario without the downsizing scheme should help you calculate how much is available to contribute after the home sale.

You may want to do a contribution for more than one individual.

Also remember that there are rules about how much each individual can contribute, which you will need to make sure you keep in (check the Australian Tax Office website).

Copy the scenario so you can add the downsizer contributions to it.

Once you are happy with the results, copy the scenario, so you can add the downsizer scheme (for more see How to make another scenario for comparison)

Add the downsizer contributions to the new scenario.

1. Go to the Cash flows sub-step (under the Cash flows & Goals step on the top menu)

2. Under Income enter an amount with the following details (this is the fund receiving the contribution):

   1. Type: Non taxable

   2. Name: Downsizing contribution

   3. Owner: Super fund which will receive the contribution

   4. Amount: amount calculated in the previous step

   5. Frequency: One off

   6. Start year: Year the home is sold

   7. Customise: Set the 'Index by' field to 'None'

   8. For more details about entering income, see Income.

3. Under Expense, add an expense with the following details (this is the contribution being made):

   1. Type: Other

   2. Name: Downsizer payment

   3. Owner: Individual who is making the contribution

   4. Amount: amount calculated in the previous step

   5. Frequency: One off

   6. Start year: year the home is sold

   7. Customise: Set the 'Index by' field to 'None'

   8. For more details about entering expenses, see Expense.

Check the results

1. At the Cash flows & action items  sub-step (under the  Results  step on the top menu):

   1. In the cash flows report, you will see the 'Downsizer payment' listed as an expense in the 'Expenditure' section

   2. Note that this scheme will not be reported in the automated action items. However you could add one (an example is in the next step on this page)

2. At the Detailed reports sub-menu (on the Results step on the top menu), you can see the contribution to the super fund. Note that the contribution will go to the accumulation phase (and Pathfinder will roll it over to the pension phase if required). To check this:

   1. On the left menu, select the individual, then their super fund, then their super fund name, then 'Transaction account (detailed)'

   2. In the 'Transaction account (detailed)' report, make sure you can see the year the contribution is made

   3. The contribution will be listed in the 'Revenue' section

3. To check what happens to the contribution, check the 'cash flows and action items'. The contribution may:

   1. 1. Stay in accumulation phase

      2. Be rolled over to the pension

      3. Be withdrawn as a lump sum withdrawal (if the contribution amount is withdrawn in the same year, then consider whether the scheme is beneficial.

   You can also compare this scenario with the first scenario to measure the benefit (or otherwise) of using the scheme.

Examples of action items to add

Note that as this is a workaround, the use of the downsizer scheme will not be listed in the action items or have special charts or detailed reports.

An example of an action item you could add is as follows:

1. John, once you sell your home, use the proceeds to contribute $200,000 to your super fund, 'ABC Super'. You can do this because you are eligible to use the Downsizer scheme, which lets you contribute a maximum of $300,000*. Note that, in addition to being over 65*, you must meet other eligibility requirements to use this scheme.

Instructions

• Put the action item in the year the contribution occurs

• If each member of a couple is making the contribution, you can repeat the action item for each person

• In the example action item, underlined items should be updated with the correct values for your case.

• Values marked with * are correct for the 2019/20 financial year, however, you should check these values against the latest legislation.