with a release authority to the extent they are able to do so. That is, they are only required to release the lesser of the amount stated in the release authority and the ‘maximum available release amount’ (being the total amount that can be paid out of the superannuation interest identified in the release authority). Superannuation providers must also notify the Commissioner of a payment made in accordance with the release authority, or that they have chosen not to comply (where permitted). In addition to the amendments that introduced Division 131, separate amendments to Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994 (SISR 1994) were made by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulations 2017. These amendments apply from 1 July 2018 and will replace the existing condition of release at item 111A of Schedule 1 to the SISR 1994 with a more general reference to release authorities issued under Division 131. These changes authorise a superannuation provider to pay the amount stated in the release authority out of the superannuation system. Tax treatment of amounts released under a release authority The general tax treatment of superannuation benefits (which include lump sums paid out of superannuation) is provided by Division 301 of the ITAA 1997. Ordinarily, the tax treatment of a superannuation benefit is determined by the status of the recipient and the ‘components’ of the benefit. Despite this general approach, superannuation benefits are nonassessable non-exempt (NANE) if they are paid in response to a release authority issued in relation to an excess concessional contribution determination, excess nonconcessional contribution determination, or a release entitlement in respect of Division 293 tax (see sections 303-15 to 303-20 of the ITAA 1997). From 1 July 2018, the rules that provide this NANE treatment will simply refer to release authorities issued under Division 131. The proportioning rule in section 307-125 of the ITAA 1997 does not apply to a payment that is required or permitted under Division 131. For releases in relation to excess concessional contributions determinations, the benefit of the deduction that was initially claimed by the entity that made the contribution is already unwound by including the amount of the excess in the individual’s assessable income. As this occurs irrespective of whether the excess contributions are released, no additional tax applies to release amounts.
make a downsizer contribution, provided that the dwelling is not a houseboat, caravan or other mobile home. [Schedule 2, item 4, paragraph 292102(1)(b) and (f)] For the purposes of the downsizer contribution rules, the definitions of ‘ownership interest’ and ‘dwelling’ that are contained in sections 118-115 and 118130 apply. However, as this definition includes houseboats, caravans and other mobile homes, those types of dwellings are specifically excluded. Restricting the downsizer contribution rules in this way is appropriate because the policy intent is to free up larger houses or units for younger, growing families. Because the contributions must relate to the proceeds of the disposal of an ownership interest, the amount of the contribution cannot be more than the proceeds that were received from the disposal, up to a limit of $300,000 (these limits are explained separately below). In addition, downsizer contributions can be made in respect of an individual if they or their spouse held an ownership interest in the dwelling, whether that ownership interest was held solely, jointly or as tenants in common. [Schedule 2, item 4, paragraphs 292-102(1)(c) and (i)] The 10 year ownership test An individual or their spouse must have owned the dwelling for 10 or more years just prior to disposing of it. [Schedule 2, item 4, paragraphs 292102(1)(c) and (e)] The period of the 10 year ownership test is calculated from the day ownership of the dwelling commenced to the day it ceased. This ownership period would usually be from the settlement date of the original contract to purchase the dwelling to the settlement date of the later contract. As a general rule, individuals must have disposed of their ownership interest in a dwelling in order to make a downsizer contribution. The only exception to this is where only one spouse holds an ownership interest in the dwelling but the other spouse does not. In these circumstances it is sufficient that one spouse held the ownership interest, as long as the spouse who doesn’t hold an ownership interest continues to meet the other requirements for the contribution to be a downsizer contribution. In certain cases, there may have been a change in ownership between two spouses over the 10 year period that preceded the sale of dwelling. Provided that either of the spouses held an ownership interest in the dwelling at all times during the period, downsizer contributions can be