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Downsizer contributions

Many Australians downsize their home when they retire, or in the lead up to retiring, motivated by a lower maintenance lifestyle or to make a sea or tree change. There are pros and cons to weigh up but if you do decide to make the move, you may be able to take advantage of the Federal Government's downsizer contribution.

How the contribution works

If you’re 65 years or older, and meet the eligibility requirements, you may be able to make a downsizer contribution of up to $300,000 to your super from the proceeds of your home.

You can make the downsizer contribution whether you’re still working or already retired, as long as you meet the below criteria.

Each owner can contribute up to $300,000 (so a total of $600,000 for couples) but the total can’t exceed the proceeds of the sale. You also have the option of splitting the amount between your accounts.

Example 1

A couple sell their home for $800,000.

  • Each partner can add up to $300,000 to their super, to a total of $600,000.
  • The remaining $200,000 cannot be contributed through the downsizer measure.

Example 2

A couple sell their home for $400,000.

  • They can contribute a maximum of $300,000 each, and can’t exceed $400,000.
  • They can choose to contribute $200,000 each, or split it, for example $300,000 to one account and $100,000 to the other.

Source: ATO.

Important considerations

The downsizer contribution does not count towards your annual super contribution cap, and you can still make the contribution if you have a super balance greater than $1.7 million. However, the contribution does count towards the $1.7 million transfer cap when you move your super into a pension account.

If you are already retired, you must open a new super account to deposit the contribution into. If you want to add this amount to your existing pension (and this doesn't take you above the $1.6m transfer cap), you will need to reinvest your pension.

The downsizer contribution is not tax deductible and it will be taken into account for the Age Pension asset and income tests.

For full details and considerations, please visit the ATO’s Downsizing contributions page.

Are you eligible?

You will be eligible to make a downsizer contribution if you can answer yes to all of the following:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
  • your home is in Australia and is not a caravan, houseboat or other mobile home
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset
  • you have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

Note: If your home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.

How to make a downsizer contribution

You will need to complete the ATO’s downsizer contribution form and provide it to your super fund when – or prior to – making the contribution.

You can split the contribution across multiple super funds but must provide a form to each fund.

You must make your downsizer contribution within 90 days of receiving the proceeds of the sale.

We're here to help

The downsizer contribution could be a great way to boost to your retirement savings but there are a lot of factors to consider.

Before you decide to make a downsizing contribution to you super, you should make sure you fully understand any potential impacts on your super or pension account(s), retirement income and Age Pension.

Depending on your circumstances, you may want to deposit full, partial, or no proceeds from the sale of your home into your super. There may also be advantages to splitting the amount between your account and your partner’s (if applicable).