Downsizer Super Contributions

If you’re aged 55 or older and thinking about selling your home, or are currently doing so, the downsizer contribution could be a valuable tool to enhance your retirement savings. Here’s what you need to know and how it works.

What is a Downsizer Contribution?

A downsizer contribution allows you to contribute up to $300,000 from the sale of your home into your superannuation, even if you’ve already retired. This is a one-time option that lets you turn home equity into retirement savings.

Does it mean I have to downsize my home?

No. There is no rule that says you must move into a smaller or cheaper home or even buy another home to make a downsizer contribution.

You and your spouse can each contribute up to $300,000, capped at the amount you receive from the sale.
It’s not subject to the standard 15% contribution tax (for most eligible super accounts).
You do not have to buy a “smaller” home or immediately move. The rules only require that you sell your home and meet the eligibility conditions.

Are You Eligible for the Downsizer Contribution?

To qualify, you must satisfy the following criteria:

You must be aged 55 or older on the day you make the contribution.
The home you’re selling must be in Australia, and it must have been your main residence (and CGT-exempt or partially exempt).
You (or you and your spouse) must have owned the home for 10 years or more before the sale.
You must make the contribution within 90 days of receiving the proceeds from the sale.
You cannot have previously made a downsizer contribution.
If you’re not on the title, your spouse’s ownership can still make you eligible (assuming all other criteria are met).

How the Downsizer Contribution Works

Scenario:

Janet (age 62) and her husband Peter (age 67) sell their long-time home for $1,650,000.
Both meet the ownership and residence criteria as they’ve lived there for 15 years.
They decide to maximise the contribution. Janet contributes $300,000 into her super. Peter contributes the remaining $300,000.
Their fund accepts downsizer contributions, and they submit the required form to their super fund.

Outcome:

They have successfully transferred $600,000 into super, tax-effectively, above what they could normally contribute via concessional or non-concessional caps. This boosts their retirement income potential.
Because they sold the home and meet the 10-year ownership rule, they are eligible.
They must remember the assets and income tests for any Age Pension or government benefits may still apply as a result of selling the home.

Key Benefits of the Downsizer Contribution

Maximises retirement savings and boost your super. Can be especially useful for those who haven’t had the capacity to make large voluntary contributions in the past.
Flexible availability. It’s open to people who have already retired, as long as they meet the age and ownership tests.
Above-cap possibilities. Because it’s separate from the usual contribution caps, it offers a unique opportunity to increase super without hitting the standard limits.

Things to Consider Before You Proceed

Selling your home and contributing the proceeds will have implications for your Age Pension eligibility, due to the assets and income tests.
Your super fund must accept downsizer contributions so check first.
You must complete and submit the correct form to your super fund and meet the 90-day timeframe.
Even though the contribution is tax-advantaged, investment returns earned inside the super will still be subject to regular super tax rules.

If you’re aged 55 or older, own your home, and are considering selling or have already sold it, the downsizer contribution could be a tool to enhance your retirement savings. With careful planning and professional advice, you can turn home equity into additional super balance that supports a more comfortable financial future.

To explore if the downsizer contribution is right for you contact our accountants at Cashflow Financial today. Our team can help you check eligibility, assess impact on pension benefits, and optimise your overall retirement strategy.