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Home / Super booster / Super contributions / Downsizer super contributions: Rules and eligibility

Downsizer super contributions: Rules and eligibility

Key points about downsizer contributions:

  • Current limit: Maximum contribution of $300,000 per person (couples can each contribute $300,000 from the same sale). Total contribution from one property must not exceed sale proceeds.
  • Tax treatment: No contribution tax and can’t be claimed as a tax deduction.
  • Eligibility: 55+ and sold a property owned for 10+ years, receiving sale proceeds that are fully or partially exempt from CGT using the main residence exemption. No upper age limit applies.
  • How it works: A once-only, non-concessional contribution to super that doesn’t count towards the contribution cap.
  • Important deadline: Contributions must be added within 90 days after receiving sale proceeds.

Owning your own home is part of the Aussie dream, but it’s also a key part of any good retirement plan. With Australia facing a housing shortage and rising rents, having a place to call your own can make the difference between a happy retirement and one that’s much tougher and more insecure.

Your current home or a property you’ve previously used as your primary residence can also play an important role in helping to boost your income in retirement.

Selling an eligible property could be a great way to release some of the equity you have built over the years to give your super a big last-minute boost.

The government’s willing to give you a hand as well, by offering some attractive incentives. It sees helping older people to ‘right size’ their home for retirement as one way to free up larger homes for young families looking to enter the housing market.

Learn more about your home and retirement planning.

What are downsizer contributions?

Watch our video guide below, or continue reading for in-depth detail on how downsizer contributions work.

SuperGuide members have access to an extended version of this video with additional case studies and examples.

Learn more about becoming a member.

When you sell an eligible property and meet the age requirements, you have the opportunity to make a downsizer contribution.

Despite the name, you don’t need to be moving to a smaller place. You could be purchasing a larger property or choose not to buy at all. The property you’re selling may not even be your current home, but somewhere you lived in the past.

To make a downsizer contribution you must be aged 55 or more on the day of the contribution. There is no upper age limit. Normally, once you reach age 75 the super rules prevent you from making voluntary contributions, so a downsizer contribution presents a rare opportunity to top up your super.

Learn about making contributions after turning 60.

There is no requirement for you to be working (or to have ever participated in paid employment) to make a downsizer contribution. However, you can’t claim a tax deduction for a downsizer contribution.

Learn about tax-deductible super contributions.

Downsizer webinar

Learn about downsizer super contributions in detail in our webinar, including how the eligibility rules work, plus timing, Centrelink and strategy considerations.

View webinar

Super tip

The costs involved in selling property can be substantial. Sales commissions, moving costs and high stamp duty and land taxes if you purchase another home all mount up, so think carefully before deciding to sell.

Remember, selling a large home and downsizing to a smaller property may not always release much excess capital (particularly in a capital city), so do some careful calculations on how much you will have left to contribute to super before deciding.

What are the contribution limits?

Under the downsizer rules, you are allowed to contribute up to $300,000 ($600,000 for a couple) from the sale proceeds of your eligible property.

The contribution limit is the lesser of this amount and the gross sale proceeds. For example, if couple sell their property for $500,000, their combined maximum downsizer contribution is $500,000 (not $600,000). Giving a property away won’t allow you to make a downsizer contribution because the sale proceeds are zero.

Any debt or remaining mortgage on the property does not impact the amount you are permitted to contribute into your super account.

To sweeten the deal, eligible downsizer contributions are exempt from many of the normal contribution caps and rules limiting what you can put into your super account. Contributions made using the downsizing rules do not count towards either your annual concessional (before-tax) or non-concessional (after-tax) contributions cap.

Downsizer contributions can be made in addition to any concessional and non-concessional super contributions you make, without needing to worry about exceeding your annual cap amounts.

Learn about exceeding your contributions caps.

Need to know

Downsizer contributions are not subject to 15% contributions tax when they enter your super account.

Is my property eligible?

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Responses

  1. Adam O'Neil Avatar
    Adam O’Neil

    This does not answer the most crucial question.
    Once a superfund is in pension mode you cannot make any more contributions,
    Is the downsizer contribution exempt from this rule, or do you have to be in accumulation mode to make a downsizer contribution

    1. Kate Crawford Avatar
      Kate Crawford

      Hi Adam,
      Thanks for your question.
      Downsizer contributions must be made to an accumulation account. If all your super is in a pension account (retirement phase) you can open a new accumulation account to make a contribution to.

  2. Lindsay Sherriff Avatar
    Lindsay Sherriff

    Why is it not $300k per person total on any number of sales. e. g. If a couple’s home is worth less than $300k can that money be contributed to Super by one of them and later in life the other make a similar contribution from a subsequent home sale 10 or more yrs later? If not this is yet another govt scheme advantaging the property rich over those less fortunate, widening the wealth gap further.

  3. Mala Avatar
    Mala

    This article is great and has brought a little known aspect of tax free contribution to my notice.

  4. Joanne Avatar
    Joanne

    I am outraged that one house can be used by couples to contribute $600,000 to super, but solos ( single home owners) can only contribute $300,000. This policy discriminates against solos and places them at a significant relative disadvantage in retirement.

  5. JOHN BROWNING Avatar
    JOHN BROWNING

    so…which is true??!?

  6. Russell Avatar
    Russell

    Contributions after-tax are normally debited to the Tax-free Component of your Super account. Since the Downsize Contributions are “like” an NCC, can we be certain that they get debited to Tax-free Component of the Super account? What have super funds been instructed on this?
    This is very important since the real-estate asset of the family home is now essentially tax free for non-dependent children after your death. It would be mighty tricky of the government to find a way to apply an 18% “death tax” via this mechanism.

  7. tom Avatar
    tom

    If you are retired and on a part-pension this is yet another ScoMo scam. The article doesn’t address what may be a vital issue: if you are a part-pensioner under the old rules and put additional funds into your super will Centrelink then re-assess you under the new rules? This means the capital you have in an account based pension will be deemed and any income you take will also be counted. This double-counting is called by pollies “the fairer way”.

    1. Jason Avatar
      Jason

      No this won’t occur. Any existing pensions will only be deemed if they are stopped and a brand new pension is restarted. Adding the contribution proceeds to super and starting a new pension will not cause the entire pension balance to be deemed. If you have an existing pension running and you stop it and add these funds to that account then yes it’s a new pension and these funds will be deemed so be very careful. The solution may be to have either mulitple pensions going or if the income test is not an issue it may be worth it.

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