For many people approaching or already in retirement, the family home is their largest asset – but historically, it’s been difficult to turn some of that equity into retirement income. The downsizer contribution rules have changed that. If you’re aged 55 or over and sell a qualifying property, you may be able to contribute up to $300,000 per person directly into superannuation.
Used strategically, downsizer contributions can significantly boost retirement savings, improve tax efficiency, and open new planning opportunities—but the rules are technical and the timing is critical.
What is the downsizer contribution?
A downsizer contribution is a one‑off (per person, per lifetime) contribution to super of up to $300,000 each from the sale proceeds of an eligible home into your super. So, a couple may be able to contribute up to $600,000 to their super.
Key features:
- Does not count toward concessional or non‑concessional contribution caps.
- Subject to meeting the eligibility criteria, the contributions can be made regardless of what your Total Superannuation Balance (TSB) is at the time of making the contribution.
- Can optimise the amount of money you ultimately transfer to ‘retirement phase’ when you are eligible to draw down from your super.
- The property sold does not have to be your primary residence at the time of the sale, if it was your primary residence at some stage during your ownership period (e.g. The property would be fully or partially exempt from capital gains tax under the main residence exemption)
What are the eligibility criteria?
To be eligible, you must meet all the following:
- You must be aged 55 or older at the time you make the contribution. There is no upper age limit.
- The property was owned by you and/or your spouse for 10 years prior to the sale (the period of ownership is generally calculated from settlement on initial acquisition to settlement on sale).
- The property must be a residential dwelling in Australia (it can’t be a caravan, houseboat or mobile home).
- The sale of the property must qualify for the main residence CGT exemption either fully or partially (or would have, if pre‑CGT).
- You have not previously made a downsizer contribution from a property sale in the past
- You must make the contribution within 90 days of settlement, unless the Commissioner grants an extension.
- You must provide your super fund the approved ‘Downsizer contribution into super form’ at the time or before the contribution is made.
Things to consider
- The value of the downsizer contributions cannot exceed the proceeds received from the sale of a property
- You may be able to put a significant amount of money into super all at once by combining downsizer contributions with non-concessional contributions. When doing this it is critical to consider the order of these contributions and any potential you may have for making additional non-concessional contributions in the future.
- Whether you can deploy a re-contribution strategy as part of the downsizer contribution so you can increase the tax-free component of your super to potentially reduce the tax payable for non-dependent beneficiaries of your super on your death.
- Can be used as an opportunity to optimise the level of income support (age pension) where an age eligible aged pension recipient has a younger spouse. Note, Centrelink outcomes depend on your broader circumstances.
- With the government considering reducing the capital gains tax discount from 50%, you may be planning to sell an investment property. Doing so on a property that you have used as your primary residence in the past can present an opportunity to contribute surplus funds from the sale of the property into your super.
To find out whether this strategy suits your circumstances, contact the IWP team.