Downsizer contribution — $300,000 from your home sale

What is it?

If you’re 55 or older and sell a home you’ve owned for at least 10 years, you can contribute up to $300,000 (individual) or $600,000 (couple) of the sale proceeds into super. This is on top of your normal contribution caps and isn’t counted against the $1.9M transfer balance cap at contribution time.

Eligibility

• Age 55 or older when the contribution is made (reduced from 65, then 60, then 55 — the final step happened in January 2023)
• You or your spouse must have owned the home for at least 10 years before sale
• The home must be in Australia (not a caravan, mobile home, or houseboat)
• The sale must qualify (fully or partially) for the main residence capital gains tax exemption
• Contribution must be made within 90 days of receiving settlement proceeds
• You must submit a Downsizer contribution into super form to your super fund before or at the time of contributing
• You can only use the rule once in your lifetime

Worked example — Graham and Beth

Graham (68) and Beth (66) sell their family home of 32 years for $1.4M. They buy a smaller townhouse for $780,000. Each contributes $300,000 of the $620,000 proceeds into their own super as a downsizer contribution. A further $20,000 is used to upgrade the garden, and the remainder stays in their offset account.

Total super boost: $600,000, outside the concessional/non-concessional caps and with no additional tax on contribution.

Key traps

• Centrelink impact — the family home is exempt from the Age Pension assets test. Once it’s in super, it’s an assessable asset (subject to deeming for the income test). Downsizing a $1.4M home into a $780k home + $600k super can push couples over the assets test and reduce or eliminate their Age Pension.
• 90-day deadline — run late and you lose eligibility. Some people request an extension from the ATO, granted only in exceptional circumstances.
• Form must be lodged before or with the contribution — your fund can’t accept it as a downsizer retrospectively.
• One-time only — can’t spread it across two sales.

Planning angles

Before making a downsizer contribution, work through:

• Would you be better keeping the money in the offset account and retaining Age Pension eligibility?
• Do you have enough transfer balance cap room to move it into pension phase later?
• Does your fund accept downsizer contributions? (Most APRA funds and all SMSFs do, but confirm.)