Are you thinking about selling your family home and moving to a smaller place? 

If you’re 55 or older, you might be able to give your retirement savings a big boost through the downsizer contribution rules. 

In this article, we’ll break down everything you need to know about downsizer contributions—what they are, how they work, and the benefits they offer.

What are downsizer contributions?

Downsizer contributions allow Australians aged 55 and over to contribute up to $300,000 from the proceeds of selling their home into their superannuation fund. 

For couples, this means a potential $600,000 boost to their retirement savings. These contributions don’t count towards the usual annual super contribution limits, making it easier to add a significant amount to your retirement fund.

Who can make a downsizer contribution?

To be eligible for a downsizer contribution, you need to meet the following criteria:

• Age requirement: From 1 January 2023, the minimum age to make a downsizer contribution is 55 years old.

• Homeownership: You must have owned your home for at least 10 years before selling it.

• Main residence: The property being sold must be your main home and qualify for a full or partial capital gains tax (CGT) exemption.

• Australian property: The home must be located in Australia and cannot be a caravan, houseboat, or other mobile home.

How much can you contribute?

The maximum amount you can contribute is $300,000 per person from the sale proceeds of your home. 

For a couple, this means you can contribute up to $600,000 combined. It’s important to note that your downsizer contribution cannot exceed the total sale price of your home.

For example:

• If you and your partner sell your home for $800,000, you can each contribute $300,000, totalling $600,000.

• If your home sells for $500,000, you can only contribute up to $500,000 combined.

Important rules and deadlines

• Contribution deadline: You must make your downsizer contribution within 90 days of receiving the proceeds from the sale of your home, usually the settlement date.

• One-time opportunity: You can only make a downsizer contribution once. If you sell another home later, you won’t be able to make another downsizer contribution.

• No new home requirement: There’s no requirement to buy a new home with the proceeds from your sale, and you don’t have to buy a smaller or cheaper home either.

Financial implications

Downsizer contributions are not counted towards your annual super contribution caps, but they do count towards your transfer balance cap. 

This cap limits how much you can transfer into a tax-free retirement phase. Currently, this cap is set between $1.6 million and $1.9 million.

Additionally, while downsizer contributions don’t count towards your total superannuation balance immediately, they will be included in the assessment at the end of the financial year. 

This can affect your eligibility for the age pension and other government benefits.

Things to consider

Selling your home and making a downsizer contribution is a big decision. Here are some important points to consider:

• Costs of selling: Selling a home involves costs like sales commissions, moving expenses, and possibly stamp duty if you buy another home. These costs can add up quickly.

• Impact on age pension: Contributing a large amount to your super can impact your age pension eligibility. Your super balance, including downsizer contributions, will be assessed under the age pension assets test once you reach the pension age. Seek financial advice to understand the impact.

• 24-month exemption: Proceeds from selling your home are exempt from the assets test for up to 24 months if used to purchase, build, or renovate another home. After this period, they will be assessed under the income and assets tests.

Helpful resources 

Navigating the downsizer contribution rules can be complex, but there are plenty of resources available to help you. Downsizing.com.au offers a wealth of information and advice to make your transition smoother:

• Downsizing to a New Apartment or Townhouse? Here are 13 Great Tips to Ensure You Find the Perfect Home: This article provides practical advice on finding a new home that suits your needs and lifestyle.

• The Five Big Trends Expected to Hit Retirement Living: Stay ahead of the curve by understanding the latest trends in retirement living, from community-focused developments to eco-friendly designs.

• The Hottest Downsizing Locations in Australia Right Now: Explore the best locations for downsizing across Australia, offering vibrant communities and excellent amenities.

Downsizer contributions are a fantastic way to boost your retirement savings if you’re 55 or older and planning to sell your home. 

By understanding the rules and planning carefully, you can make the most of this opportunity and enjoy a more secure retirement.

For more detailed information and to see if you qualify, visit the ATO’s official resources or consult with a financial advisor. Happy downsizing!

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Disclaimer: Information on this internet site or in any related communications should not be regarded as a substitute for seeking independent professional legal, financial, real estate or any other relevant expert advice.