What’s the Downsizer Contribution?

Introduced on 1 July 2018, the federal government’s downsizer contribution allows older Australians to top up their super with some of the proceeds of selling their family home.

If you are aged 60 years upward, you can contribute up to $300,000 (for singles) or $600,000 (for couples, as long as you’re both eligible) of the sale proceeds, regardless of caps and restrictions that otherwise apply to top-up your super. Please note that the downsizer eligibility age is soon to change to 55 or upwards.

No work test or upper age limits apply to downsizer contributions; usually, if you’re aged 67 to 74 you need to satisfy a work test to make voluntary super contributions. People aged 75 and over are generally ineligible to make any voluntary contributions to their super.

Downsizer contributions, which you can only make once in your lifetime, aren’t tax deductible and they can be made even if your total super balance is more than $1.7 million.

What are the downsizer contribution rules?

The ATO has six downsizer contribution eligibility requirements, all of which you need to meet in order to make the contribution and top up your super:

☑ You are 60 years old (soon to be 55) or older at the time you make a downsizer contribution

☑ The amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018

☑ Your home was owned by you or your spouse for 10 years or more prior to the sale

☑ Your home is in Australia and is not a caravan, houseboat or other mobile home

☑ The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset

☑ You have provided your super fund with the ‘downsizer contribution into super’ form either before or at the time of making your downsizer contribution

Does the downsizer contribution impact Aged Pension?

Topping up your super using the downsizer contribution may impact your Age Pension entitlements. This is because your home is typically exempt from Centrelink assessment, yet when you decide to sell it and use the proceeds to top up your super, that amount of money becomes accessible by Centrelink.

It is always advisable to seek financial advice and speak to Centrelink to discuss your individual circumstances.

Is downsizing the right choice for me?

Before making your final decision, consider the following pros and cons of downsizing in retirement:

For even more information, download our Downsizing e-guide and find answers to some of the most common questions about downsizing and the downsizer contribution.

Want to know how accessing your home equity could improve your retirement funding? Try our free-to-use reverse mortgage calculator to see how you could be better off in retirement, whether you choose to stay at your family home or not.