Downsizer super contributions - What you need to know
If you’re 65 or over, you may be able to contribute the proceeds of selling your home into Super and be exempt from some of the normal Super contribution rules and limits.
NOTE - In the 2021/22 Federal Budget, the Government announced a proposal to reduce the eligibility age for downsizer contributions from 65 to 60. Legislation needs to pass before this change becomes law. The Government has indicated the commencement date of the change is expected to be 1 July 2022.
What are downsizer contributions?
From 1 July 2018, if you’re aged 65 or older and have owned your house for at least 10 years, you may be able to contribute up to $300,000 ($600,000 per couple) into Super from the proceeds of selling your home.
Am I eligible and other considerations?
You must be aged 65 or older to make a downsizer contribution
The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time, and you need to have owned the home for at least 10 years
The sold property must be in Australia and excludes caravans, mobile homes and houseboats
A downsizer contribution must be made within 90 days of receiving the sale proceeds
A downsizer contribution form must be submitted to your Superfund before or at the time of making your contribution
You can’t have previously made a downsizer contribution to Super
You can only transfer a maximum of $1.6 million in Super savings (not including subsequent earnings) into a tax-free pension account
Downsizing your home may impact your Age Pension eligibility. There is no special Centrelink means test exemption for making downsizer contributions
There are costs involved in selling a property and buying another one that should be considered. You will need to take into account any additional property-related costs
Downsizer contributions are not tax deductible.
Benefits of making downsizer contributions
Downsizer contributions provide a way to top up your Super balance with no work test or age limits applying to downsizer contributions.
The usual annual contributions caps don’t apply to downsizer contributions (Concessional & Non-concessional) which are $27,500 and $110,000 a year, respectively and can be made in addition to any concessional and non-concessional Super contributions you may be eligible to make.
Downsizer contributions are not subject to the $1.7m total Super balance restriction. While you can’t make non-concessional contributions into your Super at all if your total Superfund balance is $1.7 million or above as at 30 June of the previous financial year, this rule doesn’t apply to downsizer contributions.
Once you have sold your main residence, there is no requirement to buy a new home and finally, both members of a couple can take advantage of the downsizer contribution rule, which means up to $600,000 per couple can be contributed toward Super.
A Case Study
Malcolm and Tracy are 73 and 75 years old and retired. They sold their home on 15 September 2019 after owning it for 13 years and received $1.5 million.
They can both make a non-concessional Super contribution of $300,000 ($600,000 in total). They can do this even though Malcolm doesn’t meet the contribution 'work test' and Tracy is over age 75.
They can make these contributions regardless of how much they already have in their Super accounts, and the contributions won’t count towards the non-concessional contributions cap. It does not matter if the house was only owned by one of them.
GENERAL ADVICE WARNING
The advice contained within this document does not consider any person’s particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product, persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make their assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information within this document. Persons doing so, do so at their own risk. Before acquiring a financial product, a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.