Most property coverage is written for buyers trying to get in. But a large and growing group is heading the other way: Australians in their late fifties, sixties and seventies selling the family home. For them, one of the most valuable and least understood rules is the downsizer contribution, which can move a large chunk of the sale proceeds into superannuation. Here’s the plain-language guide.
What the Downsizer Contribution Is
If you’re 55 or older, you may be able to contribute up to $300,000 from the proceeds of selling your home into your super fund, as a downsizer contribution. If you have a partner who is also 55 or older, they can contribute up to $300,000 too, so a couple can put in up to $600,000 from a single sale.
The big advantage is that it doesn’t count toward your normal contribution caps. You don’t need to meet a work test, there’s no upper age limit, and you can make it even if your super balance is already large. It’s a way to shift money into super that you often couldn’t otherwise.
The Eligibility Rules
The main conditions are these. You must be 55 or older when you make the contribution. The home must have been owned by you or your partner for at least 10 years, generally counted from settlement of the purchase to settlement of the sale. It must be in Australia and can’t be a caravan, houseboat or other mobile home. The sale must qualify at least partly for the main residence capital gains tax exemption. And you must make the contribution within 90 days of receiving the proceeds, usually the settlement date.
It’s also a one-off. You can only use the downsizer contribution for the sale of one home in your lifetime.
How Much Can Go In
The contribution can never exceed the sale proceeds, which is why a couple selling a $400,000 home can’t put in $600,000. And despite the name, you don’t actually have to buy something smaller. You could buy a similar-priced home, rent, or move in with family, and still qualify.
The Catches Worth Knowing
The biggest one is the Age Pension. Your home is excluded from the Age Pension assets test, but money you move into super is not. So selling the home and putting proceeds into super can reduce, or remove, your pension entitlement. That doesn’t make the contribution a bad idea, but it’s the single most important thing to model before you act.
The contribution also counts toward your total superannuation balance when it’s calculated at the end of the financial year, which can affect some other super rules. You can’t claim a tax deduction for it. And the 90-day window is strict, so talk to your fund early and complete the downsizer contribution form before or when you contribute.
Timing in This Market
Selling into a falling market is a real consideration. National values have been declining for months, and auction clearance rates remain soft with a likely rate rise ahead. If you’re selling to downsize, you may also be buying in the same market, which softens the impact. But it’s worth pricing realistically, allowing time, and not letting the 90-day window push you into rushed decisions, since the clock starts at settlement, not listing.
Where Aged Care Fits In
For some people, downsizing is part of planning for aged care. The home is treated differently depending on what you do with it, so if a move into residential aged care is on the horizon, it’s worth getting advice on how selling, keeping or renting out the home affects aged care fees and the pension before you decide. An Aged Care Specialist Officer at Services Australia can explain the aged care side for free, and the government’s free Financial Information Service can help with pension questions. The official rules are on the ATO’s downsizer contributions page.
The Bottom Line
If you’re 55 or older and selling a home you’ve owned for at least 10 years, you may be able to put up to $300,000 each into super, outside the normal caps, within 90 days of settlement. It’s a one-off, you don’t have to buy smaller, and it can’t exceed the sale proceeds. The big catch is the Age Pension, since money in super is assessed where the home wasn’t. Model that first, and get advice before you commit. This is general information, not financial or tax advice.
Epik Wire covers property in plain language for buyers, sellers and owners. Subscribe to our newsletter to stay informed.
