A downsizer contribution is a special type of superannuation contribution available to older Australians who sell their home. Eligible individuals can contribute up to $300,000 from the sale proceeds of their primary residence directly into super, regardless of other contribution caps or restrictions. Couples can each contribute, allowing up to $600,000 in total.
This contribution type was introduced to help people boost retirement savings while encouraging older homeowners to downsize, freeing up housing for younger families. It does not count toward concessional or non-concessional contribution caps.
Advanced
Technically, the downsizer contribution is available to individuals aged 55 or older (as of 1 January 2023). The home must have been owned for at least 10 years and qualify as the individual’s main residence for capital gains tax exemption. Contributions must be made within 90 days of receiving sale proceeds, though extensions may be granted in limited circumstances.
The contribution is not tax deductible, and the amount added counts towards the transfer balance cap if moved into a pension account. Importantly, once contributed, the money is preserved in super and can only be accessed under standard superannuation rules. The contribution may also affect Age Pension entitlements under means testing.
Relevance
- Helps boost superannuation balances later in life
- Supports housing market turnover by encouraging downsizing
- Provides flexibility for retirees with substantial home equity but low super savings
Applications
- Selling a long-term family home and moving into a smaller property
- Increasing retirement savings without relying on annual contribution caps
- Couples contributing up to $600,000 combined into super
- Strategic planning to improve retirement income sustainability
Metrics
- Maximum contribution amount ($300,000 per person)
- Age eligibility and timing of contribution
- Impact on Age Pension entitlements after contribution
- Growth of superannuation balance after downsizer contribution
Issues
- Funds become locked in super until meeting access conditions
- May reduce Age Pension entitlements due to asset test changes
- Strict eligibility and timing rules can lead to disqualification if not followed
- Contributions cannot exceed sale proceeds of the home
Example
A couple, both aged 60, sell their family home of 20 years for $1 million. Each contributes $300,000 into super as a downsizer contribution. Their combined $600,000 significantly boosts retirement savings, giving them greater financial security.
