7 benefits of boosting your super with downsizer contributions

Selling your home can be an emotional decision, but it can also open the door to new financial opportunities. If you're 55 or ver, the government’s downsizer contribution scheme lets you put up to $300,000 from the sale of your home into super, potentially giving you more flexibility, more income options and more confidence heading into retirement.

What are the benefits of making a downsizer contribution?

1. Super balance boost

Downsizer contributions can be a powerful way to boost your super balance, particularly if work, caring responsibilities or time out of the workforce meant you couldn’t contribute as much as you wanted earlier on.

2. Tax-free investment earnings

Once your super moves into retirement phase, the earnings on your downsizer contribution can be tax free. That means more of your money stays working for you — and less goes to tax — as you start drawing an income in retirement. This is assuming you have met the age requirements to move from the accumulation phase to drawdown retirement phase.

3. No work test requirement

Unlike many other super contributions, there’s no work test or upper age limit for downsizer contributions. This gives you the freedom to take advantage of the opportunity when the timing feels right for you.

4. Concessional and non-concessional caps don’t apply

Downsizer contributions aren’t limited by regular concessional and non-concessional contribution caps. That means you can direct up to $300,000 beyond any funds already in your super.

5. There is no requirement to buy a new home

If you sell your main residence and make a downsizer contribution to your super, you’re not required to buy a new home with the money you might make on the sale. 

6. Both partners can benefit

If you’re part of a couple and both aged 55 or over, both partners can make a downsizer contribution. Together, that’s up to $600,000 from the sale of one home added to your combined super savings.

7. No total super balance contribution restrictions

Even if your super balance is already above the usual limit for non‑concessional contributions, you can still make a downsizer contribution. That makes it a valuable option for people who’ve otherwise hit contribution roadblocks.

Important rules and considerations

Like most super strategies, there are a few rules to be aware of. While downsizer contributions aren’t counted against regular contribution caps, they do count towards your total super balance and are subject to the transfer balance cap.

To be eligible:

• You must be aged 55 or over to make a downsizer contribution.

• The sold property must have been the primary place of residence at some point in time and have been owned by you or your spouse 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 super fund before or when making your contribution.

• You can’t have previously made a downsizer contribution to super.

• The maximum amount of super savings that can be transferred into a retirement pension is currently $2 million. Some individuals, however, may have a transfer balance cap that is different to the standard transfer balance cap. Click here for more information about the transfer balance cap.

• Downsizing your home may impact your age pension eligibility as the family home is generally not considered an assessable asset when calculating entitlements. 

• The costs involved in selling a property and buying another one can be considerable.

• Downsizer contributions are not tax-deductible super contributions.

Where to go for more information

Downsizer contributions can be a powerful way to make more of what you’ve built — but the right approach depends on your wider financial picture.

Before making any decisions, it’s worth checking the details with the Australian Taxation Office (ATO) or speaking with a financial adviser. And if you’re looking for other ways to strengthen your retirement savings, explore our 10 practical strategies to help you grow your super with confidence. And for more tips on how to grow your super, check out these 10 ways to boost your super savings.