Older Aussies can put up to $300,000 into their super using the money from the sale of their main residence, regardless of caps and restrictions that otherwise apply.
If you’re aged 65 or over and are looking to boost your retirement savings, you can make a tax-free contribution to your super of up to $300,000 using the proceeds from the sale of your main residence. Take a look at the potential advantages, rules and other things you’ll want to be aware of.
Benefits if you make a downsizer contribution
Downsizer contributions provide a way to top up your super balance
Older Aussies, who haven’t had the chance to save enough funds for retirement, may find that tax-free downsizer contributions provide a good opportunity to top up what they’ve saved to date.
No work test or age limits apply to downsizer contributions
Usually, people aged 65 to 74 need to satisfy a work test (where you have to work 40 hours over a period of no more than 30 consecutive days) to make voluntary super contributions, while people aged 75 and over are generally ineligible to make any voluntary contributions to their super.
Annual contributions caps also do not apply
Annual concessional and non-concessional contributions caps, which are $25,000 and $100,000 a year respectively (bearing in mind there may be instances where you can also carry forward any unused amounts from previous years), don’t apply to downsizer contributions. In fact, downsizer contributions can be made in addition to any concessional and non-concessional super contributions you may be eligible to make.
Downsizer contributions aren’t subject to the $1.6m total super balance restriction
While you can’t make non-concessional contributions into your super at all if your total super balance is $1.6 million or above as at 30 June of the previous financial year, this rule doesn’t apply to downsizer contributions.
There’s no requirement to buy a new home
If you sell your main residence and make a downsizer contribution into your super, you’re not required to buy a new home with money you might make on the sale.
Both members of a couple can take advantage
For couples, both spouses can make the most of the downsizer contribution opportunity, which means up to $600,000 per couple can be contributed toward super.
Rules and other considerations to be aware of
- 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 super fund 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 Age Pension eligibility. There is no special Centrelink means test exemption for making downsizer contributions
- The costs involved in selling a property and buying another one (if that’s also on the agenda) can be considerable, so you’ll need to take into account any additional property-related costs
- Downsizer contributions are not tax deductible.
Where to go for more information
Depending on your situation, other rules may apply, so do your research and chat with your adviser about any possible implications. If you don’t have an adviser but would like some advice, you can call AMP on 131 267 or use our find an adviser search function.
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