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As of January 2023, those 55 years old and over can make a ‘downsizer’ contribution to their superannuation.

This contribution is significantly beneficial for those seeking to invest in long-term wealth. Now that the age limit has been reduced to 55 from 65, more people can use this strategy to boost their retirement funds.


What are Downsizer Contributions?


A downsizer contribution is one from the sale of a house. If you are 55 years or older, you can contribute up to $300,000 of the proceeds of the sale of your primary residence to your superannuation fund. 

This contribution is not subject to the contribution caps. Therefore, individuals can make these contributions even if they have reached their contribution cap limit for the financial year. 

Furthermore, downsizer contributions are tax-free and are excluded from the existing age and work test, providing a significant advantage for individuals seeking to increase their retirement savings.

For couples, both members can take advantage of the concession for the same home. If you and your spouse meet all criteria, you may contribute up to $300,000 each ($600,000 per couple). This is still valid if one member did not have an ownership interest in the sold property (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Due to the fact a downsizer contribution can only be made once in a lifetime, it is essential to ensure that this is the right option for your circumstances.


Benefits of Downsizer Contributions


The primary benefit of downsizer contributions is that they allow individuals to boost their superannuation balance and increase their retirement savings. 

This is especially beneficial for individuals looking to downsize their homes, such as a middle-aged couple whose children are all grown up and have moved out of the house. 

However, you do not have to buy another house once you have sold your existing one, nor are you required to purchase a specifically smaller home – you could buy a larger and more expensive one. Meet the eligibility criteria to place the maximum contribution toward the super fund from the sale proceeds. 

Another benefit of downsizer contributions is that they are tax-free. This means that individuals can contribute up to $300,000 to their superannuation without paying any contribution tax. This provides a significant advantage for individuals looking to reduce their taxable income. 


Is it worth it in the current market?


Whether downsizer contributions are worth it in the current market depends on individual circumstances. Downsizer contributions can be an excellent option for individuals looking to sell their homes and increase their retirement savings. 

However, considering other factors, such as your current financial situation, retirement goals, and overall financial plan, is essential.

Housing demand is up, and the market may mean you up-sell and pocket a lot of profit from your investment. But if you owe a lot of debt elsewhere or rent at a higher cost than your mortgage repayments, this contribution will not place you on better financial footing. 

Only having the option to contribute in this manner once means you must ensure you use it to the maximum extent for the most significant outcome if you are eligible.


Downsizer Contributions Eligibility Criteria:


  • When contributing, you are 55 years or older (from 1 January 2023).
  • You or your spouse owned the home for ten years or more before the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of payment of sale.
  • The home is in Australia, not a caravan, houseboat, or other mobile home.
  • The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the principal residence exemption or would be entitled to such an exemption if the house was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). 
  • You provide your super fund with the Downsizer Contribution to Super Form (NAT 75073) before or when making the downsizer contribution. 
  • The downsizer contribution is made within 90 days of receiving the sale proceeds, usually at the settlement date.
  • You have yet to make a downsizer contribution to super from selling another home or from the part sale of your home.


Consider Your Financial Situation


Downsizer contributions to superannuation can be an excellent option for individuals over 55 years old looking to sell their homes and increase their retirement savings. 

However, it is vital to consider the impact of these contributions on your overall financial situation and retirement goals before making a decision.

If you would like to book a consultation and discuss if a Downsizer Contribution would benefit your wealth plan, please contact or call (02) 7804 1849.


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