Using the downsizer super contribution: A guide for homeowners over 55

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If you’re over 55 and considering downsizing your family home, the downsizer contribution scheme can provide a way to increase your super balance. This scheme allows eligible individuals to make a one-off, after-tax contribution of up to $300,000 from the sale of their home into their super fund, helping boost your super savings for retirement.

The downsizer contribution is not subject to the usual contribution caps, and the amount you contribute won’t affect your total superannuation balance for the purposes of the transfer balance cap or the work test. However, eligibility criteria apply, including age limits and the requirement that the property being sold is your primary residence. Contributions must be made within 90 days of receiving the sale proceeds.

Whether you’re looking to contribute part of the sale proceeds or the full amount, the downsizer contribution offers a great opportunity to grow your super. To make a contribution, you’ll need to submit the downsizer form, and it’s always a good idea to consult a financial adviser to ensure the downsizer contribution aligns with your financial situation and retirement goals.

How the downsizer contribution works

The downsizer contribution is a one-off opportunity for Australians aged 55 or older to boost their super using proceeds from selling their main residence. You can contribute up to $300,000 per individual, or $600,000 for a couple, without the contribution counting towards standard caps.

To qualify, the property must be your main residence, and the contribution must be made within 90 days of settlement. As an after-tax contribution, it isn’t tax-deductible but can be a tax-efficient way to increase your retirement savings. However, it’s important to understand how it interacts with the assets test and income test if you receive the age pension.

Eligibility requirements for downsizer super contributions

If you’re 55 or older, the downsizer contribution provides a one-time opportunity to boost your super using proceeds from the sale of your home.

To ensure you qualify, the following criteria must be met:

• You must be 55 years or older, with no upper age limit.

• The property sold must be in Australia and owned by you or your spouse for at least 10 years.

• The home cannot be a mobile home, caravan, or houseboat.

• The sale must be fully or partially exempt from Capital Gains Tax (CGT).

• You must not have previously made a downsizer contribution from the sale of another property.

• The contribution must be made within 90 days of settlement.

• Each individual can contribute up to $300,000, totalling $600,000 per couple.

• While it doesn’t count towards regular super caps, it affects your transfer balance cap.

For more details or personalised advice, visit the ATO website

How downsizer contributions can boost your retirement

If you’re 55 or older, the downsizer contribution offers a simple way to increase your superannuation balance when you sell your home. By contributing up to $300,000 from the sale proceeds, you can significantly enhance your super savings, potentially providing greater income during your retirement years.

Increase your retirement savings

The downsizer contribution scheme opens a valuable path to enhance your retirement savings when you reach age 55. This program allows you to contribute up to $300,000 from your home sale directly into your super account, potentially creating a stronger income stream for your retirement phase. Your super balance can grow substantially through this one-time contribution, helping to build more robust super savings for your retirement years.

No work requirements and tax benefits

These contributions offer unique advantages compared to standard super deposits. Unlike traditional super contributions for those 67 and above, downsizer contributions bypass the work test requirements, allowing you to contribute regardless of your employment status. As an after-tax contribution, this money enters your super fund without triggering additional tax obligations, making it an efficient method to boost your total superannuation balance. Your contribution moves directly into your super account, potentially strengthening your long-term financial position without the usual restrictions that apply to other contribution types.

Challenges to consider with downsizer contributions

Making a downsizer contribution can have significant effects on your financial situation, particularly concerning your age pension, tax implications, and superannuation contribution limits. It’s important to understand the key impacts before proceeding with a downsizer contribution.

Effect on age pension eligibility

A downsizer contribution can create significant changes to your pension situation. When you add these funds to your super, they become part of your assets test calculations for the age pension. This means your pension payments might decrease or stop if your total assets rise above the threshold limits. This impact needs particular attention if you depend on the age pension for your retirement income.

One-time benefit

The downsizer contribution represents a single opportunity in your lifetime. Once you’ve used this benefit for a property sale, you cannot apply it to any future home sales. This makes your timing and eligibility decisions particularly important for maximising the benefit’s value to your retirement strategy.

Transfer balance cap considerations

Your downsizer contribution counts toward the $1.9 million transfer balance cap. If your total super balance grows beyond this limit, you’ll need to move excess funds to an accumulation account or withdraw them. These adjustments could trigger various tax implications that affect your overall financial position.

Strict 90-day deadline

The timing requirements for your downsizer contribution demand careful attention. You must complete the contribution within 90 days of your property settlement date. Missing this deadline could prevent you from making the contribution, making it essential to plan your contribution timeline carefully.

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This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.