Downsizer Contribution Rules 

If you or someone you love is downsizing ahead of retirement, this blog which outlines the downsizer contribution rules and eligibility is a worthwhile read.  

From July 1 2022, the age of eligible Australians who can make a downsizer contribution drops from 65 to 60. 

In the video below, our Certified Financial Planner® Glenn Hilber, discusses the downsizer contribution in greater detail. If you’d like to find out more, keep reading or call 1300 200 012.  

Want to learn more about the other superannuation changes coming into effect this year? Click here. 

DISCLAIMER – The information provided in this blog is general and does not consider your individual financial needs or objectives. It does not constitute personal advice. We recommend seeking out professional and independent financial, legal and tax advice which has been designed for your individual situation before acting on any information contained below. 

What is the Downsizer Contribution? 

The downsizer contribution is a scheme which allows eligible Australians who sell their principal place of residence of at least 10 years to contribute up to $300,000 from the proceeds of the sale into their superannuation.  

Downsizer Contribution Rules and Eligibility Explained  

As of July 1, 2022 the downsizer contribution rules are changing and Australians who are 60 and above and selling their principal place of residence to downsize will be able to boost their super in this way. 

From this date, the criteria will be as follows: 

• You are the eligible age when you make the contribution. This minimum age is 60-years-old from July 1, 2022. No maximum age limit applies.  
• You or your spouse have owned the principal residence for more than 10 years. 
• This place of residence is in Australia. 
• The contribution is made within 90 days of receiving the proceeds of the sale 
• You have not made a downsizer contribution into super from another sale in the past.  
• Before you make the contribution, or when you are making the contribution, you must also provide the Downsizer contribution into super form (NAT 75073) to your super fund. 
• The proceeds from the sale must be exempt or partially exempt from Capital Gains Tax.  

You can find further information about eligibility here.  

Superannuation Downsizer Contribution 

This contribution will be beneficial for a range of older Australians, including those approaching retirement, empty nesters whose kids have moved out so they want a smaller property with less maintenance, or someone looking to relocate to a more rural area.  

Here’s an example of how it would work.  

Your family home is now worth $1,000,000 but you’re looking to sell and buy something for approximately $500,000. Therefore, you would have $500,000 left over from the downsize. 

In this scenario, if this family home was owned by a couple and both of them were eligible for the contribution, they could each contribute up to $300,000 to their super.  

It might be that one contributes $300,000 and the other contributes $200,000 to their super fund.   

By doing this, they haven’t used up any of their normal contribution caps. So, they could also make additional contributions using concessional or non-concessional contribution caps.  

Downsizer Contribution and Non-concessional Caps  

Combining the downsizer contribution with normal contribution caps means you can inject a lot of money into superannuation in a short period of time in a tax effective way.  

An example of this is as follows:   

A couple is selling their home for $3,000,000 and spending $1,000,000 on a new home. This leaves about $2,000,000 that they will want to invest into their superannuation. So how do they get the maximum amount into their super? 

If this couple is over 65 and they have lived in this principal place of residence for 10 years, we can make a downsizer contribution of $300,000 for each of them. Then we could also add a non-concessional contribution of $110,000 each.  

Then finally in the new financial year (July 1, 2022) they will have a new non-concessional cap and could trigger the bring-forward rule, which means they could each contribute another $330,000 each in July.  

1. Downsizer contribution: 2 x $330,000 = $660,000 

2. Non-concessional contribution: 2 x $110,000 = $220,000  

3. Non-concessional contribution with bring forward rule: 2 x $330,000 = $600,000 

So, that means a total of $1.48 million of the proceeds from the house downsize could be put into superannuation in a really small space of time in a tax-effective manner.  

If they’re over age 65, this money could then be immediately used to start an account-based pension which is tax-free. 

Approximately $500,000 is left over from the house sale, which may be used for a non-super investment portfolio. 

We are currently helping one couple maximise the proceeds of their house sale. Read about that here.  

Talk to us about the Downsizer Contribution 

Do you have any questions about the downsizer contribution? Or would you like advice from a certified financial planner about whether or not it will be applicable to your situation? 

We are happy to take your call so please contact us today on 1300 200 012.