Turbocharge your super if you sell your home

The downsizer contribution scheme allows you to release money locked up in your home to boost your super balance and increase your income in retirement. Currently it is available for people aged 60, but once the proposed reduction is passed into law it will be extended to people aged 55 and over.

How does it work?

If you sell¹ your primary home, you may be able to make a ‘downsizer contribution’ to your superannuation of up to $300,000 from the proceeds of the sale. Currently, you have to be 60 years or over to be eligible to make these contributions. Once the proposed reduction in eligibility age is passed into law, from the start of the next quarter you can be 55 years or over.

Your downsizer contribution is not a non-concessional (after-tax) contribution and will not count towards your contributions caps.

If you have a partner you can both take advantage of this measure, which means together, you could contribute up to $600,000 to super from the proceeds of the sale.

Although it’s known as a downsizer contribution, you don’t have to buy a smaller house or even purchase another property at all.

^*Assumptions:

Based on a couple, making a ‘downsizer contribution’ at age 55 and retire at age 67.
The ‘downsizer contribution’ is assumed to be invested in the Aware Super MySuper Lifecycle option from age 55-67, with annual returns being CPI + 4.00% at age 60, gradually reducing to CPI + 2.75% between the ages 55-65 (inclusive) and remaining at CPI + 2.75% for ages 65-66. CPI is assumed to be 2.50% p.a.
Starting from age 67 at retirement, the couple started an income stream which is invested in the Balanced Growth (pension) option with an assumed return of CPI + 3.25% p.a.
All investment returns are assumed to be net of all fees and taxes.
Starting from age 67 at retirement, the couple draw down to nil for 30 years until age 97 with a constant income in real terms.
Income is shown in today’s dollars adjusted by CPI inflation of 2.50% p.a. This example is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome.

Am I eligible to make a ‘downsizer contribution’?

From the start of the next quarter once the reduced eligibility age has been passed into law, you must be 55 years or older at the time you make a downsizer contribution. Currently, you can make a downsizer contribution from age 60.
You do NOT need to meet the work test.
You must not have previously made a downsizer contribution to your super from the sale of another home.
You or your spouse must own your home for 10 years or more prior to the sale.
You must have lived in the home as your main residence.
Your home must be in Australia and it cannot be a caravan, houseboat or other mobile home.
For the full set of eligibility criteria, visit the ATO website.

How do I make the contribution?

If you decide to make a downsizer contribution, you need to complete the ‘Downsizer contribution into super’ form either before or at the time of making your contribution.
You need to make your downsizer contribution within 90 days of receiving your sale proceeds.
Your downsizer contribution will count towards your total super balance and where the funds are subsequently moved into pension phase, the transfer balance cap (TBC). The general transfer balance cap is currently set at $1.7 million. The TBC might restrict future contributions and applies when you move your super savings into retirement phase.
Any downsizer contributions you make will be counted for the assets and income test applied by Centrelink so they could affect your eligibility for the age pension.