This is a type of contribution to super that anyone over the age of 55 can consider after selling your home. You may contribute some or all the money into your super account. How much you can contribute will depend on your age and circumstances.
Key points:
- You can contribute proceeds from the sale of your family home into your super fund
- Your home must have been owned by you or your spouse for 10 years or more prior to the sale
- Your home must be either your current or previous primary residence
- How much you can contribute to super will depend on your relationship status
- A single person may contribute up to $300,000
- A couple may contribute up to $600,000
- You cannot contribute more than the sale price of the property
- A downsizer contribution is a special contribution type:
- How much you already have in super doesn’t matter
- It does not count towards your contribution cap. Plus,
- You do not need to meet the work test
- It will count towards your transfer balance cap if you use the contribution to start a retirement income stream
- As with any change to your financial circumstance, it may affect your eligibility for the Government Age Pension.
Benefits of the downsizer contribution
It can be a great way to grow your super
By topping up your super, you could benefit from compounding returns. This could mean more money when you retire.
Contribution caps don’t apply
It doesn’t matter how much you already have in your super. Your contribution cap doesn’t apply for downsizer contributions.
There may be tax advantages
The downsizer contribution is an after-tax contribution. This means no tax is paid on the money when you put it in your super. Once you’re eligible, when you withdraw this money from your super in the future, it will be tax-free.
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- Contributions of $100,000 and $300,000 are based on a single female, making a downsizer contribution at age 55 and retire at age 67.
- Contributions of $600,000 are based on a couple (male and female), making a downsizer contribution at age 55 and retire at age 67. Each member will contribute $300,000 into their super.
- Extra incomes are rounded to the nearest $100 and are stated in today’s dollars deflated using Average Weekly Ordinary Time Earnings (AWOTE) of 3.5% p.a. in accumulation phase and CPI of 2.50% p.a. in pension phase.
- The downsizer contribution is made at age 55 and invested in the Aware Super MySuper Life Cycle option, assumed to be CPI + 4% until age 55, reducing from CPI + 4% to CPI + 2.75% between the ages 55-65 (inclusive) and CPI + 2.75% from age 65 onwards.
- Starting from age 67 at retirement, the single and couple started an income stream which is invested in the Conservative Balanced (pension) option. The assumed return is CPI + 3.25% p.a net of all taxes, investment, and admin fees.
- Starting from age 67 at retirement, the single and couple will both attempt to maximise their income until age 95.
- The female member has a starting salary of $80,000 and a starting balance of $126,000
- The male member has a starting salary of $102,000 and starting balance of $164,000
- Age pension and asset and income test thresholds are valid as at 1st July 2024.
Impacts to Government Age Pension eligibility
Downsizer contributions are added to your super balance. They are included in the assets and income test and could impact your eligibility for the Government Age Pension.
The income and assets test
The Government uses an income and assets test to see if you're eligible for the Government Age Pension.
Your eligibility will depend on:
- An assets test. This is the value of your assets
- An income test. This is the income you receive from all sources. This includes income from financial investments such as your super.1
1 Centrelink use the deeming rules to work out how much income your financial investments produce. These rules assume your assets earn a set percentage of income. This may be different to what they actually earn.
You have flexibility to buy, build or renovate your new home
Your home is not included in the assets test. But if you sell your home, part or all of the proceeds maybe exempt for up to 24 months. The good news is if you plan to use the proceeds to buy, build or renovate another home, you have time.
The proceeds are also 'deemed' in the income test. They are assessed as income from financial assets. This may affect the amount of government benefits you get. Find out more about the income and asset tests.
Things to consider
- You must not have previously made a downsizer contribution
- Your home must be in Australia
- Your home cannot be a caravan, houseboat or other mobile home
- You must be eligible for at least a partial capital gains tax exemption on the sale of your home
- You must provide the fund with a downsizer form either before or at time of contribution
- Downsizer contributions will count towards your transfer balance cap if used to start a retirement income stream
- You can find more information about the transfer balance cap on the ATO website.
Where next?
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