As a baby boomer approaching retirement, selling your family home can be a significant financial and emotional decision. However, with the Australian Government’s downsizer contribution scheme, selling your family home can also provide a valuable opportunity to boost your superannuation.

If you're aged 55 or older, the downsizer contribution allows you to make a substantial one-off contribution to your super without being constrained by the usual contribution caps. Whether you’re looking to free up cash or simplify your lifestyle, taking advantage of the downsizer contribution can help enhance your retirement savings.

Are you thinking about downsizing the family home and freeing up some of your capital? Did you know you can use the downsizer contribution to boost your super?

How does the downsizer contribution work?

If you're 55 or older, you can use the proceeds from selling your home to boost your super by making a downsizer contribution. This is a one-time payment that doesn’t count towards regular contribution caps.

You must make the contribution within 90 days of receiving the sale proceeds. It's considered an after-tax contribution, so it doesn’t offer a tax deduction. However, this option can provide a tax-efficient way to grow your super, provided you meet the eligibility requirements.

What are the eligibility requirements?

• You need to be 55 or older with no upper age limit.
• The home sold must be in Australia, and you or your spouse must have owned it for at least 10 years.
• The home must not be a mobile home, caravan, or houseboat.
• The sale must be fully or partially exempt from Capital Gains Tax (CGT).
• You cannot have previously made a downsizer contribution from the sale of any other property.
• The downsizer contribution must be made within 90 days of receiving the sale proceeds. Both individuals in a couple can contribute $300,000 each, up to $600,000 total, but it is a once-off opportunity. Importantly, it doesn't count towards your regular super contribution caps, but it does affect your transfer balance cap, which could have tax implications in the future.

For more details, visit the ATO website for the full eligibility criteria.

Benefits of boosting your super with a downsizer contribution

If you're 55 or older, making a downsizer contribution is an easy way to add more to your total superannuation balance when you sell your home.

Increase your retirement savings

You can contribute up to $300,000 from the sale of your home into your super account. This can give a significant increase to your super balance, potentially leading to a higher income during your retirement years.

No work requirements

Unlike other contributions that require individuals aged 67 and older to pass a work test, downsizer contributions don’t have this condition. This means you can contribute regardless of whether you’re still employed.

Tax benefits

Downsizer contributions are considered after-tax, so they won’t incur additional taxes when added to your super fund. This makes it a tax-efficient way to grow your retirement savings.

Potential challenges to watch out for

Making a downsizer contribution in Australia can have significant effects on your financial situation, especially regarding your age pension, tax considerations, and superannuation contribution limits.

Here’s a closer look at the key impacts you should be aware of:

Effect on your age pension

The funds you add to your super from downsizer contributions will count towards the assets test for the age pension. If your total assets exceed the threshold, your pension entitlement could be reduced or even lost. This is important to keep in mind, especially if you rely on the age pension for income during retirement.

One-time benefit

Downsizer contributions can only be made once. After you’ve used this benefit from the sale of your home, you won’t be able to apply it to future home sales, so timing and eligibility are crucial.

Transfer balance cap considerations

Downsizer contributions count towards the $1.9 million transfer balance cap. If your total super balance exceeds this limit, any excess will need to be moved into an accumulation account or withdrawn, which may have tax implications.

Strict 90-day deadline

You must make your downsizer contribution within 90 days of your home’s settlement date. Careful planning is essential to ensure you meet this deadline, as missing it may prevent you from making the contribution altogether.

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How to make a downsizer contribution

Check with your super fund

First, contact your super fund to ensure they accept downsizer contributions. Not all funds may offer this option.

Submit the required form

You need to complete and submit a Downsizer contribution into super form (NAT 75073) to your super fund either before or at the same time as your contribution. Without this form, your fund may not accept the contribution as a downsizer contribution.

If you plan to make multiple contributions to one or more super funds, you must submit a separate form for each. The total of your contributions cannot exceed $300,000.

Meet the 90-day deadline

All contributions must be made within 90 days of receiving the sale proceeds. In some cases, you can request an extension if needed.