From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.
Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has been reduced to 55 from 60, more people can use this strategy if it suits their needs.
What’s a ‘downsizer’ contribution?
If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.
Downsizer contributions are excluded from the existing age test, work test, and transfer balance threshold (but are limited by your transfer balance cap).
For couples, both members can take advantage of the concession for the same home. If you and your spouse meet the other criteria, you can contribute up to $300,000 ($600,000 per couple). This would be the case even if one of you did not have an ownership interest in the sold property (assuming they meet the other criteria).
Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is essential to ensure that this is the right option for you.
Let’s look at the eligibility criteria:
- When making the contribution, you are 55 years or older (from 1 January 2023).
- You or your spouse owned the home for ten years or more before the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.
- The home is in Australia and is not a caravan, houseboat, or other mobile home.
- The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.
- You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.
- The downsizer contribution is made within 90 days of receiving the sale proceeds, which is usually at the settlement date.
- You have not previously made a downsizer contribution to super from selling another home or from the part sale of your home.
Do I have to buy another smaller home?
The name ‘downsizer’ is a bit of a misnomer. To access this measure, you do not have to buy another home once you have sold your existing home, and you are not required to purchase a smaller home – you could buy a larger and more expensive one.