- If you are aged 55 or more;
- Looking to sell your primary residence that you have owned for more than ten years;
You may be able to contribute some of the proceeds to super to boost your retirement savings.
The Downsizer Contribution allows eligible individuals to contribute up to $300,000 from the proceeds of the sale of a qualifying dwelling into super where specific requirements are met.
Benefits of the contribution:
- Boosts to retirement savings to assist in ensuring you have sufficient assets to live off in retirement accordingly;
- Downsizer contributions do not count towards the client’s non-concessional contribution (NCC) cap. They are not subject to the eligibility rules that ordinarily regulate super contributions, such as the total super balance limits or upper age limits. You could therefore make a downsizer contribution and other contributions to super without it impacting these caps;
- Although the name suggests otherwise, there are no specific requirements concerning an individual’s future accommodation choices – i.e. there is no need for a person actually to be ‘downsizing’;
- Also, a person may be eligible to make a downsizer contribution with the proceeds of the sale of a property that was not their primary residence for the entire period of ownership, including at the time of sale.
Eligibility:
- The home must be in Australia, have been owned by you or your spouse for at least ten years, and the disposal must be exempt or partially exempt from capital gains tax (CGT). Therefore, if only one spouse owned the home, the spouse that did not have an ownership interest may also make a downsizer contribution provided the below is also met;
- You meet the age requirement at the time the contribution is made being:
- 55 or over from 1 January 2023
- 60 or over from 1 July 2022, or
- 65 or over from 1 July 2018
- The contribution(s) amounts are to be equal to or part of the actual capital proceeds of the sale of the home up to a maximum of $300,000 per individual. Therefore the contribution amount cannot be greater than the total proceeds from the sale of your home;
- The contribution is made within 90 days of the change of ownership (extensions are subject to ATO approval);
- An election is made to treat the contribution(s) as a downsizer contribution via the approved ATO form either before or at the time of making the contribution; and
- You have not previously made a downsizer contribution.
Things to note:
Unfortunately, a dwelling cannot be a houseboat, caravan or mobile home.- You must own the home in your name, so it cannot be in the name of a company or trust.
- Downsizer contributions will count towards your transfer balance cap. This cap applies when you move your super savings into the retirement phase.
- It will count towards the asset and income tests for determining eligibility for the age pension (whereas when the home was your home, it was exempt from these tests).
Some examples from the Australian Tax Office
Contribution of maximum amount
A couple, George and Jane, sell their home for $800,000. Each spouse can contribute up to $300,000.
Contributions cannot exceed the total sale price
A couple, Bruce and Betty, sell their home for $400,000. The maximum contribution both can make cannot exceed $400,000 in total. This means they can choose to contribute half ($200,000) each or split it – for example, $300,000 for Betty and $100,000 for Bruce.
When a property is owned by one spouse
A couple, John and Fatima, sell their home for $600,000. Only John is on the title. Both John and Fatima meet all the other requirements. Therefore both John and Fatima can make a downsizer contribution of up to $300,000 each.
Sale of home and a listed share portfolio
Alisha has a portfolio of listed shares worth $150,000. She sells her home for $500,000. As Alisha meets all the other requirements, she can make a downsizer contribution of up to a maximum of $300,000 using a combination of cash and transferring her shares to her super.
Selling part of the equity in a property
Robert and Wendy decide to sell part of their home’s equity, allowing them to continue living in the house. Their home is currently worth $500,000, and they sell 20% of its equity, which is $100,000. They can make a Downsizer contribution of up to $100,000 between them.Suppose they decide to sell more of the ownership interest in the property in the future. In that case, they will not meet the eligibility as they can only access the scheme concerning one disposal of an ownership interest in the relevant home.
For more information, visit the ATO’s website.
Please get in touch with us if you would like advice concerning the above or if you have any questions.
