Downsizer Contributions: How Selling Your Home Can Boost Your Super

What Is the Downsizer Contribution?

The downsizer contribution allows eligible Australians to make a one-off contribution of up to $300,000 per person (or $600,000 per couple) into their superannuation from the proceeds of selling their home. It was introduced to encourage older Australians to free up larger homes for families, but there is no requirement to actually buy a smaller property — you can rent, move in with family, or buy whatever suits you.

Unlike regular super contributions, the downsizer contribution does not count towards the concessional or non-concessional contribution caps. It is also available regardless of your total super balance or work status, making it one of the most flexible ways to boost retirement savings later in life.

Eligibility Requirements

To make a downsizer contribution, you must meet all of the following criteria:

• Age: You or your spouse must be 55 or older at the time of the contribution (reduced from 60 in January 2023)
• Ownership: You must have owned the home for at least 10 years (ownership by either you or your spouse counts)
• Home type: The property must be your principal residence and be in Australia. It does not need to have been your main residence for the entire 10 years, but it must qualify for a partial or full CGT main residence exemption
• First time: You can only make a downsizer contribution once in your lifetime, from the sale of one home
• Timing: The contribution must be made within 90 days of settlement (though extensions can be requested from the ATO)

Investment properties, commercial properties, and houseboats do not qualify. The home must be a dwelling — vacant land alone is not eligible.

How Much Can You Contribute?

Each person can contribute the lesser of $300,000 or the total sale proceeds. For a couple who both meet the age requirement, the combined maximum is $600,000 from the sale of a single property.

The contribution does not need to equal the full sale price. You can choose to contribute any amount up to the cap. There is no minimum.

Example: Margaret and David, both 67, sell their family home for $1.2 million. Each can contribute up to $300,000 to their super, for a combined $600,000. The remaining proceeds are theirs to use as they wish — perhaps to buy a smaller property, pay off debt, or supplement their living costs.

Tax Treatment

The downsizer contribution is a non-concessional (after-tax) contribution, so:

• No tax deduction is available for the contribution
• The funds are not taxed when they enter super
• Investment earnings within super are taxed at up to 15% (or 0% if the fund is in pension phase)
• Withdrawals after age 60 are generally tax-free

This can be significantly more tax-effective than holding cash in a personal bank account, where interest is taxed at your marginal rate.

Impact on the Age Pension

There is one important trade-off. Money in superannuation is counted in the assets test and deemed under the income test for the Age Pension. A large downsizer contribution could reduce or eliminate your Age Pension entitlement if it pushes your assessable assets above the relevant thresholds.

If you are receiving or approaching eligibility for the Age Pension, seek financial advice before making a downsizer contribution. The interaction between super, pension entitlements, and the family home (which is exempt from the assets test while you live in it) can be complex.

Does It Make Sense for You?

The downsizer contribution is most beneficial if you:

• Are selling a home with significant equity and want to boost retirement savings
• Have a low super balance relative to your home equity
• Are not relying on the full Age Pension (or your super will not push you over the threshold)
• Want the tax advantages of the super environment for investment earnings

It may be less suitable if:

• You rely heavily on the Age Pension and a large super balance would reduce your entitlements
• You need the sale proceeds for living expenses in the short term
• You plan to use most of the proceeds to buy another property

How to Make the Contribution

1. Sell your eligible home and complete settlement
2. Complete the ATO downsizer contribution form (available on the ATO website)
3. Provide the form to your super fund before or at the time of making the contribution
4. Transfer the funds to your super fund within 90 days of settlement

Your super fund will not accept the contribution without the completed ATO form, so ensure this is prepared before settlement.

Estimate your property sale costs: Property Purchase Cost Calculator | Check CGT on your sale: Capital Gains Tax Calculator | Calculate your income tax position: Income Tax Calculator.

Sources: ATO — Downsizer Super Contributions, ASIC Moneysmart — Downsizing and Super, Services Australia — Assets Test for Age Pension.