31 Jan 2023
If eligible, older Aussies can put up to $300,000 into their super using the money from the sale of their main residence, regardless of caps and restrictions that otherwise apply.
If you’re looking to boost your retirement savings, you may be able to make a tax-free contribution to your super of up to $300,000 using the proceeds from the sale of your main residence.
The good news is that thanks to changes first announced in the 2021-22 Federal Budget, the age Australians can make downsizer contributions was reduced from 65 to 60 from 1 July 2022.
Here are some things you’ll need to know if you’re considering using the proceeds of the sale of your home to top up your super.
Benefits of making a downsizer contribution
- Downsizer contributions provide a way to top up your super balance. Older Aussies, who haven’t had the chance to save enough funds for retirement, may find that tax-free downsizer contributions provide a good opportunity to top up what they’ve saved to date.
- No work test or upper age limits apply to downsizer contributions.
- Annual concessional and non-concessional contributions caps don’t apply. In fact, downsizer contributions can be made in addition to any concessional and non-concessional super contributions you may be eligible to make.
- Downsizer contributions aren’t subject to the $1.7m total super balance restriction. You usually can’t make non-concessional contributions into your super if your total super balance is $1.7 million or above as at 30 June of the previous financial year. But this rule doesn’t apply to downsizer contributions.
- There are no requirements to buy a new home. If you sell your main residence and make a downsizer contribution into your super, you’re not required to buy a new home with money you might make on the sale.
- Both members of a couple can take advantage. For couples, both spouses can make the most of the downsizer contribution opportunity, which means up to $600,000 per couple can be contributed toward super.
Rules and other considerations to be aware of:
- Currently, you must be aged 60 or older to make a downsizer contribution
- The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time and you need to have owned the home for at least 10 years
- The sold property must be in Australia and excludes caravans, mobile homes and houseboats
- A downsizer contribution must be made within 90 days of receiving the sale proceeds
- A downsizer contribution form must be given to your super fund before or when making your contribution
- You can’t have previously made a downsizer contribution to super
- The maximum amount of super savings (not including subsequent earnings) that can be transferred into a retirement pension increased to $1.7 million on 1 July 2021, but not for everyone. Downsizing your home may impact age pension eligibility. There is no special Centrelink means test exemption for making downsizer contributions
- The costs involved in selling a property and buying another one (if that’s also on the agenda) can be considerable, so you’ll need to take into account any additional property-related costs
- Downsizer contributions are not tax-deductible super contributions.
Where to go for more information
Depending on your situation, other rules may apply, so do your research and contact us if you’d like to find out more about downsizer contributions.
©©AWM Services Pty Ltd. First published Jul 2022
If you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser.
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
