Is your house the key to your retirement?
Simplify and secure your future with a downsizer contribution
Selling the family home can be a difficult decision — especially if it’s where you raised a family and lived some of the best years of your life.
But downsizing into retirement can have a lot of benefits, both to your lifestyle and finances.
Downsizing often means lower mortgage repayments, lower property taxes, reduced insurance, and smaller bills. It can also mean less cleaning, mowing and maintenance.
Importantly, the proceeds from selling your home can free up much-needed capital to significantly boost your super. This can provide greater flexibility and security in retirement.
Potential benefits of downsizing in retirement |
Potential cons of downsizing |
|
|
What is a downsizer contribution?
Downsizer contributions allow you to contribute up to $300,000 from the sale of your home into super as a one-off post-tax contribution. If you’re a couple, you and your partner can contribute up to $300,000 each.
This can be a tax-effective way to boost your super savings and secure a tax-free retirement income stream after you turn 60.
Contrary to popular belief, downsizing doesn’t always mean moving into a smaller place. You can sell your home, move to the country for a tree change and buy an even bigger home if you really wanted to. And you can still make a downsizer contribution if you still have funds left over.
Benefits of downsizer contributions
Downsizer contributions were introduced to encourage older Australians to sell their family homes to fund their retirements. They were also designed to ease pressure on the housing market.
As a result, they come with a lot of tax benefits.
You don’t pay any contributions tax on downsizer contributions.
Downsizer contributions don’t count towards any contribution caps and don’t affect your total super balance until it’s re-calculated at the end of the financial year. This means you can make a downsizer contribution even if your total super balance (across all super funds you participate in) is over $1.9 million.
There’s no maximum age limit to downsizer contributions. Usually, you can’t make voluntary contributions into super after age 75. Downsizer contributions can be made any time after you turn 55.
You can make multiple downsizer contributions from the proceeds of a single sale. However, your contributions mustn’t exceed $300,000 or the total sale proceeds of your home.
Who’s eligible?
To take advantage of this scheme:
- You must be over 55 years old.
- You or your spouse must have owned your home for at least ten years.
- Your home must be in Australia (and isn’t a caravan, houseboat, or other mobile home).
- Your home must be your primary residence and exempt or partially exempt from capital gains tax (i.e. it can’t be an investment property).
- You mustn’t have previously made a downsizer contribution in relation to another home.
- The downsizer contribution can’t be greater than the sale proceeds of your home.
- The contribution must be made within 90 days of receiving the sale proceeds unless you’ve been granted an extension of time from the ATO.
Downsizer case studies
Helping John and Cheryl downsize
John (76) and Cheryl (69) are both retired and have decided to sell their family home to move interstate for a more relaxed lifestyle. The sale proceeds are $800,000. They can both make a downsizer contribution into super of $300,000 into each of their super accounts ($600,000 in total).
Helping Brett and Sally downsize
Brett and Sally (both 62) still work part-time but are empty nesters. They decide to sell their large family home and buy a small apartment. The sale proceeds are $700,000. They can both make a downsizer contribution of up to $300,000 each ($600,000 in total) into super.
Helping Eric and Joan downsize
Eric (76) and Joan (68) are both retired and decide to sell their home and travel. The sale proceeds are $400,000. The maximum contribution they can make is $400,000. This means they can contribute half ($200,000) each or split it – for example, $300,000 for one and $100,000 for the other.
Find out more
To find out more, read our Thinking of downsizing your home? fact sheet.