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Downsizer super contributions

Downsizing your house?

If you are selling your house, the government allows you to contribute some of the sale money into super. This can be a great way to boost your super savings, either before or during retirement.

What is a downsizer super contribution?

When selling your house, you may be able to contribute up to $300,000 into your super account as a ‘downsizer contribution’, without paying tax.

You must be aged 55 and over, and can make a downsizer contribution whether you are working or retired.

If your partner is 55 and over, they can also make a downsizer super contribution to their super of up to $300,000. This would allow an eligible couple to contribute a total of $600,000 to their super savings.

Who is eligible to make a downsizer contribution?

  • Aged 55 and over
  • Selling your own home in Australia
  • You and or / partner must have owned the home for a minimum of 10 years and used it as your main residence at some stage
  • You have not already made a downsizer contribution
  • You make the downsizer contribution within 90 days of receiving the money from the sale of your house

The benefits of making a downsizer super contribution

There are many benefits to making a downsizer contribution, however there are also some limitations to be aware of.

Benefits Limitations
It allows you to boost your super before, or during, retirement You and or your spouse / partner must have owned the home for at least 10 years
You can contribute up to $300,000 per individual. A total of up to $600,000 per couple.

 

 You and or your spouse / partner must be aged 55 years or older to make downsizer contributions to their own super.
Downsizer contributions don’t count toward voluntary contribution limits.

 

 You cannot claim a tax deduction for a downsizer contribution as it’s a tax-free contribution
A spouse / partner can make a downsizer contribution to their super even if their name wasn’t on the title of the property You must have used the house as your main residence for some time during the ownership, and have no capital gains tax on the sale of the house
You can also make additional voluntary contributions or salary sacrifice contributions to super (within the applicable contribution limits) You can only make one downsizer contribution to super, so if you sell another house, you cannot make another downsizer contribution
It’s a tax-free contribution to your super You must submit a downsizer contribution form either before you make the contribution or at the same time as the contribution
It may impact your eligibility for the Age Pension

Downsizer contribution case study

Julie, aged 62 and Mike, aged 67, are both retiring and would like to spend some time travelling around Australia in their caravan.

  • Julie has a super balance of $97,000
  • Mike has a super balance of $157,000

Based on their combined super balances their retirement income will be $58,496 per year, made up of superannuation as well as the Age Pension.

Now that their kids have left home Mike and Julie think about selling their current house and buying a smaller place.

They speak with a financial planner and learn about contributing some of the money from the sale of their house into super.

When they sell, they decide to contribute $190,000 to Julie’s super and $150,000 to Mike’s super.

Current super balance Downsizer contribution amount Final super balance after downsizer contribution
Julie $97,000 $190,000 $287,000
Mike $157,000 $150,000 $307,000
Total $254,000 $340,000 $594,000
Retirement Income $58,496 a year $75,332 a year

Source: Moneysmart Retirement Planner

The difference a downsizer contribution could make

These downsizer contributions make a large difference, giving Mike and Julie an extra $16,836 each year, allowing them to move from a modest lifestyle and achieve a comfortable lifestyle in retirement.

Their combined annual income would increase to $75,332, from both super and the Age Pension.

Their financial planner explains that if they were to transfer their super into a First Super Retirement Income account, their income payments each month would be tax-free and they would continue to earn investment returns on their money.

If you’re ready to make a downsizer contribution, complete and return the ATO Downsizer Contribution form when you make your contribution.

Is a downsizer contribution right for you?

To make the most of a downsizer contribution and work out if it’s the right choice for you, it’s best to speak with a qualified financial planner.

Financial advice about downsizer contributions is included in your membership, there’s no extra cost. Give us a call on 1300 368 988 to find out how a downsizer contribution could benefit you.