The downsizer superannuation contribution applies to those aged 65 years or over. Who may want to contribute some of the proceeds from the sale of their home to superannuation.
Legislation enabling the downsizer superannuation contribution measure was passed in December 2017. This meant, people aged 65 and over, who sold their principal/main residence could contribute up to $300,000 each to their superannuation fund from the sale proceeds.
The downsizer superannuation contribution may appeal to those individuals who previously could not contribute to the tax-advantages superannuation provides. Mainly due to age based eligibility and work test restrictions.
The downsizer superannuation contribution eligibility criteria:
- You must enter the contract to sell the property after 1 July 2018.
- You make the downsizer superannuation contribution when your are 65 years of age or older.
- The property must be located in Australia and cannot be a caravan, mobile home or houseboat.
- You and/or your spouse must have owned the home for at least 10 years prior to the sale.
- The property is the person’s main residence. Or is eligible for at least a part main residence capital gains tax exemption, including a residence purchased pre-September 1985.
- An election form is provided to your super fund before or with the contribution.
- You have 90 days from settlement to make the contribution.
- You have not previously made a downsizer superannuation contribution to your fund from the sale of another home.
A person can contribute a maximum of $300,000. However, the actual sale proceeds of the house can potentially limit this.
Examples of the downsizer superannuation contribution
John and Kate (both aged 65+)
John and Kate sell their main residence for $400,000. They also have $200,000 in the bank. John and Kate are limited to contributing a combined total of $400,000 in any ratio. Which does not exceed the $300,000 per person contribution cap. Such as Kate making a contribution of $300,000 and Rob contributing $100,000.
Peter and Lily (both aged 65+)
Peter and Lily sell their main residence for $700,000. Both Peter and Lily could contribute up to $300,000 each as downsizing contributions. They could contribute the remaining $100,000 as a non-concessional contribution (NCC). This would be subject to meeting the over 65 work test and their previous 30 June total super balance.
Other things to consider
Your total superannuation balance does not impact your ability to make a downsizer superannuation contribution. This will however, increase your total superannuation balance and may affect your eligibility for future contributions.
This measure does not necessarily allow this contribution to be moved to a tax-exempt pension phase. As the amount that can be moved to a tax-exempt pension phase in super is limited by the $1.6 million pension transfer balance cap.
Your main residence is an exempt asset for Centrelink. However, Centrelink will asses the sale proceeds leading to a reduction or loss of social security benefits.