Upsize your retirement savings with downsizer contributions
The downsizer superannuation contribution provides an opportunity for eligible people aged 55 and over to sell their home and make a contribution to superannuation from the proceeds.
You may be eligible to make additional contributions to super of up to $300,000 (or $600,000 per couple) from the proceeds of the sale of your home.
What are the possible benefits of making a downsizer contribution?
The benefits of making a downsizer contribution vary depending on individual circumstances but may include:
increasing your retirement savings • increasing your savings without the need to satisfy normal eligibility criteria (including total super balance test and being under age 75)
the contribution is not assessed against any of your other contribution caps, meaning that you could contribute even more to super
if the amount remains in the accumulation phase of superannuation, investment earnings are taxed at a maximum of 15% rather than your marginal tax rate (which could be higher, if you invested the proceeds outside super)
if the amount is used to commence a superannuation income stream, earnings on this amount are taxed at 0% rather than your marginal tax rate (if you invested the proceeds outside super)
the amount forms part of the tax-free component which is not taxable when you withdraw it, or if paid to a nontax dependant (such as an adult child) after death.
How does it work?
Downsizer contributions are superannuation contributions that have been sourced from the sale proceeds of your current home or a property that you sell that you’ve treated as your main residence at some point since you’ve owned it.
The maximum downsizer contribution that you can make is the lesser of $300,000 or the total proceeds received from the sale. As this is an individual limit, this means that for couples, it may be possible to contribute a combined amount of up to $600,000. However, the total downsizer for each person is limited to a maximum of $300,000, and the total combined downsizer contributions for a couple cannot exceed the total proceeds from the sale.
Multiple contributions can be made, however, the contributions can only be made from the sale proceeds of one eligible dwelling.
This means that if you don’t fully utilise your $300,000 downsizer cap, you can’t make additional downsizer contributions if you later sell another property that qualifies.
To be eligible to make a downsizer contribution the following must be satisfied:
You are aged 55 or over at the time the contribution is made
The contribution is from the proceeds of the sale of a single eligible property in Australia (and is not a houseboat, caravan or mobile home)
You have owned the property for at least 10 years prior to the sale KnowHow Upsize your retirement savings with downsizer contributions
You claim the capital gains tax (CGT) main residence exemption on the sale of this property (wholly or partly)
The contribution is made within 90 days of settlement
You complete the required paperwork to elect to treat the contribution as a downsizer contribution and submit the form to your super fund (either before or when the contribution is made)
You do not claim a tax deduction for this contribution; and,
You have not previously made a downsizer contribution in relation to another sale.
To find out more about the downsizer contribution, how the rules apply to you and some other things you should think about, speak to your financial adviser.
You can also visit ato.gov.au for more information.