Downsize Your Home + Boost Your Super!

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Downsize Your Home + Boost Your Super!

Written by: Samantha Butcher l Advisory Team


Many older Australians remain in their oversized family homes even after their children have grown and left the nest.  Historical contribution rules and the contribution caps have restricted these Australians from making contributions into superannuation from the sale of their family home in a bid to boost retirement savings post-age 65.  As a result, these larger family homes are being occupied by singles or couples and there is in turn, less property on the market for young and growing families.

Did you know that the ‘downsizer contribution’ was introduced in 2018 and is just one of the ways the federal government is hoping to reduce pressure on housing affordability?  The Australian Tax Office introduced the ‘downsizer contribution’ to reduce the restrictions on older Australians to downsize their home and contribute the proceeds into superannuation.

Fast forward a few years and in the 2021/22 Federal Budget there were changes to superannuation put on the table, specifically in regard to extending access to downsizer contributions.  The Australian Government proposed to lower the age that Australians can make tax-free contributions to their superannuation from the proceeds of selling their homes from the ages of 65 years old, down to 60 years old.

With the superannuation guarantee at the forefront of people’s minds, we want to highlight the value of the family home to help people through retirement, because that’s what we specialise in – retirement planning.  So let’s talk super and your home and how to boost your super savings!

How Does The Downsizer Contribution Work?

The downsizer contribution has eligibility requirements.  Like many government incentives, there are rules and regulations around eligibility.

If you have reached the eligible age, you may be able to contribute up to $300,000 from the proceeds of the sale (or part sale) of your home into your superannuation fund.

From 1 July 2022, the eligible age is 60 years old.  Prior to this, the eligible age was 65 years or older.

Some of the eligibility criteria you must satisfy are:

  • The home must be in Australia, have been owned by your or your spouse for at least 10 years and the disposal must be exempt or partially exempt from capital gains tax (CGT);
  • Your home is in Australia and is not a caravan, houseboat, or other mobile homes;
  • You have not previously made a downsizer contribution to your superannuation from the sale of another home or from the part sale of your home;
  • You make your downsizer contribution within 90 days of receiving the proceeds of the sale, which is usually at the date of settlement; and
  • Prior to (or at the same time) as making your contribution you must provide your superannuation fund with the ‘Downsizer contributions into super form‘.

It is important to understand that a downsizer contribution doesn’t count towards any of the contribution caps and will not affect your total superannuation balance until it is re-calculated at the end of the financial year.

However, downsizer contributions count towards your transfer balance cap.  This cap applies when you move your superannuation savings into the retirement phase and will be considered for determining eligibility for the age pension.

It is important to consider seeking advice from your financial adviser in relation to the age pension asset test.

What Are The Downsizer Contribution Rules?

You can only use downsizer contributions for the sale of one home.

We recommend checking that your superannuation fund will accept downsizer contributions and that you complete the necessary ‘Downsizer contributions into super‘ forms before you submit the funds.

As we mentioned above in regard to eligibility, you will have 90 days from receiving the proceeds to make the contribution.  You can make instalment payments, however, you will still only have a total of 90 days to make the full payment.  However, in some circumstances, you may be able to request an extension of time.

How Much Can You Contribute (To Your Financial Goals)?

You can make a downsizer contribution up to a maximum of $300,000 for each spouse, so a total of $600,000.  However, the contribution amount can not be greater than the total proceeds from the sale of your home.

Here are a couple of the most common examples we find with our clients:

Contribution of Maximum Amount

A couple, Edwina and Aaron, sell their home for $800,000.  Both Edwina and Aaron can contribute up to $300,000 each, so a total of $600,000 combined.

Contributions Cannot Exceed The Total Sale Price

A couple, Bruce and Claire, sell their home for $400,000.  The maximum contribution both individuals can make cannot exceed $400,000 in total.  This means they can choose to contribute half ($200,000) each, or split it – for example, $300,000 for Claire and $100,000 for Bruce.

When A Property Is Owned By One Spouse

A couple, Samantha and Jason, sell their home for $600,000.  Only Samantha is on the title.  Both Samantha and Jason meet all of the other requirements, therefore both Samantha and Jason can make a downsizer contribution of up to $300,000 each.

Sale of Home and Listed Share Portfolio

Zara has a portfolio of listed shares worth $150,000.  She sells her home for $500,000.  As Zara meets all of the other requirements, she is able to make a downsizer contribution of up to a maximum of $300,000 using a combination of her shares and her cash.

Selling Part of the Equity in Property

Phoebe and Gus decide to sell part of their home’s equity, allowing them to continue living in their home.

Their home is currently worth $500,000, they sell 20% of the home’s equity, which is $100,000.  They can make a downsizer contribution of up to $100,000 between them.  If they decide to sell more of the ownership interest in the property in the future, they will not meet the eligibility as they can only access the scheme in relation to one disposal of an ownership interest in the relevant home.

Canny Advisory + Helping To Maximise Your Retirement Planning Savings!

How do you envisage your retirement?  How is your superannuation balance looking at the moment?  If you’re considering downsizing to a smaller home and you think that you might meet the criteria, and are ready to sell your family home, downsizer contributions could be a great way to boost your superannuation savings.

We recommend seeking the advice of a financial adviser if this is one of the ways you are looking to increase your super balance for your retirement.  Canny Advisory is here to help.

Get in touch with our team to have a chat and find out how we can help.

Canny Advisory Director and Financial Adviser Samantha Butcher stands centre in the photograph wearing a short sleeve white top

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