Selling your family home has wonderful lifestyle and financial benefits. Whether you’re dreaming of holidaying in exotic places, planning to help your children buy their first home or want to unlock equity to boost your superannuation, it’s all possible with downsizing. 

There are limits on how much you can funnel into superannuation, but for people downsizing in Australia, those limits are greater. This is especially lucrative because you’ve likely retired or are planning to, so you’re no longer contributing to the fund. 

About the downsizer measure

Australians 65 years and over can make a non-concessional (after-tax) contribution into their superannuation up to $300,000 from the proceeds of selling the family home — as long as they’ve owned the property for at least 10 years.

This contribution includes your transfer balance cap (TBC), which is the limit on the total amount of superannuation that can be moved into the tax-free retirement phase to begin the income stream.  For more information about the TBC threshold, visit the ATO. 

From July 1 2022, the eligibility age to make a downsizer contribution will reduce to 60.  

To be eligible for this contribution, the property must be your main residence (for Capital Gains Tax purposes) and be sold in the family name. If you’re a couple, you can contribute up to $600,000 — but $300,000 into each superannuation account. You can only access this scheme once. The downsizer super contribution must be made within 90 days of receiving the house sale proceeds. You can apply for an extension under special circumstances. 

Granted you meet the downsizer contribution eligibility requirements, you can contribute any amount under $300,000. This might be $100,000, $150,000 or $200,000.  

Benefits of this scheme

The greatest advantage of the downsizer measure is the huge injection into your superannuation. There’s no work test, (upwards) age limit or condition to buy a new house. With the 90-day window to contribute, you can use that money however you like (including investing). 

Tax considerations

As an after-tax downsizer super contribution, there’s no tax paid on it. For individuals over 65, it’s returned tax-free when the funds are withdrawn in the future. 

However, downsizer contributions will be taken into account when determining age pension eligibility. Because your main residence is exempt from the assets and income tests, it’s important to know you’ll be moving your money into the non-exempt category. An individual’s super balance is used to determine eligibility for residential aged care and home care services. While this might not be a need now, it’s worthwhile understanding for the future. 

The ATO website is the best source for up-to-date information on the downsizer measure. To complete a contribution, a specific form is required. 

How much super do you need to retire?

While your specific lifestyle will map out your superannuation plan, experts suggest to plan $640,000 for a couple and $545,000 for an individual. These figures account for a partial Age Pension. Use this retirement calculator to help estimate your ideal income. 

Another option is to work out your yearly spending and multiply by 20 or 25. Assume you’ll require two-thirds of your pre-retirement income to maintain the same quality of life. For example, a weekly expenditure of $750 equals $39,000 per year. You’ll need $780,000 in retirement to last you 20 years. 

Just like careers, no one individual retirement scenario is the same as the next. You might choose to continue to work casual or part-time. You could buy another (smaller) home or decide to rent. You might have other investments or Government support available. No one retirement path fits all. That’s the beauty of it — this is the chapter to take full ownership of your life. 

While retirement undoubtedly raises financial concerns, empower yourself at this life stage with planning, support from your family, as well as people who live in this world every day. 

Homesuite will help guide your downsizing journey, maximise your sale price, and coordinate the services you need along the way… all for a flat fee of $299, or free, if you engage a real estate agent we connect you to.