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.
From 1 January 2023, Australians aged 55 and over may be eligible to make a downsizer contribution to super from the proceeds of selling their home. The eligible age was originally 65 when the scheme commenced on 1 July 2018, reduced to 60 from 1 July 2022, and then to 55 from 1 January 2023.
You can contribute up to $300,000 per person, meaning an eligible couple may contribute up to $600,000 combined, provided the contributions do not exceed the proceeds received from the sale. Downsizer contributions are separate from the normal non-concessional contribution cap.
To qualify, you or your spouse must generally have owned the home for at least 10 years, and the sale must qualify wholly or partly for the main-residence Capital Gains Tax exemption. The sale contract must have been entered into on or after 1 July 2018, and the contribution generally needs to be made within 90 days of receiving the sale proceeds. You must not have previously made a downsizer contribution from the sale of another home.
You also need to provide your super fund with the Downsizer contribution into super form (NAT 75073) before or when you make the contribution. There is no work test and no maximum age limit for making an eligible downsizer contribution.
A downsizer contribution can increase the amount you hold in super, but different rules apply when money is moved into the tax-free retirement phase. The general transfer balance cap is $2.0 million for 2025—26 and $2.1 million for 2026—27. Your personal transfer balance cap may be lower depending on when you first started a retirement income stream and how much of your cap you have previously used.
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).
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.
Age Pension considerations
Downsizing can also affect your eligibility for the Age Pension. Your principal home is generally exempt from the assets test, but once sale proceeds are contributed to super their treatment may change. Once you reach Age Pension age, superannuation is generally included in the assets test and assessed under the income test using deeming rules. Services Australia recommends considering professional advice or speaking with its Financial Information Service before making a decision.
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.
