Downsizing your home
Downsizing your life can help upsize your super – so you may have more money when you retire
Benefits
Selling your family home and contributing all, or some, of the sale proceeds to your super account, can be a great way to give your super a boost before you retire.
How it works
- You must be 55 or over
- You must have owned your home for 10 plus years
- You can contribute up to $300,000 individually (or $600,000 as a couple)
- Contribution must hit your super account within 90 days of the settlement.
- It was your primary residence (i.e. exempt or partially exempt from Capital Gains Tax)
- You must complete the ‘Downsizer contribution into super form’ and provide it to your fund before or at the time you make the contribution. This form is available from the ATO here
- It could impact on your eligibility for the government Age Pension
How much difference can it make?
Janelle is a single mum aged 55 and wants to downsize. If she decides not to make a downsizer contribution, her income from her CareSuper retirement income account will be $38,000 per annum.
Let’s see what her retirement income will be if she makes a downsizer contribution:
| Contribution | Income in retirement | Extra income |
|---|---|---|
| $150,000 | $46,000 per annum | $8,000 per annum |
| $300,000 | $52,000 per annum | $14,000 per annum |
Assumptions: Janelle has starting salary of $87,000 and starting balance of $92,000. She makes downsizer contribution at 55 and retires at age 67. Her super is invested in the Balanced option 5.5% (after fees but before taxes). Retire at age 67 starting an income stream invested in the Balanced option 5.5% (after fees but before taxes). Her aim is for her super to last up until age 92 (Life Expectancy + 5 years). Income is in today’s dollars. CPI – 2.5%. Salary and contributions indexation – 2.5%. AWOTE – 4%. Age pension rates as of August 2023.
How to make a downsizer contribution
To make a downsizer contribution complete the Downsizer contribution into super form from the ATO and return to us before you make your super contribution. Downsizer contributions can only be made by cheque, payable to CareSuper.
If you make more than one contribution, you’ll need to provide a form for each one.
All downsizer contributions must be made within 90 days of receiving the sale proceeds from your home. You may be eligible to apply to the ATO for an extension of time in some circumstances.
For all the T&Cs, check the ATO website.
#Up to $300,000 for singles.
FAQs
The main benefits of making downsizer contributions are tax incentives, that they don’t count toward the non-concessional contributions cap, and that you can contribute regardless of whether or not you’re still working – there is no upper age limit.
Further detail on the benefits as follows:
- Potential tax benefits: including no tax payable when you make the contribution, and if you move it to a retirement income account you won’t pay tax on investment earnings
- It’s a non-concessional contribution, but doesn’t count toward the non-concessional cap
- The work test doesn’t apply, so you can make this type of super contribution from age 55, and after age 75, whether or not you’re still working.
It’s a good idea to seek financial advice before you make a downsizer contribution, to make sure it’s right for your circumstances. You have access to financial advice as part of your membership.
You can’t make any further contributions to a retirement income account once it has been opened. You would need to either contribute the money to an accumulation account or start a new retirement income account.
Give us a call on 1800 005 166 if you need help with downsizer contributions – we can talk you through your options.
Yes, both you and your partner can make a downsizer contribution following the sale of your home. This is the case as long as the combined value of your two contributions will not exceed the sale price and the spouse that didn’t have an ownership interest meets all the other requirements.
Give us a call on 1800 005 166 if you need help with downsizer contributions – we can talk you through your options.
Downsizer contributions are used in the means (asset) test for the Age Pension.
If you currently receive the Age Pension, it’s a good idea to get financial advice before making a downsizer contribution to your super to see how it might affect your entitlements. You have access to financial advice to sort your super at no extra cost, it’s part of your membership.
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