From age 55 you can move up to $300,000 each from selling your home into super, outside the normal contribution caps. Here is how the rules work.
If you have sold or are about to sell a long-held family home, the downsizer contribution lets you top up your super with a large lump sum that sits outside the usual contribution limits. It is aimed at older Australians who want to free up money from the family home in retirement. The rules are specific, and getting one of them wrong can turn the contribution into something the fund has to reject or treat differently, so it pays to understand them before settlement.
According to the ATO, you can contribute up to $300,000 per eligible person. For a couple, that means each spouse can put in up to $300,000, so up to $600,000 between you. There is one important ceiling: the total of your downsizer contributions cannot be more than the total proceeds from the sale. So if a couple sells for $800,000, each can contribute up to $300,000. If they sell for $400,000, their combined downsizer contributions cannot exceed $400,000, though they can split that amount however they choose.
A useful quirk is that only one spouse needs to have been on the title. If your home was legally owned by just one of you, the other spouse can still make a downsizer contribution as long as the remaining conditions are met.
You need to meet all of the following for a contribution to qualify as a downsizer contribution:
| Condition | Detail |
|---|---|
| Age | 55 or older at the time of the contribution. No upper age limit, no work test. |
| Ownership period | You or your spouse owned the home for 10 or more years before the sale. |
| Main residence | The sale qualifies for the main residence CGT exemption, fully or partially (or would have, for homes bought before 20 September 1985). |
| Property type | A residential building in Australia. Caravans, houseboats and mobile homes do not count. |
| One-off | You have not previously made a downsizer contribution from another home. |
| Form and timing | Give your fund the ATO downsizer form before or at the time you contribute, within 90 days of receiving the proceeds. |
Note that you do not actually have to buy a smaller home, or any home at all. Despite the name, there is no requirement to "downsize" your living arrangements. The scheme is about the sale of a qualifying home, not what you do next.
Timing matters. You must contribute within 90 days of receiving the sale proceeds, which is usually the settlement date. You also must complete the ATO's "Downsizer contribution into super" form (NAT 75073) and give it to your super fund before or at the time you make the contribution. If you contribute in several payments, you complete a form for each one. If you cannot meet the 90-day window, you can apply to the ATO for an extension, but the ATO is clear that an extension cannot be granted simply to help you reach the minimum age of 55.
The big drawcard is that a downsizer contribution does not count towards either the concessional or non-concessional contribution caps. That makes it valuable for people who have already used up their normal caps. You can also make it even if your total super balance is already high, which is not true of after-tax non-concessional contributions.
There are two flow-on effects to keep in mind. First, the contribution is included in your total super balance once your fund reports your 30 June balance, which can affect your eligibility for other contribution types in later years. Second, like any super amount, it counts towards your transfer balance cap when you move money into a retirement phase pension. If you would like a refresher on how the broader super contribution rules fit together, our salary sacrifice guide and super co-contribution explainer are good starting points.
This is the trap that catches people. Your family home is generally an exempt asset for the age pension, but cash and super are not assessed the same way. Moving money out of an exempt home and into super or a bank account can increase your assessable assets and change your pension entitlement. The ATO specifically flags that selling your home and making a downsizer contribution may affect income support payments, and points people to Services Australia. If you receive or expect to receive the age pension, model this before you commit.
Disclaimer: This article explains downsizer super contributions in general terms and is not financial or tax advice. Rules and thresholds can change. Check the current rules on the ATO downsizer contributions page, consider the Moneysmart guidance, and speak to a licensed financial adviser before acting.