If you’re thinking of selling your home, you may be able to give your super a boost by making a ‘downsizer contribution'. The downsizer contribution was introduced by the government as part of a broader initiative to help improve housing affordability. It gives people over a certain age the opportunity to make a super contribution of up to $300,000 from the proceeds of the sale (or part sale) of their home. Downsizer contributions aren’t subject to the usual contribution caps and restrictions applied to super contributions.
To be eligible to make a downsizer contribution, you must meet several conditions.
You must be aged 55 years or older at the time you make the contribution. The amount you contribute can’t be more than the capital proceeds you’ve received from the sale of a qualifying property in Australia, and can’t be more than $300,000
If you’re a member of a couple, you each have a limit of $300,000. This means a couple may be able to contribute up to a maximum of $600,000 combined, but the combined amount is limited to the proceeds of the sale.The property must have been owned by you or your spouse at the time of the sale and, generally, you (or your spouse) must have owned it for a minimum of 10 years.
Any capital gain or loss from the sale of the property must qualify (or would have qualified) for a full or part main residence capital gains tax (CGT) exemption
You must make the contribution within 90 days of selling the property, unless the Australian Taxation Office (ATO) has allowed you more time
You must make a choice to treat the contribution as a downsizer contribution. The choice is made by completing the ATO Downsizer contribution into super form and providing it to your super fund at or before the time you make your contribution, and
You can’t have previously made a downsizer contribution, or had one made on your behalf, in relation to an earlier sale.
It’s important to note that any money contributed to super is generally preserved. This means you can’t access it until you meet certain conditions – for more information on accessing your super see ‘When and how can I access my super?’.
As with many super related matters, the rules can be complex. Seeking advice from a financial adviser before making a downsizer contribution may help you understand how the rules apply to your circumstances.
You may also find this information on the ATO website helpful.
Questions and Answers
Do I need to provide any specific paperwork to my super fund to make a downsizer contribution?
Yes, it’s essential that you complete the ATO’s Downsizer contribution into super form and provide it to your fund before or at the time you make your downsizer contribution.
Super funds are not permitted by law to accept the form after the contribution is made. If the form is provided late, the contribution won’t be treated as a downsizer contribution.
If you’re a member of the Macquarie Superannuation Plan, downsizer contributions to your super account need to be made by direct debit using the Macquarie Superannuation Direct debit request form.
Is there a maximum age to be eligible to make a downsizer contribution?
No, there is no maximum age, but you do need to be at least age 55 at the time the contribution is made.
Does the contribution count towards my non-concessional contribution cap?
No. Downsizer contributions have their own limits and don’t count towards any other contribution caps or limits.
Does the property need to be my home at the time of sale?
No, but it does need to have been your primary place of residence at some point. This means you need to have lived in the property for a period and treated it as your main residence for CGT purposes.
When does the 90-day requirement to make the contribution start?
The ATO’s view is that in most cases this time starts when the settlement of the sale occurs. This date is usually different to the date the contract for the sale of the property was entered into.
What if I can’t make the contribution within 90 days?
You, or your tax agent, can speak to the ATO about your circumstances and request an extension.
When does the 10-year ownership period start and stop?
The ATO’s view is that the ownership period generally starts from when the settlement of the purchase occurs and end on the settlement of the sale.
Do I need to buy a new property to be eligible to make a downsizer contribution?
Despite the name of the scheme, you don’t need to buy another property to be eligible to make a downsizer contribution.
If I qualify, but don’t make a downsizer contribution, can I make a downsizer contribution later if I sell another property?
If you’ve previously sold your home and decided not to make a downsizer contribution, you may still qualify in relation to the sale of a different property in future.
If I have a high total super balance, does this prevent me from qualifying?
No, your total super balance doesn’t affect your eligibility to make a downsizer contribution.
If I don’t qualify for a main residence CGT exemption because I bought the property before 20 September 1985, can I still qualify?
In this scenario, you need to consider whether you would otherwise qualify for a full or part CGT exemption if you had bought the property on or after 20 September 1985. If not, then you won’t qualify for making the downsizer contribution.
What happens if I make a downsizer contribution and later find out that I don’t qualify?
The ATO is likely to reclassify your contribution from a downsizer contribution to a non-concessional contribution. This means it will count towards your non-concessional contribution cap. Depending on your circumstances, this may have tax implications.
Can my spouse make a downsizer contribution if I own the property?
Yes, your spouse may be able to make a downsizer contribution, provided they otherwise meet the eligibility requirements outlined above.
