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“Downsizer” super contributions for those who are 65 and older

Many Australian retirees find that they want a smaller home, or a home more suited to their empty-nest requirements. For some, selling the family home can be a great way to release built-up equity to pay for retirement living expenses or in-home support that will allow them to stay at home longer. Older Australians are the beneficiaries of the federal government’s policy to allow homeowners aged 65 years or over to sell their family home and invest some or all of the proceeds into their super account.

Despite the tightening of its tax concessions in the recent years, superannuation remains a tax-effective vehicle for building wealth. Some of the tax-related benefits of superannuation include access to a lower income tax rate on earnings in the fund (generally 15% and as low as 0% for retirees drawing pensions, with some limitations for those with large balances) and a tax-free income stream in retirement. On top of that, superannuation is protected against creditors’ claims (though it must be noted here that strict rules are in place against manipulation of this in anticipation of declaring bankruptcy) and super is excluded from the Net Asset Test for those small business owners who may want to qualify for Capital Gains Tax Concessions.

So what’s this downsizer contribution all about?

Broadly, it is an opportunity for those who are 65 or older to make an additional contribution into their superannuation from proceeds from the sale of their homes. Strictly speaking, downsizing is not required – you could upsize and still take advantage of this rule. Importantly, the downsizer contribution is exempt from existing contributions caps and certain other restrictions.

The downsizer contribution is not tax deductible to you. The scheme, rather, is about getting funds into the concessional superannuation environment.

What are the benefits?

1. Exempt from contribution caps

Because superannuation is such a tax-effective investment vehicle, allowable super contributions are limited by annual caps. For example, for the 2020 financial year the concessional contributions cap is $25,000 for deductible contributions which include your employer contributions and salary sacrifice. The annual non-concessional cap of $100,000 applies to non-deductible, after-tax contributions.

Importantly, from 1 July 2017 not everyone is permitted to make non-concessional contributions, and whether you are or not depends on whether you have reached or are approaching your “transfer balance cap”. Broadly, this restricts people with large balances from putting more money into super. If you are not sure where you stand with your transfer balance cap, please give your Ruddicks adviser a call and we’ll be happy to help you.

2. There is no work test or age limit

The existing work test which requires individuals who are aged 65-74 to pass a work test before any contributions to super does not apply to the downsizer contributions. In addition, those who are aged 75 or over cannot ordinarily make voluntary contributions to their super account but can make a contribution under the downsizer rules.

3. There is no requirement to buy a new home.

In addition, people selling their home are not required to buy a cheaper or smaller home after making a downsizing contribution, and conversely, it may be possible to purchase a larger or more expensive replacement home. It is also not a requirement to purchase a replacement home at all.

4. An opportunity to boost your super balance.

Where you have not had the opportunity to save sufficient funds for a comfortable retirement, the downsizing cap can be used to top up your balance.

As a result of the caps, as well as age limits on making contributions and the “work test” for those over 65, people who are approaching retirement may find themselves at the peak of their earning capacity and wanting to save as much as possible for a comfortable retirement but being unable to do so due to the restrictions in place. The “downsizer” contribution presents an opportunity to contribute up to $300,000 each from the proceeds of selling their home, in addition to the standard contribution caps.

How do I qualify for this?

In order to access this measure, some conditions must be met which include:

  • The individual is at least 65 years old when the contribution is made;
  • The contract for sale of the dwelling is exchanged on or after 1 July 2018, and the individual and/or their spouse owned the dwelling for at least 10 years before the sale;
  • Any capital gain or loss made on the sale of the dwelling is fully or partially exempt from tax under the Capital Gains Tax main residence rules;
  • The contribution is made within 90 days of the sale (generally, the date of settlement);
  • The individual notifies their superannuation fund (in the approved form) before, or at the time, of making the contribution; and
  • You can only make downsizing contributions from the sale of one home. You cannot access it for any subsequent home sale.
  • The total of your downsizer contribution must not exceed $300,000 or the total proceeds of the sale less any other downsizer contributions that have been made by your spouse.

Couples will be able to contribute up to $300,000 each, giving a total maximum contribution per couple of up to $600,000.

Whether you sell your home and move into another property that you buy or already own elsewhere does not affect the opportunity to make the downsizing contribution.


To be eligible to make a downsizer contribution, there is no requirement that a dwelling be used as an individual’s main residence just before disposal (or even throughout their entire ownership period), or that their main residence cannot also be used for income purposes.

This means that downsizer contributions may be made where, for example, the individual:

  • initially rented out the dwelling for a period before using it as their main residence;
  • used the dwelling as their main residence for a period before moving out and renting it out;
  • concurrently used the dwelling as their main residence and a place of business; or used a dwelling, situated on land they used in a farming business, as their main residence.

Should you wish to discuss your eligibility for the downsizer contribution or obtain further details in relation to it, please contact your Ruddicks adviser.

Please note the strict time frames outlined above, meaning that you need to act quickly following any house sale in order to benefit from this concession.

Additional information is available on the ATO website.


We are not licensed to provide financial product advice under the Corporations Act 2001 (Cth)and taxation is only one of the matters that must be considered when making a decision on a financial product, including on whether to make superannuation contributions. You should consider taking advice from the holder of an Australian financial services licence before making a decision on a financial product.


Liability limited by a scheme approved under Professional Standards Legislation.

The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 28 May 2020, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.

Any advice provided is not ‘financial product advice’ as defined by the Corporations Act. Ruddicks is not licensed to provide financial product advice and taxation is only one of the matters that you need to consider when making a decision on a financial product. You should consider seeking advice from an Australian Financial Services licensee before making any decisions in relation to a financial product. © Ruddicks 2020

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