Downsizing Contributions Into Superannuation

Wednesday 11 Apr 2018

   
   

 

From 1 July 2018, the Australian Government will introduce the “Contributing the proceeds of downsizing into superannuation (downsizing)” measure. This measure is part of a package of reforms to reduce pressure on housing affordability in Australia.

From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made if an individual has a total super balance greater than $1.6 million.

Your downsizer contribution will not affect your total super balance until your total super balance is re-calculated to include all your contributions, including your downsizer contributions, on 30 June at the end of the financial year.

The downsizer contribution will also count towards your transfer balance cap, currently set at $1.6 million. This cap applies when you move your super savings into retirement phase.

If you sell your home, are eligible, and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:

  • you are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
  • the amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018
  • your home was owned by you or your spouse for 10 years or more prior to the sale
  • your home is in Australia and is not a caravan, houseboat or other mobile homes
  • the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset
  • you have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution
  • you make your downsizer contribution within 90 days of receiving the proceeds of the sale, which is usually the date of settlement
  • you have not previously made a downsizer contribution to your super from the sale of another home.

Importantly, if the home is owned by both names, $300,000 each can be contributed to super. 

These initiatives will certainly make down-sizers think seriously about the benefits of making the move!

 


- Majid Mokhtari