Older Australians can contribute the sale proceeds of their home to their superannuation when downsizing.
From 1 July 2018, eligible individuals have been able to make a contribution to their super of up to $300,000 from the proceeds of the sale of their home. Fortunately, individuals are not required to purchase another home to access this measure.
Those aged 65 and over (prior to 1st July 2022 and then aged 60 & over after this date) must meet the following eligibility requirements to make downsizer contributions to their super:
- the contract of sale must be exchanged on or after 1 July 2018;
- an individual or their spouse has owned the home for 10 or more years before the date of settlement of the sale;
- the home is located in Australia and is not a caravan, houseboat or other mobile homes;
- the sale proceeds are exempt or partially exempt from CGT under the main residence exemption or entitled to an exemption if the home was a CGT rather than a pre-CGT asset.
If you meet the aforementioned requirements, you must make your downsizer contribution within 90 days of receiving the proceeds of the sale – usually the date of settlement. Additionally, you will need to provide your super fund with the downsizer contribution form either before or at the time of making your contribution.
Individuals can make multiple downsizer contributions as long as they do not exceed $300,000 or the total sale proceeds less any other downsizer contributions that have been made by a spouse.
It is important to note that you can only make a downsizer contribution to your super from the sale of a single home. Therefore, if you sell another home in the future and you have previously used the downsizer contribution, you will no longer be able to access this measure.
The downsizer measure is available for those with a total super balance greater than $1.6 million. It will not affect your total super balance until your total super balance is recalculated to include all your contributions, including your downsizer contributions, on 30 June (at the end of the financial year).
- The measure will, however, count towards your transfer balance cap – set at $1.7 million. This cap affects you when you move your superannuation into the retirement phase.
- The downsizer contribution will also be considered to determine age pension eligibility.
- If you cannot make your contribution within 90 days of settlement due to factors outside of your control, you will need to apply for an extension of time with the ATO.
- Contributions that are incorrectly declared eligible may be subject to false and misleading penalties.
Before making a downsizer contribution, ensure you meet the eligibility requirements, check that your super fund accepts downsizer contributions and that the contribution will not conflict with your future retirement plan, i.e., exceed the transfer balance cap or affect your eligibility for the age pension assets test.