The 2017/18 federal budget introduced a downsizing superannuation contribution scheme starting from 1 July 2018. It may be available to you if you’re over 65, your downsizing your home and you choose to contribute some of the proceeds from the sale into your super fund. The contribution is capped at $300,000 per person (so $600,000 for a couple).

The Government’s aim is to encourage the older population to downsize their larger than needed homes to free them up for the younger generation looking to buy their family home.

The eligibility requirements are:

– You must be 65 or over (there is no maximum age limit)
– The sale contract of the property must be dated on or after 1 July 2018
– You (or your spouse) must have owned the property for 10 years or more prior to sale
– The home must have been your main residence for at least 10 years
– The downsizer contribution must be contributed to the super fund within 90 days of receiving the sale proceeds (usually 90 days from settlement)

The good thing about the downsizing contribution is that it does not count towards any of your yearly contribution limits and can be made by anyone over the age of 65. Moreover, the work test is ignored for this contribution, so it is a great way for someone who is over 65 and fully retired to put more money into their super fund where they otherwise could not.

The downside is that it could affect your eligibility to receive the age pension. Age pension eligibility takes into account all financial assets including money in super, but the family home is exempt from age pension eligibility calculations. So by shifting value from a non-assessable home to an assessable super investment you may exceed the age pension asset or income thresholds and reduce your pension eligibility.

Before considering using the downsizing contribution it is highly recommended that you speak to your accountant or financial planner. This way you can confirm your eligibility for the contribution and whether it will affect your age pension.

Other related blogs:

Contributing to super – options for employees
What are the benefits of super salary sacrifice?
Allowing catch up concessional contributions

Author: Rhys Frewin