Is ‘downsizing’ worth it?

From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has reduced to 55 from 60, more people have an opportunity to use this strategy if it suits their needs.

What’s a ‘downsizer’ contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.

Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple).

This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

Let’s look at the eligibility criteria:

You are 55 years or older (from 1 January 2023) at the time of making the contribution.
The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.
The home is in Australia and is not a caravan, houseboat, or other mobile home.
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 post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.
You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.
The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one.

Get in touch to start a conversation.

We provide strategic business and tax advisory, underpinned by our expertise in financial planning to ensure we develop financial structures that are smart and well considered.

LET'S TALK LET'S TALK

25 Sep

Navigating the Changing Legal Landscape: Key Updates for Employers

WEBINAR 25 SEPT // 12PM

The final session focuses on the changing legal environment, highlighting recent amendments to the Fair Work Act, capturing independent contractors under workers' compensation schemes, payroll tax considerations, superannuation compliance, and practical steps to mitigate risks.

READ MORE READ MORE

11 Sep

Super Guarantee and Employee Terminations: Compliance Essentials for Employers

WEBINAR 11 SEPT // 12PM

In the third session, we'll delve into superannuation guarantee changes, including proposed changes to payday superannuation, new rates and bases, and the impact on SG liability. Gain insights into employer deductions, termination of employment considerations and more.

READ MORE READ MORE

4 Sep

Allowances, FBT, and Compliance for Employers

WEBINAR 4 SEPT // 12PM

Master allowances and reimbursements, understand their PAYG and super guarantee implications, and learn to navigate travel vs. living-away-from-home allowances. Gain insights into FBT considerations, new ATO record-keeping requirements, and effective salary packaging arrangements.

READ MORE READ MORE

Related News

2 Sep

How to Prepare a NFP Self-Review Return

Starting July 1st, 2024, non-profit organisations (NFPs) in Australia with an ABN, but not recognised as charitable, must annually submit a NFP self-review return to the ATO to confirm their tax exemption status. This process involves three main sections:

READ MORE READ MORE

12 Aug

The Power of Systemisation: Why, How, and What Types of Businesses Can Benefit

Systemisation is the backbone of a successful business. It is the process of creating repeatable and efficient workflows that streamline operations, reduce stress, and foster growth. This blog explores why businesses should embrace systemisation, how they can implement it, and what types of businesses stand to benefit the most.

READ MORE READ MORE

16 Jul

Small Business Productivity: Industry & Regional Trends

Building on the findings from Xero Small Business Insights (XSBI) report, Small business productivity: Trends, implications and strategies, this special report presents industry and regional labour productivity data for small businesses.

READ MORE READ MORE