Introduced in 2018, the downsizer superannuation contribution strategy gives Australians aged 65 and above a considerable opportunity to boost their superannuation savings. It means that eligible people can now sell their home and make voluntary superannuation contributions of up to $300,000 from the proceeds of the sale.

Retirees can add to their super balance

This legislation allows people to add to their super balance by selling their home once they near retirement age. It can be extremely beneficial for those who been unable to maximise their superannuation contributions during their working life. (See Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017.)

However, there are eligibility criteria that need to be met before a person qualifies for the right to make a superannuation contribution from the proceeds of selling their home. Aside from a person needing to be aged 65 or over at the time the contribution is made, the home which is sold must have been owned by the individual for a minimum of 10 years and must have been their principal place of residence.

The criteria also specify that a tax deduction cannot be claimed for the contribution and that the contribution must be made within 90 days of settlement.

The tax office website gives further details and provides examples of downsizing superannuation contributions, including the fact that existing contribution caps and restrictions do not apply to this initiative. (See Downsizing contributions into superannuation.)

Also important to note is that the downsizer contribution can still be made if an individual has a total superannuation balance greater than $1.6 million.

Reasoning behind introduction of downsizer voluntary superannuation contributions

The downsizer contribution was introduced to help ease pressure on housing affordability in Australia.

Its aim is to encourage empty nesters, or people aged 65 and over, to sell their large family home and downsize to a smaller property, possibly outside the big cities.

What is a property downsize?

Although the government classifies these superannuation contributions as a result of "downsizing", there is no definition in the legislation of what constitutes downsizing.

In fact, people don't have to buy a smaller home or buy any new home at all. To qualify for the downsizer contribution, the law simply asserts that the home you sell cannot be a caravan, houseboat or mobile home.

Downsizer contribution may impact tax, financial planning and estate planning

The downsizer contribution can provide a number of tax advantages. However, it may also have an unforeseen impact, with certain implications for tax, inheritance and estate planning matters.

Before considering making a downsizing superannuation contribution, it is advisable to seek professional advice from a trusted business planner with legal expertise, to determine whether this would be beneficial in your particular circumstances.

Tony Mitchell
Wealth protection
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.