As of 1 January 2023, you can now make downsizer contributions to superannuation if you are 55 or older, previously you would need to be at least 60 years old to utilise the downsizer contribution option.
The downsizer contribution option allows an individual to contribute up to $300,000 ($600,000 for a couple) from the proceeds of the sale of their principal residence to superannuation, without it being assessed under the contribution caps. The contribution can still be made even if your total super savings are greater than $1.7 million, and it is also treated as an after-tax contribution, so no tax is paid on the way in to superannuation.
Other than the age requirement the other criteria that must be satisfied to be able to make a downsizer contribution are:
· The property must be in Australia and must have been owned for at least 10 years.
· You must be eligible for some form of exemption from capital gains tax (CGT) on the sale of the property under the “main residence” provision.
· The contribution must be made to super within 90 days of the proceeds being received. The ATO downsizer contribution form must also be provided to your superannuation provider, before or at the time the contribution is made.
Whether making a downsizer contribution is appropriate for you or not will depend on your personal circumstances, as you need to consider that funds will be ‘locked away’ in superannuation until you reach preservation age and retire or satisfy another condition of release to access your superannuation. If you are in receipt of the Age Pension from Centrelink or expect to be in the future, you also need to consider the impact that downsizing your home will have on your Centrelink entitlement.
If you are considering the option of downsizing your home, please don’t hesitate to contact one of our dedicated financial advisers to discuss your options.