Feature – downsizing

1 Feb,2018

On 13 December 2017, the Government’s downsizing proposal was passed as law meaning that older Australians may be able to boost their retirement savings if they sell the family home.

The downsizing measure

From 1 July 2018, if you are over 65 years, you may be able to contribute up to $300,000 from the sale of your primary home to your super.

This money is not counted towards your contribution limits nor affected by the total super balance test that financial year.

However, it will count towards your total super balance and total income stream transfer balance cap. The amount is included with any super balances for age pension calculations and is not tax deductible.

Who is eligible for this measure?

There is no requirement to buy a smaller home, or any home for that matter, for this measure to apply, and

You must meet all the following criteria to be eligible:

  • be 65 years or older when you make the contribution (there is maximum age limit)
  • the house being sold is your main residence prior to the sale
  • you and/or your spouse must have owned the house for at least 10 years prior to the sale
  • your home is in Australia and is a permanent structure (ie caravans, houseboats and other mobile options are excluded)
  • the contribution is based on a sale contracted on or after 1 July 2018
  • you make the contribution within 90 days of receiving the proceeds of the sale
  • you have not previously made a downsizer contribution to super – the measure can only be used against the sale of one home
  • the proceeds (the capital gain or loss) of the sale are exempt or partially exempt from capital gains tax (CGT) as a main residence

You can only contribute up to the proceeds  of a single sale, even if that amount is less than the $300,000 limit.

Sally made $150,000 from the sale of her family home, so she can make a downsizer contribution of $150,000 or less.

Louis made $500,000 from selling his family home but is limited to a maximum $300,000 downsizer contribution.

Does it apply to couples?

The downsizing measure applies to an individual so a couple may be entitled to contribute $600,000 in total.

The proceeds of a sale can be split in any proportions between the couple but the total proceeds (or $600,000) is the maximum amount that can be contributed by the couple.

Amy and Charles sold their house for $500,000 (after allowing for relevant expenses and liabilities) and are both eligible for the downsizer measure. They could each contribute $250,000 into super, or Amy could use her entire $300,000 limit while Charles just contributes $200,000 to help rebalance their individual balances (based on women’s lower average balance)

How to make a downsizer contribution

Once you have confirmed you are eligible and sold your home, you can make a downsizer contribution to AvSuper (note not all super funds will accept such contributions).

You must complete a downsizer contribution form (available from the ATO) and provide it to your super fund with or ahead of the contribution. By doing so, you are declaring you are eligible to make a downsizer contribution.

To contribute to AvSuper, simply deposit the money into our bank account, using your member number as the reference. Let us know about the deposit via our form or use our electronic form, selecting downsizer as the contribution type.

To make downsizer contributions to multiple super funds you will need one form per fund. Note that the total contribution must be under $300,000 – it is not a limit of $300,000 per account!

When to make contributions

You have 90 days from receiving the proceeds (usually settlement date) to make a downsizer contribution. The Commissioner of Taxation may grant an extension to the 90 days in some circumstances.

What if I make a contribution mistake?

If it is discovered that your downsizer contribution was not an eligible contribution, your super fund will be notified and adjustments will be made.

Where feasible, the contribution will be treated as a personal contribution but only if you are under contribution limits and otherwise meet the fund’s contribution rules.

Otherwise the contribution will be returned to you by your fund.

Penalties may apply if the Commissioner finds you incorrectly declared eligibility under fraud and misleading rules.

Please contact our Member Advice Team if you are considering selling your home so we can discuss if the downsizing measure suits your circumstances.

Want your super to take off?

Want your super to take off?

Want your super to take off?

Some ideas for breakout boxes

Sample – call out box using Divi module styling

Amy and Charles sold their house for $500,000 (after allowing for relevant expenses and liabilities) and are both eligible for the downsizer measure. They could each contribute $250,000 into super, or Amy could use her entire $300,000 limit while Charles just contributes $200,000 to help rebalance their individual balances (based on women’s lower average balance)

Sample – call out box using Divi module styling

Amy and Charles sold their house for $500,000 (after allowing for relevant expenses and liabilities) and are both eligible for the downsizer measure. They could each contribute $250,000 into super, or Amy could use her entire $300,000 limit while Charles just contributes $200,000 to help rebalance their individual balances (based on women’s lower average balance)

Sample – call out box using Divi module styling

Amy and Charles sold their house for $500,000 (after allowing for relevant expenses and liabilities) and are both eligible for the downsizer measure. They could each contribute $250,000 into super, or Amy could use her entire $300,000 limit while Charles just contributes $200,000 to help rebalance their individual balances (based on women’s lower average balance)

Sample – call out box using Divi module styling

Amy and Charles sold their house for $500,000 (after allowing for relevant expenses and liabilities) and are both eligible for the downsizer measure. They could each contribute $250,000 into super, or Amy could use her entire $300,000 limit while Charles just contributes $200,000 to help rebalance their individual balances (based on women’s lower average balance)

This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). Printed 27 September 2020.