Selling a long-held family home often comes with a mix of financial opportunity and complexity. For many Australians aged 55 and over, the downsizer contribution rules offer a valuable way to move some of the sale proceeds into superannuation without being restricted by the usual contribution caps.
While the concept sounds straightforward, eligibility depends on a number of conditions that are often misunderstood. Getting it wrong can mean missing the opportunity altogether or triggering unnecessary compliance issues.
What Is a Downsizer Contribution?
A downsizer contribution allows eligible individuals to contribute up to $300,000 each into superannuation from the sale of a qualifying home. Couples may be able to contribute up to $600,000 combined, even if only one person owned the property.
These contributions sit outside the standard concessional and non-concessional caps, making them a powerful planning tool when used correctly as part of a broader superannuation strategy.
Basic Eligibility Rules
To be eligible to make a downsizer contribution, several conditions must be met:
- You must be 55 or older at the time the contribution is made
- The property must be located in Australia and generally owned for at least 10 years
- The sale must qualify for the main residence exemption, at least in part
- The contribution must be made within 90 days of settlement
- A downsizer election form must be lodged with the super fund no later than the time the contribution is received
The contribution amount is limited to the lesser of the gross sale proceeds or $300,000 per person, and it can only be used once per individual.
Does the Property Need to Be Fully CGT-Exempt?
One of the most common misconceptions is that the property must be fully exempt under the main residence rules.
That is not the case.
A property may still qualify even if only part of the capital gain is exempt, provided the other downsizer conditions are met. This can occur where the home was rented out for a period or used for income-producing purposes.
Understanding how the main residence exemption applies is critical, particularly where capital gains tax outcomes form part of wider tax planning and structuring decisions.
Does the Property Need to Be Your Main Residence at Sale?
Another point often misunderstood is timing.
The property does not need to be your principal place of residence at the time of sale. If you lived in the property for a period and later rented it out, it may still qualify, as long as the ownership and occupancy history supports at least a partial main residence exemption.
Each case turns on its specific facts, which is why these decisions should be reviewed carefully rather than assumed.
Special Considerations for Pre-CGT Properties
Where a property was acquired before CGT commenced, the downsizer rules look at whether some or all of the capital gain would have been disregarded if CGT had applied.
A key requirement is that there is a dwelling that qualifies as a main residence. Vacant land, even if previously used as a home site, will generally not meet this requirement and will not qualify for downsizer contributions.
Can a Non-Owning Spouse Contribute?
It is common for only one spouse to be listed on the property title.
In some circumstances, a non-owning spouse may still be eligible to make a downsizer contribution, even though they were not on title. This can apply where all other conditions are met, except for legal ownership.
However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to qualify. These scenarios require careful assessment before any contribution is made.
Preservation Rules Still Apply
While downsizer contributions are generous from a contribution perspective, they are not exempt from preservation rules.
Once contributed, the funds generally cannot be accessed until:
- You reach preservation age (currently 60) and retire, or
- You turn 65, regardless of your work status
Before locking funds into super, it’s important to consider future cash-flow needs and how the contribution fits within your broader business and cashflow plan.
Before You Make a Contribution
Downsizer contributions can be highly effective, but the rules leave little room for error. Timing, documentation, and eligibility all matter.
Before proceeding, it’s worth having your circumstances reviewed in full, particularly where there are CGT implications, mixed use of the property, or complex ownership arrangements. These decisions are best made with business advisory support, rather than in isolation.
Planning Ahead with Confidence
Downsizer contributions can be a powerful way to strengthen your retirement savings after selling a family home, but the rules leave little room for error.
Before making a contribution, having your circumstances reviewed can help confirm eligibility, manage tax outcomes, and ensure the strategy supports the retirement lifestyle you’re planning for. Trekk Advisory can help assess your position and guide you through the next steps with confidence.
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