How downsizing your family home can help to give your super a tax-free boost without the usual restrictions.

Downsizing your home¹ is one way to boost your super savings in a tax-efficient way. Eligible Australians can put up to $300,000 into their super from the proceeds of selling their family home, without the usual restrictions

The downsizer contribution is tax-free (i.e., no tax is paid on the way into super). It also won’t count towards your annual contribution caps, as it can be made in addition to any concessional and non-concessional contributions.

And despite the name, there is no requirement to buy a new, smaller home with the money you make from the sale.

Those aged 55 years or older at the time of making the contribution, may be eligible to make a downsizer super contribution. There is no work test or upper age limit to meet the eligibility criteria².

If you have a spouse aged 55 years or older, they can also make a downsizer contribution of up to $300,000 ($600,000 per couple) to their super from the same proceeds.

• The home you sell must be a residential building in Australia and not a caravan, mobile home or houseboat.
  
  
• You and/or your spouse need to have owned the house for at least 10 years before the sale. If only one spouse owned the home, the other is also eligible to contribute if the other conditions are met.
  
  
• The home you sell must be exempt or partially exempt from main residence capital gains tax (CGT) (or if the home was purchased before 20 September 1985, it would have qualified if it were a CGT asset)
  
  
• You have not previously made a downsizer contribution to your super from the sale of another home or from the partial sale of your current home.

Will selling your home impact your eligibility for the Age Pension? Your family home isn’t counted as part of the means test for the Age Pension. However, if it’s sold and the proceeds go towards a downsizer contribution, this will be included in the Age Pension eligibility tests. That means you may reduce or lose your entitlement to the Age Pension.

Downsizer contributions count towards your transfer balance cap if you use your super to open a pension account.

• Contact your super fund first to confirm that they could accept your downsizer contribution.
  
  
• You must submit a downsizer contribution into super form to your super fund with or before your downsizer contribution is made.
  
  
• Contributions to your super account must be made within 90 days of receiving the proceeds of the sale unless you apply for and are granted an extension of time.

Find out more via the Australian Taxation Office.

A downsizer contribution allows eligible Australians aged 55 and over to contribute up to $300,000 from the sale of their home into super. For couples, this can mean up to $300,000 each, depending on eligibility.

A downsizer super contribution is not counted towards standard contribution caps, which makes it a useful option for boosting retirement savings later in life. Adding a large lump sum through a downsizer contribution to super may increase your overall super balance and retirement income potential, depending on how your savings are invested.

It may also affect Age Pension eligibility once you reach pension age, as super is generally included in income and assets testing.

Put your home equity to work for your retirement

If you’re eligible, a downsizer contribution can be a powerful way to boost your super. With Australian Ethical, those funds can continue working towards your retirement goals while supporting companies aligned with your values.

Invest your downsizer contribution ethically

All our super and pension portfolios are guided by our Ethical Criteria, so your retirement savings stay aligned with what matters to you.

Seamless transition into pension

When you’re ready, you can move your super into one of our ethical pension options and start receiving regular retirement income.

Support at every step

Our team and online resources can help you understand eligibility, contribution rules and how a downsizer contribution fits into your broader retirement plan.

Following the downsizer contribution rules carefully is important. A common issue is missing the 90-day deadline to make the contribution after settlement. Another mistake is assuming the home qualifies without meeting the main residence capital gains tax exemption requirements.

Some people also overlook the need to submit the correct downsizer forms to their fund, or misunderstand how the contribution interacts with other retirement and Centrelink rules.

Downsizer contributions can be a useful way to add to your super later in life, but eligibility rules and pension impacts are important to understand. Australian Ethical provides resources to help you compare your options and decide what suits your circumstances.