Recent changes implemented this year, enable more people to access downsizer contributions.
As of 1 July 2022, people aged 60 and over (from 65 and over) can utilise these rules to contribute to super.
The eligibility requirements
Currently, individuals will need to satisfy the following requirements to be able to make downsizer contributions:
An individual will be eligible to make a downsizer contribution to super if they can answer yes to all of the following:
they are 65 years old or older at the time they make a downsizer contribution (there is no maximum age limit);
the amount they are contributing is from the proceeds of selling their home where the contract of sale exchanged on or after 1 July 2018;
their home was owned by themself or their spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale;
their home is in Australia and is not a caravan, houseboat or other mobile home;
the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset;
they have provided their super fund with the downsizer contribution into super form either before or at the time of making the downsizer contribution;
they make the downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement; and
they have not previously made a downsizer contribution to their super from the sale of another home.
Note: If their home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements.
How much can be contributed?
If a person is eligible for the downsizer contribution, then:
$300,000 for each individual; and
the gross capital proceeds received (before any mortgage repayments or costs incurred from the sale such as agent fees).
It is important to note that contributions can only be made in respect of one eligible property (regardless of how much was contributed), but multiple contributions can be made for that property (to different superannuation funds for example) if they are made within the above cap and timeframe (90 days).
What if the home was in a retirement village?
The requirement to dispose of an ownership interest in a dwelling can also be satisfied where the sale is in relation to an interest in a retirement village.
Based on the definition in the Tax Act, an individual is taken to have an ownership interest:
for a dwelling which is not a flat or home unit, they have a legal or equitable interest in the land on which the dwelling is erected or a licence or right to occupy it; or
for a flat or home unit, the individual has – a legal or equitable interest in a stratum unit, or – a licence or right to occupy it, or – a share in a company that owns a legal or equitable interest in the land on which the flat or home unit is erected and that it gives them a right to occupy it.
Of note, the retirement village accommodation does not meet the definition of a caravan, houseboat or other mobile home (for example, transportable homes where the person owns the property but leases the land on which it stands) as these are specifically excluded by the downsizer contribution legislation.
Contract Craig Phillips for more information about the downsizer contribution.