Downsizing and contributing to Super

Downsizing and Super

During the last budget the government proposed legislation (now law) that comes into effect on July 1 to allow those downsizing their home to make an additional contribution to Superannuation.

The legislation allows for home owners aged 65 or over to contribute up to $300,000 into Superannuation from the proceeds of the sale of their home into Superannuation.  To be eligible the house must be the family residential property and be owned for at least 10 years. The house must also be exempt from capital gains tax. It should be noted there is no requirement to buy a new home.

This contribution is in addition to other contribution caps and those making it do not have to meet the work test or age limits to make the contribution. The contribution must be made within 90 days of receiving the funds from the sale of the property. The $300,000 limit is for each member of the couple and the downsizing contribution has a 1 off life time limit.

This presents an opportunity as many older Australians have a significant portion of their wealth tied up in their residential property and many also live in properties much bigger than they need. This will allow those inclined to do so the opportunity to downsize their property and free up assets to provide for their ongoing needs in a tax free environment.

There are a number of things of that need to be considered before implementing this strategy.

Funds unlocked by downsizing the property are assessable for both Centrelink asset and income tests. The family home is asset test exempt, so by downsizing you are effectively moving a portion of your assets from an exempt asset to an assessable asset. This may reduce any pensions that you may be receiving.

Although this contribution is exempt from the $1.6 million super balance contribution restriction (normally you are unable to make non-concessional contributions if your Super balance exceeds $1.6 million), the transfer cap remains in place. This means you are still only able to move $1.6 million to pension phase, any additional funds must remain in accumulation phase. Pension phase earnings are tax free whereas accumulation fund is taxed at 15% on income and capital gains are taxed at 10%.

It should also be noted that there are significant transfer costs associated with downsizing. Sales cost, stamp duty and alike all reduce the funds available to contribute after downsizing. The cost of doing so may limit the effectiveness of the strategy.

This new legislation is an excellent opportunity for many, but before acting, Id strongly recommend getting advice.

Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services


  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State


  • University of Western Sydney
  • Penrith High


As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

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