Downsizer superannuation contributions

Exploring the federal rules for injecting home sale proceeds into your super fund.

Basics of the downsizer contribution rule

The Australian Government allows eligible individuals to make a one off post tax contribution to their superannuation fund using the proceeds from the sale of their main residence. This is known as a downsizer contribution. As of recent rule changes, the age eligibility has been lowered, making it accessible to more Victorians. You do not need to be working to make this contribution, and it does not count towards your standard non concessional contribution caps. This represents a significant opportunity to boost your retirement savings and move wealth from a non liquid asset into the superannuation environment.

There are strict limits on the amount you can contribute. Currently, each individual can contribute up to 300,000 dollars, meaning a couple can potentially move 600,000 dollars into their superannuation accounts. The property being sold must have been your main residence and must have been owned by you or your spouse for at least ten years. These rules are governed by the Australian Taxation Office, and you must follow the specific reporting requirements, including submitting the Downsizer contribution into super form to your fund before or at the time of the contribution.

Eligibility and timing requirements

Timing is critical when making a downsizer contribution. The contribution must be made to your superannuation fund within 90 days of receiving the proceeds of the sale, which is usually the date of settlement. Extensions are rarely granted and only under exceptional circumstances. You should also ensure that the home you are selling is located in Australia and is not a caravan, houseboat, or other mobile home. The ten year ownership period is calculated from the date of the original settlement when you purchased the home to the date of the settlement of the sale.

• Age eligibility (check ATO for current age)
• Maximum contribution of 300,000 dollars per person
• 10 year ownership requirement
• 90 day window for contribution after settlement
• Principal place of residence requirement

Impact on your Age Pension

While moving money into superannuation can be tax effective, it can also affect your entitlements to the Age Pension. Your family home is generally exempt from the Centrelink assets test. However, once you sell the home and put the proceeds into superannuation or a bank account, those funds are counted as assets. This change in asset status could reduce your pension payments or even result in the loss of your pension altogether. It is vital to seek advice from a financial planner or a Centrelink Financial Information Service officer before proceeding with a large downsizer contribution.

You should also check with your superannuation fund to ensure they accept downsizer contributions. Not all funds are set up to handle these specific types of payments, and there may be internal forms or processes you need to follow. If you are already in the pension phase of your superannuation, you may need to open a new accumulation account to accept the contribution before moving it into your pension account. Coordination between your conveyancer, your financial advisor, and your super fund is essential for a smooth transaction and to avoid missing the strict 90 day window.

Finally, remember that you can only use this scheme once. If you sell a property and make a downsizer contribution, you cannot do it again for a different property in the future. This makes it a unique opportunity that should be timed for when it provides the most benefit to your long term financial plan. Always refer to the Australian Taxation Office website for the most up to date rules, as the federal government frequently reviews superannuation and housing policies. Professional advice tailored to your personal circumstances is the best way to navigate these complex federal regulations.