The downsizer contributions into superannuation was introduced in the 2017-2018 Budget as part of the Government’s reforms to reduce pressure on housing affordability. This allows people who are 55 years and over to make a contribution into their superannuation after selling their home.
Eligibity for the downsizer contribution
You can make a downsizer contribution up to a maximum of $300,000 from sale proceeds of your home if you satisfy all of the following:
- you have not previously made a downsizer contribution to your super
- You are 55 years old or older (from 1 January 2023) at the time you make a downsizer contribution, the age was different for previous financial years
- There is an actual sale of the eligible dwelling, not the act of gifting
- You have provided your super fund with the Downsizer Contribution Into Super Form either before or at the time of making your downsizer contribution
- the downsizer contribution must be made within 90 days of receiving the proceeds of sale
Treatment of Downsizer Contributions:
Your downsizer contribution is not counted towards either your non-concessional contribution or concessional contribution caps. This means you can still make the contribution even if you have a total super balance greater than the Transfer Balance Cap. From 1 July 2023, the cap will be $1.9 million.
Frequently Asked Questions
Is there any legal requirement for repurchase the new home or the price of the repurchase?
There is no requirement for repurchasing new main residence. Additionally, if the SMSF Members purchase a new home, there is no requirement in terms of the property size and price.
What are the requirements for eligible dwelling?
- The SMSF Member must own the property for at least 10 years. The period is counted from acquisition date to settlement date.
- The home must be Australian residential property.
- The property cannot be a caravan, houseboat or other mobile home
- The property must be either fully or partially exempt from CGT under Main Residence Exemption or would be if acquired pre-1985
How much an SMSF can receive for downsizer contributions?
Each Member can contribute up to $300,000 from the property sale proceeds.
- For single Member, the maximum amount is the lesser of $300,000 and sale proceeds
- For couples that are all SMSF Members, the maximum amount are the lesser of $600,000 and sale proceeds. This applies even if only one spouse had the legal interest in the house sold. De facto partner is considered as spouse in this instance
Some facts to note
- SMSF Members can only make downsizer once. This means if the cap of $300,000 for each Member wasn’t exhausted from the first downsizer, it is forfeited
- SMSF Members have choice to make downsizer contributions to multiple funds with the downsizer form
- Trustees are responsible for making considered decisions since the downsizer is counted towards Transfer Balance Cap which is used to determine the contribution caps. This also depends on their personal situations
- The money put into the SMSFs for downsizer is not necessarily directly from the sale proceeds but the actual sale must incur.
