Downsizer Contributions Explained
A downsizer contribution lets eligible older Australians contribute proceeds from selling their home into superannuation, outside the normal contribution caps and without needing to meet a work test — a useful option for people whose wealth is tied up in property rather than super.
How it works
If you meet the eligibility rules, you can contribute up to a set amount (per person, meaning a couple can potentially contribute double between them) from the proceeds of selling your home into your super fund, within 90 days of settlement. Because it's a specific, separate category, downsizer contributions don't count toward your concessional or non-concessional contribution caps — see Contribution Caps Explained for how those caps work for other contribution types.
Who's eligible
Broadly, you generally need to be over a minimum age, have owned the home for a minimum period, and the property generally needs to have qualified as your main residence (or partly so) at some point — exact eligibility criteria are specific, so it's worth checking the current rules in detail, or with your fund, before assuming you qualify.
Why it doesn't require a work test
Normally, making voluntary contributions later in life can require meeting a work test (demonstrating a certain amount of gainful employment) — see Contribution Caps After 60. Downsizer contributions are specifically exempt from this requirement, which is part of why they're a useful option for fully retired people who otherwise couldn't add to their super through normal voluntary contributions.
How it interacts with the Age Pension
Adding a downsizer contribution to super doesn't reduce your assessable assets the way spending or gifting money might, since it simply moves money from one assessable asset (the sale proceeds, or the home before sale in some contexts) into another assessable asset (your super balance) once you're of Age Pension age — worth understanding clearly before assuming it will improve your pension position. See Superannuation and the Age Pension for how the assets test generally treats super once you're of pension age.
Things to consider before using it
Factors that are often weighed up before making a downsizer contribution include accommodation plans and costs after selling (downsizing doesn't always mean a cheaper property, once purchase and moving costs are factored in), the transfer balance cap if the contribution is being moved into pension phase (see Account-Based Pensions Explained), and whether the timing fits with broader retirement plans. Because these factors interact with each other, a licensed financial adviser can help weigh them up for a specific situation.
Frequently asked questions
Do I have to buy a smaller home to use a downsizer contribution?
No — despite the name, there's generally no requirement to purchase a cheaper or smaller property afterward, or even to purchase another property at all, provided the other eligibility criteria are met.
Can both partners in a couple make downsizer contributions from the same sale?
Yes, in many cases each eligible partner can make their own downsizer contribution from the same home sale, up to their own individual limit.
Does a downsizer contribution count toward my transfer balance cap?
It doesn't count toward contribution caps, but once inside super, moving it into a pension is still subject to the transfer balance cap like any other pension transfer.
Downsizer contribution eligibility rules and limits are set by legislation and can change — confirm current details on ato.gov.au before publishing.
This article contains general advice only. It has been prepared without taking into account your personal objectives, financial situation or needs, and does not constitute a recommendation to acquire, hold, or dispose of any financial product. Before acting on this information, consider its appropriateness to your own circumstances, and seek independent financial, tax and/or legal advice, or speak with a licensed financial adviser, before making any decision.
