One of the biggest changes to superannuation that became effective 1 July 2018 - the downsizer super contribution. These contributions present a unique opportunity to add to your super even in circumstances in which you would otherwise be unable to contribute under superannuation law due to your age or work status.

In short, it allows people aged 65 or more, who sell their homes, to make extra contributions to their super of up to the lesser of the sale proceeds, or $300,000. The home must have been the person’s primary residence at some time and must have been owned for at least 10 years. The normal contribution rules around having to be under 75 and meet a work test and other contributions caps don’t apply.

A major benefit is that downsizer contributions are not treated as non-concessional contributions so that your total superannuation balance (which can impact non-concessional contributions) won’t impact your ability to make a downsizer contribution. This means the contribution can be made even if your Total Super Balance  (TSB) is $1.6m or more.

Colonial First State’s Head of Technical Services, Craig Day, says it’s an opportunity for people who are looking at downsizing into a smaller or less expensive home to top up their super with any surplus sale proceeds.


Flexibility comes from the fact that although it’s called a downsizer contribution there is no restriction on what you buy next. It could be a larger home, an investment property, a holiday home, aged care or no home at all. The rules even allow you to sell a current investment property that was at one stage the family home as long as the other downsizer contribution rules are met. That means that you may have more than one property that qualifies. Each individual may choose one property they want to use in relation to their downsizer contribution

“The interesting thing about it is that it applies for both the person owning the house as well as their spouse, so even if the house is in only one person’s name, a couple could still get up to $600,000 into superannuation where they’ve essentially been prohibited from contributing for the last couple of years because they’re over 65 and retired,” Day says.

In essence, those most likely to benefit from the downsizer contribution are those self funded retirees who are excluded from receiving a government pension due to exceeding the income and/or assets tests and who are planning to relocate for a sea or tree change or those wishing to maximise their super.

It’s important to note that the rule only applies where the contract of sale of the relevant property is exchanged on or after 1 July 2018 and the contribution is then made within 90 days of settlement.

“So, if you’re planning to sell anyway, it’s worth planning the dates carefully,” says Day.

What else do you need to do?

So apart from meeting the age test of being at least 65 years old at the time of contribution, the funds must come from the disposal of a property in Australia that qualified the contributor1 for at least a partial main residence capital gains tax (CGT) exemption or would have qualified, in full or part, if it is a pre-CGT asset, acquired before 20 September 1985.

The property must also have been owned by you or your spouse for a continuous period of at least 10 years. Ownership can be held solely, jointly, or as tenants in common and there is no need for the spouses to have been in a relationship for 10 years or more as long as one spouse has met the 10 year requirement.

You must make any contribution within 90 days of the receipt of sales proceeds.

The amount of the contribution will be the lesser of the sale proceeds or $300,000 per individual. Therefore a couple may be eligible to contribute up to $600,000.

It is critical that you notify the super fund trustee that it's a downsizer contribution, at or before the time of the contribution, by completing the ATO downsizer contribution form.

Important things to remember

  • Your principal home is termed an “exempt asset” when it comes to the social security assets test. However, amounts in super are counted under the assets test and generally subject to deeming under the income test if you are old enough to apply for age pension (currently 65.5 or older). This means a downsizer contribution could reduce, even eliminate, any means-tested social security payments (eg, the age pension) and associated pensioner concession card. A downsizer contribution could also impact your eligibility for a Commonwealth Seniors Health Card.
  • Another important thing to consider is that if you intend making non-concessional contributions in addition to a downsizer contribution, timing the contributions may be critical. This is because non-concessional contributions should be made before, or at least in the same financial year as downsizer contributions in case the downsizer contribution pushes your Total Superannuation Balance (TSB) above $1.6m. If your TSB on 30 June is $1.6m or more, your non-concessional contributions cap in future financial years will reduce to nil. In comparison, you can still make a downsizer contributions when the TSB is $1.6m or more.
  • It’s also worth calling out that the home must be affixed to land so that means caravans, houseboats, or other mobile homes are not eligible.
  • Downsizer contributions cannot be used to claim a tax deduction.
  • It’s also a one-off event and only one home sale ever is eligible for downsizer contributions. So if you sell a home and contribute less than the $300,000 maximum you are not able to make subsequent “make up” downsizer contributions on a later sale.


To illustrate how the downsizer contribution would work, Day has supplied two scenarios.

Scenario 1

A couple over 65 with $500,000 in super and a house worth $1.3m are receiving an age pension of $27,141 combined. The couple sell their house and buy a $900,000 apartment. They then make downsizer contributions of $200,000 each.

In this case, the couple’s assessable assets would increase from $500,000 to $900,000, which exceeds the current assets test cut-off threshold of $848,000. As a result they would cease to qualify for any age pension and would lose entitlement to the pensioner concession card. Note however, that the assets test outcome is the same regardless of whether the couple contributed the proceeds to super as a downsizer contribution or invested the proceeds in another fully assessable financial investment.

The couple would also be unlikely to get any tax benefit from contributing the proceeds to super and commencing an account based pension (ABP) because, assuming a 5% rate of return, the income they would receive from investing the $400,000 outside super would be less than their effective tax-free threshold of $29,609 (each), taking into account the tax-free threshold and offsets.

Based on Social Security rates as at 20 September 2018 and tax-free threshold of a couple eligible for LITO, LMITO and SAPTO in 2018/19.

Scenario 2

A self-funded retiree couple with no age pension and the following assets:

  • A 4-bedroom house valued at $1m
  • A residential investment property valued at $1m and generating a net rent of $40,000 a year (4% return)
  • Other non-super investments of $1.5m generating a net investment income of $75,000 a year (5% return)
  • Super Fund assets of $800,000 super providing an account based pension (ABP) generating tax-free income of $40,000 a year (5% return)

After selling their home for $1m and purchasing a 2-bedroom apartment for $1m, they make a combined $600,000 downsizer contribution from their non-super investments and commence a second account based pension (5% return).

As the investment income and pension payments from the ABP are tax free, the couple’s assessable income is reduced by $30,000 ($600,000 x 5%), which results in a tax saving of $11,475 (based on 2018/19 tax rates).  

Who might benefit?

The downsizer contribution can be of great assistance to older Australians who would otherwise be unable to increase their super balances. There are many factors to consider and you should seek professional financial advice before making a downsizer contribution to ensure you maximise the opportunity and understand any reduction in age pension that may result.

Explore our investing & super products

Tell me more

Things you should know

1 Where a spouse does not personally hold an ownership interest in the old dwelling just before it is sold, they must have chosen to treat the dwelling as their main residence for some period prior to their spouse selling the dwelling. 

objectives, financial situation or needs. You should consider talking to a financial planner before making any financial decision based on this information. This document has been prepared by Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, (Commonwealth Financial Planning) a wholly-owned, but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning. 

Information in this article is based on current regulatory requirements and laws. While care has been taken in the preparation of this document, no liability is accepted by Commonwealth Financial Planning, Commonwealth Financial Planning related entities, agents and employees for any loss arising from reliance on this document. Taxation considerations are general and based on present taxation laws. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Before you make a decision about your combining your super if you multiple accounts, you should compare the costs, fees, risks and benefits of each super fund. It makes sense to consider whether you can replace any insurance cover you may lose when you bring your accounts together, as well as any costs for withdrawing from other super funds and any investment or tax implications.