From 1 January 2023, the minimum age to make a downsizer contribution was reduced to 55, allowing more individuals to use the proceeds from the sale of their home, to boost their retirement. This means an individual must be at least 55 years of age at the time they make the downsizer contribution even though they may have been under age 55 at the time contracts were exchanged and settled.
Eligible individuals, who settled on the sale of their eligible home any time after 1 April 2023, can still make a downsizer contribution in 2022/23 as it will be within 90 days of settlement, provided they are at least 55 at the time of the contribution.
Despite the name, there is no requirement that an individual actually ‘downsize’ their residence, nor must they buy another property – they must merely sell an eligible property. All other eligibility rules also remain unchanged and the maximum amount of downsizer contributions that can be made remains at $300,000 per person or $600,000 per couple.
For members taking advantage of the couple’s combined cap, there’s no requirement that they are both listed as owners of the home. There is also no need to split a downsizer contribution to reflect the proportion of legal ownership of the home. For a couple, contributions can be in any proportion so long as neither spouse contributes more than $300,000 and the total contributed is no more than the total proceeds received from the sale.
Consider whether there is an opportunity to delay downsizer contributions until after 30 June 2023. Although downsizer contributions are not restricted by a member’s TSB, once made they will be included in the future value of a member’s TSB which may impact their ability to make contributions in future years.
Example: Selling home in May 2023
Let’s assume a member recently sold their eligible home and settlement was in May 2023.
The eligibility rules for a downsizer contribution generally require the contribution to be made within 90 days of settlement (unless the ATO has granted an extension).
By delaying the downsizer contribution until after 1 July 2023, the member can retain a lower TSB and potentially boost their super using other contribution opportunities in 2023/24.
For example, this could enable the member to combine their downsizer contribution with the NCC bring-forward rules to contribute up to $630,000 in 2023/24. For a couple this could present a one-off opportunity to boost retirement savings by $1.26m.
Note: There is no requirement that a downsizer contribution be made from the actual proceeds of the sale of the eligible home. The contribution can be funded from other cash or assets.
There is no maximum age limit associated with a downsizer contribution. A trustee can still accept an eligible downsizer contribution for an individual over the age of 75.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.