Budget: Australians 60 and over may also downsize to top up super
11 May 2021
5
min read
Eligible Australians aged 60 and over may be able to use some of the proceeds from the sale of the family home to top up their superannuation, under a change in the rules reducing the downsizer eligibility age from 65 years to 60.
Under changes revealed in the 2021-22 Federal Budget, from 1 July 2022, the minimum age for the downsizer contribution will be lowered from 65 to 60. Please note this change is proposed, but still subject to legislation.
This will allow Australians nearing retirement to make a one-off contribution of up to $300,000 per person (or $600,000 per couple) when they sell their family home.
The change means more Australians will have greater flexibility to contribute to their super savings and may encourage people to downsize sooner and increase the supply of family homes, according to the Government.1
QSuper Chief of Member Experience, Jason Murray, said since it was introduced, the downsizer contribution had become part of the retirement income mix.
He said it allowed people to achieve two goals – to move to more suitable accommodation as their family size dropped and to turn the capital tied up in their home into retirement income.
Extension of the program to younger members will give them more flexibility in planning their retirement, adding to the sense of security about what their future income will be,” Mr Murray said.
“We expect it will be a popular measure for people aged between 60 and 65 when they can access it.”
Downsize your home to upsize your super
The downsizer scheme was introduced in the 2017-18 budget.
It currently allows people aged 65 or over to make a one-off contribution to their super account worth up to $300,000 after selling their home, outside of the normal rules governing the tax treatment of super.
From 1 July 2022, people aged 60 or over will be eligible to make downsizer contributions to their super.
Who is downsizing?
QSuper members downsizing their family homes contributed almost $97 million to their super accounts in 2019-20, which was the second year of the government’s downsizer measure.
More than 520 QSuper members made downsizer contributions, with the average contribution around $200,000 and an average age of 73.
This was up from 320 members using the scheme in 2018-19.2
In 2018-19, the first year of the scheme, 4,246 individuals in total across Australia downsized from their family homes, contributing $1 billion to their superannuation funds.3
How the downsizer contribution works
If you are eligible, the downsizer contribution is an amount of up to $300,000 that can be paid in to your super, from the proceeds of selling your home. If you have a spouse, the total contribution is up to $600,000 ($300,000 each).
Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps.
People with balances over the transfer balance cap (which is $1.7 million from 1 July 2021) are also able to make a downsizer contribution, however the downsizer amount will count towards that cap when savings are converted to the retirement phase.
Who is eligible for the downsizer scheme?
You (and if applicable, your spouse) will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:
- You are 65 years old or older at the time you make a downsizer contribution (there is no maximum age limit). From 1 July 2022, you must only be aged 60 or above.
- The amount you are contributing is from the proceeds of selling your home, where the contract of sale was exchanged on or after 1 July 2018.
- Your home was owned by you or your spouse for 10 years or more prior to the sale (the ownership period is generally calculated from the date of settlement of purchase, to the date of settlement of sale).
- Your home is in Australia and is not a caravan, houseboat, or other mobile home.
- The proceeds (capital gain or loss) from the sale of the home are either exempt, or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption, if the home was a CGT rather than a pre‐CGT (acquired before 20 September 1985) asset.
- You have provided your super fund with the Downsizer Contribution into Superannuation form either before, or at the time of making your downsizer contribution.
- You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
- You have not previously made a downsizer contribution to your super from the sale of another home.
What could a Downsizer contribution mean for your retirement income?
The examples below show how utilising the downsizer scheme may impact your retirement. The examples are illustrative only.
A 60-year-old adding $200,000 to your super balance would be able to draw an additional tax-free income of $16,351 per year until age 88.4
A 60-year-old adding $300,000 to your super balance would be able to draw an additional tax-free income of $24,527 per year until age 88.5
Interested in making a downsizer contribution?
Send QSuper the form before or at the same time you make your downsizer contribution
1. Australian Government, Budget 2021-22, Fact Sheet, Superannuation: More flexibility for older Australians at budget.gov.au
2. QSuper member data
3. Media Release, 28 June 2019, Downsizer contributions reach $1 billion, at ministers.treasury.gov.au
4. These figures are illustrative only and assume an earnings rate of 7.5%pa(net of fees and taxes) and the $16,351 in annual income being indexed to CPI each year.
5. These figures are illustrative only and assume an earnings rate of 7.5%pa (net of fees and taxes) and the $24,527 in annual income being indexed to CPI each year.)