Downsizing your home

Summary

How downsizing your home can help grow your super

Thinking of downsizing your home in the lead-up to retirement? Eligible Australian homeowners can contribute money from the sale of their family home into super.

If you've owned a principal home (Capital Gains Tax exempt-full or partial) for 10 years or more, are 55 or older and have not previously made a downsizer contribution, you may be eligible to make a downsizer contribution of up to $300,000 per person, separately (up to $600,000 if a couple) from the sale of your home¹. It’s one way to boost your super savings as you near retirement and might be looking for a smaller home.

Downsizing your home may affect your eligibility for or payments from the Government Age Pension. Consider getting financial advice before downsizing your home.

Downsizer super contributions: how they work

A robust Australian property market, post-pandemic work and lifestyle changes, freeing up capital and super advantages are all reasons why you might consider downsizing your home.

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If you’re 55 years or older and sell your primary residence, you may be eligible to contribute up to $300,000 (each spouse) into super from the proceeds of the sale¹ to $600,000 as a couple into super from the proceeds of sale¹. The amount you can contribute to super can’t be greater than the total proceeds of the sale of your home.

You may be eligible to make a downsizer contribution if:
- you’re 55 or older
- your home is in Australia and is not a caravan, houseboat or other mobile home
- the contract sale for your home is exchanged on or after 1 July 2018 and made within 90 days of receiving sale settlement proceeds
- your home is owned by you and/or your spouse and has been for 10 years or more prior to the sale and is exempt (full or partially) from Capital Gains tax
- you have not previously made a downsizer contribution from the sale of another home
- Use an ATO Downsizer contribution into super form (NAT 75073) for each.
You can find the full list of eligibility criteria on the Australian Taxation Office (ATO) website: ato.gov.au

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home.

How the downsizer contribution works
1. Adding to the cap

Jenny and Tom are both 60 and sold their family home they have lived in for 10 years for $800,000. Using the new downsizing contribution rules they can add up to $300,000 each to their super accounts.

2. Splitting contributions

If Jenny and Tom’s house sold for $400,000, they could each contribute $200,000 to their super. If they wanted to add more to Jenny’s super, they could split the contributions super, they could split the contributions by adding $300,000 to Jenny’s super and $100,000 to Tom’s super.

Tax, caps and the Government Age Pension

You won’t pay tax on the money you add to super from the sale of your home via a downsizer contribution and it won’t count towards any concessional or non-concessional contribution caps. However, if you move your super to an account-based pension (like Choice Income) it won’t be exempt from the transfer balance cap (the lifetime limit a person can transfer into an income stream).

Downsizing your home may affect your eligibility for or payments from the Government, including Age Pension. Consider getting financial advice before downsizing your home.

How downsizing her property earned Vicki freedom in retirement

In 2018, AustralianSuper member Vicki decided to downsize her family home to unlock some equity so she could boost her confidence and preparedness for retirement. Vicki wanted a smaller mortgage, less dependency on work, and more time to travel.

Making the decision to downsize didn’t happen overnight for Vicki, it was just a thought for 5 years and something that seemed like a dream.

Many Australians can relate to this, with 26% of people over 55 having downsized their homes, and 29% considering it².

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Vicki felt a little stuck in her family home situation - a large home meant lots of debt. But she also wasn’t sure downsizing was an option for her.

This is her story.

'I was living in Victoria in a pretty large family house. My mum had come to live with me, and my eldest daughter was there too. But she moved out and my mum passed away so I knew that downsizing could be an option. I wanted a bigger life - more time to exercise, to volunteer, and to travel,' she says.

'The debt from the house worried me. I was getting closer to retirement, and that was worrying me too. By downsizing, I thought maybe I could get rid of a little bit of that debt’.'
Have a bigger life by downsizing your property

In this video, Vicki talks about her decision to downsize her home and what it meant for her retirement.

The views expressed are those of the member based on their particular circumstances, reproduced with their continuing consent.

Have a bigger life by downsizing your property

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The circle of super for Vicki. AustralianSuper member since 1989

Having a bigger life by downsizing.

I’ve got a huge bucket list.

I’m going to Uluru in a couple of months.

Later this year, I’d like to get to Canada.

The year after that, I’d like to get to the Beijing Winter Olympics, so lot of travel.

I thought for a number of years that if I downsized, I could actually get more from life.

I’d have less mortgage, less stuff.

In the house in Elsternwick, I had enormous debt, and that debt really worried me.

I had this fear that everyone would move out and I’d be last man standing.

I feel that for a number of years that life was running me, whereas now I’m running the show.

When I first thought about the idea I thought ‘oh, it’s just a pipe dream.’

Once I realised I could make it a reality, it was quite easy getting to that point.

And I leaned on the information that AustralianSuper had on their website.

But I was working out how I could put myself in the best position.

On the day we sold the house, I was equal parts excited and crying.

I had such a happy life there with my kids. And they were also the last memories of my mum being alive, so there was that sadness.

For me there’s no retirement date, because I’ve done it now in a sense.

I exercise, I do ten thousand steps every day.

I volunteer for a group called Try Mentoring where I mentor a young girl.

I’m not so focused, obviously, on the 9-5.

I love being near the beach.

I know I’m not young but it makes me feel young.

I feel like I’ve won the jackpot. Best thing I’ve done.

End transcript
Empowered by research and seeking guidance

Vicki researched downsizing online so that she understood how it would affect her super. She looked at how much she could get for her property and investigated the impact her downsizing efforts would make to her current debt.

'I was forever working out how I could put myself in the best position,' recalls Vicki. 'Legislation kept changing and I was confused by that, and the rules seem to change. So, I used the resources available on AustralianSuper’s website to guide me.'

Transitioning to retirement through part-time work

Downsizing has given Vicki the opportunity to work less in the lead up to retirement and allowed her to create a new life. Vicki can now focus on exercising, volunteering, visiting galleries and cafes, and she has recently joined a book club. Most importantly, working less has given Vicki time to travel.

'I just have more time for everything, and I've got a huge travel bucket list.'

'I'm going to Uluru in a couple of months and later this year I'd like to get to Canada. Next year I'd like to walk the Camino and the year after that I'd like to get to Cuba and Mexico. But I suppose top of the bucket list is just stay healthy. That's why I exercise. My main aim is to stay healthy enough that I can just have a big life now and really enjoy it.'

'I don't feel stuck anymore. I’ve got flexibility now and that’s so important. For years life was running me. But now I’m running life.'

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Read the fact sheet: Downsize your home and grow your super

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