Downsizer contributions were introduced mainly to increase housing stocks in Australia. Eligibility was expanded from 1 January 2023 to include individuals aged 55 years or older (formerly 60 years or older).
If you are eligible for the age pension, or might become eligible in the future, think hard about downsizer contributions. If you have a main residence, it is exempt from Centrelink assets and income tests. If you sell your main residence (and do not buy another), the cash proceeds are subject to the assets and income tests, whether you make downsizer contributions or not. Seek specialist advice. You risk losing all or part of your pension.
However, if you are unlikely to ever become eligible for the age pension, downsizing is a strong option (although not necessarily the best option). Seek advice. You might be able to contribute the sale proceeds up to a maximum contribution of $300,000 for an individual or $600,000 for a couple. Of course, you cannot contribute more than the sale proceeds.
As always, conditions apply.
The home must be in Australia and must have been owned by you or your spouse for at least ten years. It must be fully or partly exempt from capital gains tax under the main residence exemption. You must not have made a previous downsizer contribution and you must make the downsizer contribution within 90 days of receiving the sale proceeds. You cannot claim a tax deduction for the contribution and it is not taxed in the super fund. You must also complete the relevant paperwork.
Age and the work test can be barriers to making super contributions. For example, you cannot make voluntary contributions after age 75 except by making downsizer contributions.
Super funds are tax-advantaged both in the accumulation phase and particularly in the retirement phase. That is the incentive for getting more of your assets into super.
On the most recent statistics I have seen, individuals have made downsizer contributions totalling $9.4 billion since 2019.
This is general information only. Seek advice related to your own circumstances.
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