Understanding Downsizer Contributions to Super

Downsizer contributions are one of the ways to enhance your retirement savings. They provide retirees and those approaching retirement with a way to use their downsized home as a financial asset to make concessional contributions to their superannuation fund. Downsizer contributions are a great way to increase the amount of money you have in retirement. 

What Is Downsizing?

Downsizing generally means selling your current home and purchasing one with a smaller price tag. Downsizing can have many benefits, such as reducing your living costs, getting a better lifestyle and freeing up money to provide a better retirement. 

If you're aged 65 or over, you may be able to use a downsizer contribution to your super fund of up to $300,000 from the proceeds of selling your home. This contribution is in addition to any other concessional contribution you might make (such as salary sacrifice or personal deductible contributions), including those you are already making under age 65. You can only make a downsizer contribution once in your life. 

Who Is Eligible for Downsizer Contributions?

Downsizer contributions are available to those aged 65 or over who have owned the property they are downsizing for at least 10 years. This includes individuals and couples, as well as owners with joint tenancies. 

Downsizer contributions can only be made from the proceeds from selling a primary residence, and the house must have been owned for at least 10 years prior to the sale. The contribution can only be made by the owner who is aged 65 or over and must be made within 90 days of the settlement of the sale. 

How to Make a Downsizer Contribution 

Once you have met the eligibility criteria, you will need to fill in the Downsizer Contributions for Superannuation form found on the Australian Taxation Office website. You will need to provide details such as your name, superannuation fund details, your age, and the contract of sale for your home. 

Before making the contribution, you should speak to a financial adviser and ensure the downsizing is in your best interests. Downsizing is a major financial commitment, and you should ensure you have enough money to cover essential costs in retirement before you make any contribution.

You can make a downsizer contribution to your existing accumulation or retirement phase account or establish a new super account. When selecting a superannuation fund, you should ensure the fees and investment options suit your needs. 

What Are the Benefits of Downsizing?

Downsizing can be a very effective way of increasing your retirement savings. The main benefit is that the amount of money contributed is in addition to any other contributions you may make up to the concessional contribution cap of $25,000 per person per year. 

The contribution is also tax-free and is not included in your assessable income when determining eligibility for the Age Pension. Furthermore, if the total contribution adds up to more than $1.6 million, the excess amount will be refunded, making it a risk-free contribution to your superannuation fund.

Downsizing can be a great way to enhance your retirement savings, and with the right financial guidance, it can be a rewarding and stress-free experience. At Prudent Finance, we can offer extensive advice when it comes to planning your retirement through investments and superannuation. Contact us today to learn more about using downsizing to your financial advantage.

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