Downsizer Super Contribution: The Complete Guide

The downsizer contribution is a special superannuation contribution that allows eligible Australians aged 55 or over to contribute up to $300,000 per person (or $600,000 for a couple) into their super from the proceeds of selling a qualifying home. Introduced in July 2018 with an original age threshold of 65 (later reduced to 60, then 55 from 1 January 2023), it's one of the most powerful retirement planning tools available.

What makes it special is what it bypasses: the downsizer contribution doesn't count toward your concessional ($30,000) or non-concessional ($120,000) contribution caps, it's not subject to the work test (which normally prevents contributions for those aged 67-74 who are not employed), and there's no upper age limit. An 85-year-old can make a downsizer contribution. The contribution is made with after-tax money (it's not tax-deductible), but once inside super, the money benefits from the concessional tax rate of 15% on earnings — compared to up to 47% if the same money were invested outside super.

In retirement phase (account-based pension), earnings are taxed at 0%. For a couple selling a $1.2 million home and contributing $600,000 into super, the lifetime tax savings from moving this capital into the superannuation environment can exceed $100,000.

One thing people miss: To make a valid downsizer contribution, all seven conditions must be met. First, you must be aged 55 or over at the time of the contribution (not at the time of sale).

Second, the home must be in Australia and must have been owned by you or your spouse for at least 10 continuous years before the sale. Third, the home must be or have been your main residence at some point during ownership. It doesn't need to be your main residence at the time of sale — you could have moved out years ago and rented it out, and it still qualifies as long as it was your main residence at some point.

Fourth, the home must not be a caravan, houseboat, or mobile home. Fifth, you (or your spouse) must not have previously made a downsizer contribution from the sale of another home. This is a once-only opportunity — you get one downsizer contribution in your lifetime.

Sixth, you must provide your super fund with the approved 'Downsizer contribution into super' form (NAT 75073) before or at the time of making the contribution. Seventh, the contribution must be made within 90 days of receiving the sale proceeds (typically the settlement date).

Extensions can be granted by the ATO in limited circumstances. Note: there's no requirement to actually 'downsize' — you can sell your home and rent, buy a more expensive home, or move into aged care. The name is misleading; it's simply a contribution from the proceeds of a home sale.

Heads up — The 90-day rule is strict: you must make the downsizer contribution to your super fund within 90 days of receiving the proceeds of sale, which is normally the settlement date. If settlement occurs on 1 June, the contribution must be made by 30 August.

If your super fund takes time to process the contribution (some retail funds take 3-5 business days to credit), lodge well before the deadline. Practical considerations: first, contact your super fund before settlement to ensure they can accept downsizer contributions. Some funds have specific processes or forms.

Self-managed super funds (SMSFs) need a valid trust deed that permits downsizer contributions. Second, the contribution is made by transferring funds to your super fund with the completed NAT 75073 form. You can make it as a single lump sum or in multiple installments, as long as the total is within $300,000 and all payments are within the 90-day window.

Third, if you're selling and buying simultaneously (exchanging and settling on the same day), the proceeds you 'receive' are the net amount after paying for the new property — but practically, the full sale proceeds are received at settlement and then distributed, so the 90-day clock starts at settlement of the sale regardless of whether you're buying another property. Fourth, extensions: the ATO can grant an extension beyond 90 days if there were circumstances beyond your control (such as the super fund losing the paperwork or a natural disaster).

Apply using the ATO's extension request process as early as possible — don't wait until after the 90 days have passed.

This bit matters. The tax advantage of the downsizer contribution is significant and compounds over time. Consider $300,000 contributed to super versus held in a personal bank or investment account.

Inside super (accumulation phase): earnings are taxed at 15%, and capital gains on assets held over 12 months are taxed at 10% (the 15% rate with a one-third discount). Inside super (retirement phase, after pension commencement): earnings are taxed at 0%. Outside super, earnings are taxed at your marginal rate — for a retiree with $80,000 in total income, the marginal rate on additional income is 32.5% + 2% Medicare = 34.5%.

Worked example: $300,000 invested in a balanced portfolio earning 7% ($21,000/year). Outside super, tax at 34.5% = $7,245, leaving $13,755 net. Inside super (accumulation), tax at 15% = $3,150, leaving $17,850 net.

Inside super (retirement phase), tax at 0%, keeping the full $21,000 net. Over 10 years, the difference between outside super and retirement-phase super compounds to approximately $65,000-$85,000 in additional wealth, depending on returns and reinvestment.

Over 20 years, the gap exceeds $180,000. For a couple contributing $600,000, the lifetime tax saving from moving this capital into super can exceed $250,000. This makes the downsizer contribution one of the most tax-effective strategies available to older Australians. Simple as that.

Don't skip this part. The downsizer contribution counts as an asset for Age Pension purposes. This is the most important limitation to understand.

When you sell your home and contribute $300,000 to super, you're converting a non-assessed asset (the family home, which is exempt from the Age Pension assets test while you live in it) into an assessed asset (super). If your existing assessable assets are near the pension cut-off, a downsizer contribution could reduce or eliminate your Age Pension. Example: Maria, 68, single homeowner.

Current assessable assets: $500,000 (super and investments). She receives a part Age Pension of approximately $18,000/year. She sells her home for $900,000, buys a unit for $550,000, and contributes $300,000 to super.

Her assessable assets jump from $500,000 to $800,000. At the single homeowner assets test, a $800,000 asset position results in a significantly reduced pension — approximately $5,000/year.

Maria has traded approximately $13,000/year in pension for the long-term tax advantages of having $300,000 in super. Over 20 years, the pension lost is $260,000, while the super tax saving might be $120,000-$180,000. In Maria's case, the downsizer contribution may not be worthwhile.

The practical side: However, for retirees who are already above the pension asset threshold (or who have very large super balances and no pension eligibility), the downsizer contribution is almost always beneficial. The key rule: if you're currently receiving the Age Pension or are close to the threshold, model the pension impact before contributing.

Scenario 1 — the sweet spot. Greg and Pam, both 66, sell their Sydney home for $1.5 million.

They buy a $850,000 apartment and contribute $300,000 each to super. Existing combined super: $800,000. New combined super: $1,400,000.

They were already above the couple homeowner pension cut-off ($1,030,000), so the downsizer contribution has zero pension impact — they were not receiving a pension and still are not. The $600,000 in super earns 7% ($42,000/year), taxed at 0% in retirement phase. Outside super, the same $600,000 would earn $42,000 taxed at approximately $12,000 in their hands.

Annual tax saving: $12,000. Over 20 years: $240,000+ in additional after-tax wealth.

What actually happens: Verdict: no-brainer. Scenario 2 — full pensioner. Betty, 74, single, sells her home for $650,000, moves into a rental.

Existing assets: $180,000. Full pension: $29,754/year. If she contributes $300,000 to super, assets rise to $480,000, reducing her pension by approximately $16,200/year.

She should contribute only to the point where pension loss is minimised — modelling suggests contributing $120,000-$150,000 and keeping the rest in her own name balances the tax saving against pension reduction. Scenario 3 — SMSF couple.

John and Susan, both 58, sell their home for $2.2 million, buy for $1.4 million, and contribute $300,000 each to their SMSF. At 58, they can't access super yet (preservation age is 60), but the money grows tax-effectively for 2+ years before they start a pension. With combined super of $1.8 million (existing $1.2M + $600K downsizer), they're well positioned for a fully self-funded retirement at 60-65.