A downsizer contribution allows you to make a contribution to superannuation following the sale of your home when over the age of 65.
Advantages of making downsizer contributions:
- Making additional superannuation contributions will allow you to increase your retirement savings in a tax effective environment.
- Earnings (capital gains and income) on your accumulated superannuation balance will be taxed at a maximum rate of 15% (if retained in accumulation phase) or tax free (if transferred to a pension account).
- There is no tax applied to downsizer contributions made to superannuation.
- Downsizer contributions are added to the tax-free component of your superannuation account. No tax is payable on the tax-free component if distributed to non-tax dependent beneficiaries upon death.
- Downsizer contributions do not count towards any non-concessional or concessional contributions cap. As a result, they can still be made if an individual has a total superannuation balance of $1.6 million or more.
Limitations of making downsizer contributions:
- Downsizer contributions are only available to individuals aged 65 and over at the time of contribution.
- Each individual can make a downsizer contribution up to $300,000 (i.e. $600,000 total as a couple).
- You are unable to claim a tax deduction on a downsizer contribution.
- You cannot make a downsizer contribution into superannuation if you have previously made a downsizer contribution following the sale of another home.
- Your home must have been owned by the individual, spouse or former spouse for a period of at least 10 years prior to sale.