3 Benefits of Adding a Downsizer Contribution to Your Super

It often comes as a surprise to some that their lifestyle significantly changes after their final working day. In retirement, most have a lot more free time on their hands and hopefully far less stress. 

Commonly, people begin to see their living situation change. This results in many retirees becoming aware that their current home isn’t necessarily the right fit for them anymore.

Retirees might begin to ask themselves; do I need to be living so close to the city or my previous work office? 

Some might see their homes as being far larger than what they actually need (and begin to realise that the long list of house chores that come with it are too hard to maintain) or maybe you’re looking to relocate, possibly closer to family or to your dream location? 

If this is starting to sound like you, the downsizer contribution scheme may be advantageous in exploring. It involves contributing to your super which, can provide you with:

  • A steady income during your retirement;
  • Potential tax benefits;
  • A completely tax-free solution to boosting your account-based pension.

According to the Australian Taxation Office (ATO), if you are 65 years old or older and meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000 per person from the proceeds of selling your home.

Am I Eligible for the Downsizer Contribution Scheme?

According to the ATO, you are eligible for the downsizer contribution scheme if you are an Australian who:

  • Is aged 65 and above, but there is a proposal to extend it to people aged 60 to 64.
  • If you have owned (by you or your spouse) your home for 10 years or more prior to selling.
  • If you own a home in Australia and is not a caravan, houseboat or other mobile home.
  • If you have not previously made a downsizer contribution to your super from the sale of another home.

You may be wondering what particular benefit does a downsizer contribution have? How does it positively affect your super as a whole? 

Here are 3 benefits of the Downsizer Contribution Scheme:

It Will Boost Your Super Balance

This may probably be one of the most important advantages of a downsizer contribution. It’s essential to maximise your super fund so you can rely on it for your entire retirement. 

If you are someone who didn’t have the chance to save enough funds for retirement, then you may find the tax-free downsizer contribution an optimal opportunity to top up what you have saved to date.

Contribution Caps Aren’t Applicable

This is one advantage that most people would find appealing about the downsizer contribution.

As you might already be aware, you can make voluntary contributions to your super during your working years if you choose to. However, depending on which type of contribution you choose to make (either non-concessional or concessional), there are certain caps for each type of contribution on the amount you can add to your super. 

  • Concessional contributions (pre-tax also known as salary sacrificing) are capped at $27,500 per financial year
  • Non-concessional contributions (after-tax contributions) are capped at $110,000 per financial year

This further highlights the benefits of a downsizer contribution as the scheme is completely separate to these types of contributions, the aforementioned caps don’t apply. This will allow you to contribute additional contributions to your super, after making a downsizer contribution, if you wish to.

Both Members of a Couple Can Make A Downsizer Contribution - Doubling The Amount To $600,000

For couples, you might already be starting to plan out your retirement life together and be looking at growing your super balances during this time. 

If this is you, both you and your partner can make the most of the downsizer contribution opportunity, by contributing $300,000 to each of your super for a combined total of $600,000. 

This can ensure that both of you can have a reliable nest egg during your retirement years.

Downsizer contributions are indeed an opportunity for you if you want to grow your superannuation.

If this is you, both you and your partner can make the most of the downsizer contribution opportunity, by contributing $300,000 to each of your super for a combined total of $600,000. 

If you want to learn about the best investments for retirement, or are considering using a downsizer super contribution strategy, look no further than our expertise here at Poole Advisory. We are a financial advice firm in Bowral NSW, helping people achieve financial freedom. 

Contact us today!


Compliance Disclaimer:

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917

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