The 6 benefits of downsizing your home

Such is the effectiveness of the scheme, and the government's want to increase supply, that as of 1 July 2022 the rules will be stretched to accommodate people aged 60 and over.

This contribution allows individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person (or $600,000 per couple) from the proceeds of selling their home, subject to meeting certain criteria.

It should be noted that downsizing contributions will count towards age pension assessment tests.

To help older Australians, AMP has compiled the six benefits of downsizing your home:

1. Downsizer contributions provide a way to top up your super balance

Superannuation fund AMP highlights that older Australians who haven’t had the chance to retire may find a tax-free downsizer contribution provides an opportunity to top up their nest egg.

2. No work test or age limits apply to downsizer contributions

AMP also highlights that to be able to make voluntary super contributions, usually people aged 67 to 74 need to satisfy (or be exempt from) a work test, where you have to work 40 hours over 30 consecutive days, while people aged 75 or over are generally ineligible to make any voluntary contributions to their super.

For downsizer contributions, these rules don’t apply.

3. Annual contribution caps also aren’t applicable

Further, AMP tells members that annual concessional and non-concessional contribution caps don’t apply to downsizer contributions.

In fact, downsizer contributions can be made in addition to any concessional and non-concessional super contributions you may be eligible to make.

4. Downsizer contributions aren’t subject to the $1.7 million total super balance restriction

Another key benefit from the downsizer legislation is it is available outside of the concessional contribution cap.

While you can’t make non-concessional contributions into your super at all if your total super balance is $1.7 million or above as at 30 June of the previous financial year, this rule doesn’t apply to downsizer contributions. 

5. There are no requirements to buy a new home

AMP also states Australians who take advantage of the scheme are not required to buy a new home with money you might make from the sale of your existing place.

While noting members still can buy a place, the downsizer contribution does not force Aussies to own their own home.

6. Both members of a couple can take advantage

Finally, for couples, both spouses can make the most of the downsizer contribution opportunity, which means up to $600,000 per couple can be contributed towards super.