If you are selling a home you have owned for many years, you may be able to contribute some of the sale proceeds into your super using the downsizer contribution rules.

Who can qualify?

To make a downsizer contribution, you must meet several conditions:

• You must be at least 55 years old at the time you make the contribution.
• The property must be located in Australia.
• You must have owned the home for at least 10 years before selling it.
• The sale must qualify for at least a partial main residence capital gains tax (CGT) exemption.
• The contribution must be made within 90 days of settlement.
• You must submit the required election form to your super fund before or at the time the contribution is made.

The downsizer contribution can only be used once per person. The maximum amount is $300,000 each, or the total sale proceeds if lower.

Does the home need to be fully exempt from CGT?

A common misunderstanding is that the property must be completely exempt from capital gains tax. This is not correct.

A full main residence exemption is not required. The property can still qualify even if part of the capital gain is taxable, as long as some of the gain is covered by the main residence exemption and the other conditions are met.

Does it have to be your main residence at the time of sale?

The property does not need to be your main home when you sell it. For example, you may have lived in the property for many years and later rented it out. As long as the ownership history allows you to claim at least a partial main residence exemption, the downsizer rules may still apply.

What about properties purchased before CGT?

For properties acquired before CGT started, special rules apply. In these cases, the test looks at whether the property would have qualified for a main residence exemption if CGT had applied.

Importantly, the property must include a dwelling. Selling vacant land will generally not meet the requirements.

Can a non-owning spouse contribute?

It is common for only one spouse to be listed on the title. A spouse who is not on the title may still be able to make a downsizer contribution if the other eligibility rules are met.

However, if that spouse never lived in the property and could not reasonably treat it as their main residence, they are unlikely to qualify.

Accessing the funds

Once the money is contributed to super, it is subject to normal preservation rules. This means you generally cannot access the funds until you reach age 60 and retire, or until you turn 65.

Before making a decision

Although the rules seem simple, the details matter. Review your personal circumstances and future cash flow carefully before contributing, and seek advice to ensure you meet the requirements.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

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This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax