Making a downsizer contribution can be a good way to grow your superannuation fund if you’re over 65 years and are looking to sell an eligible property. Learn more about downsizer contributions.
Many Aussies are finding ways to grow their retirement savings even after they reach 65 years old by making voluntary contributions to their superannuation. One example of this is downsizer contributions, where you make a non-concessional contribution of up to $300,000 to your super fund from the proceeds of a property sale.
Your downsizer contribution isn’t counted towards your contribution caps. It can still be made even if your super balance is higher than $1.6 million at the time of the contribution.
Who is eligible to make downsizer contributions?
To make a downsizer contribution to your superannuation, you must be 65 years or older when you make the contribution. As of now, there is no maximum age limit set. Besides this, you must meet the following criteria to make a downsizer contribution:
- The funds you’re contributing should be the result of selling a property located in Australia, and should not be a houseboat, caravan or mobile home.
- You or your spouse must have owned the property you’ve sold to get these funds for at least ten years before making the sale.
- If you’ve previously made a downsizer contribution, you cannot contribute to your super from the sale of another property.
You need to check with your super fund if they accept downsizer contributions. If they don’t, you could consider opening a new account with a super fund that accepts downsizer contributions.
If you plan to make a downsizer contribution, you need to fill out the Downsizer contribution into super (NAT 75073) form. This form needs to be submitted to your super fund before or while making the downsizer contribution.
Why should you make downsizer contributions?
1. Top-up your super balance
You may not have gotten the chance to save sufficient funds in your super to live the life you dreamed of after you retire. By making downsizer contributions, you get an opportunity to make tax-free contributions to your super fund and top-up what you’ve already saved to date.
2. No work test or age limits
If you want to make a contribution to your superannuation between the age of 67 to 74 years, you’d need to satisfy the work test rule, which includes working for 40 hours over 30 consecutive days. Moreover, if you’re over 75, you usually aren’t permitted to make any voluntary contributions to your super. However, these restrictions don’t apply to making downsizer contributions to your superannuation fund.
3. Make double the contributions with your spouse
Individually you can contribute up to $300,000 as part of your downsizer contribution. However, couples can benefit even more from the downsizing contribution opportunity. Together they can contribute up to $600,000 towards their super.
When should you make a downsizer contribution?
You need to make a downsizer contribution to your superannuation within 90 days of receiving the property sale’s proceeds, which is usually the date of settlement. You could ask your super fund for an extension on this date if there is a change in circumstances that are beyond your control. An extension is usually granted if:
- You’re suffering from an illness.
- There has been a death in your family.
- You’re moving into a new house.
However, keep in mind that you cannot request an extension of time to meet the age requirement. For example, if you sell your house at the age of 64 and need an extension of time to reach the required age of 65, your application will likely be rejected.