Key points
- From age 55, eligible home-sale proceeds can go into super as a downsizer contribution of up to $300,000 per person, or $600,000 per couple (ATO).
- The home must have been owned for at least 10 years, and the contribution made within 90 days of settlement.
- A downsizer contribution doesn’t count toward the concessional or non-concessional caps, and there’s no work test or upper age limit.
- It does count toward your Total Super Balance and, in pension phase, the transfer balance cap.
- The family home is exempt from the Age Pension assets test. Once the proceeds are invested, they aren’t.
For most retired couples the family home is the largest thing they own, and it earns nothing for the retirement income plan. It sits there, valuable and idle, while the super balance does the work. Downsizing turns part of that value into capital you can invest for income. Done at the right time, it can be the difference between drawing on super too fast and drawing at a rate the balance can sustain.
The tax system actively encourages it. The downsizer contribution rules let eligible proceeds move into super on top of the normal contribution caps, which is a rare thing in super. Most contribution paths are capped tightly. This one isn’t.
Who can use the downsizer contribution
The eligibility rules are specific, and getting one wrong can disqualify the whole contribution:
- Age. You must be 55 or older at the time of the contribution. There’s no upper age limit.
- Ownership. You (or your spouse) must have owned the home for at least 10 years before the sale.
- Main residence. The home must qualify, at least in part, for the main residence capital gains tax exemption.
- Timing. The contribution must be made within 90 days of receiving the proceeds, which is usually the settlement date.
- The form. You have to submit the ATO downsizer form to your super fund before or at the time of the contribution.
- Once only. You can use the downsizer contribution for one sale in your lifetime.
Both members of a couple can each contribute up to $300,000, so a couple can move up to $600,000 into super from a single sale, even if only one of them was on the title.
The numbers
The appeal is the size of the contribution and the fact that it sidesteps the usual limits.
| Rule | Downsizer contribution |
|---|---|
| Maximum per person | $300,000 |
| Maximum per couple | $600,000 |
| Counts toward contribution caps | No |
| Work test required | No |
| Upper age limit | None |
| Counts toward Total Super Balance | Yes |
That last row is where planning matters. A downsizer contribution won’t be blocked by a high Total Super Balance, but it does lift your balance, and a higher balance can shut off your ability to make future non-concessional contributions. It also counts toward the transfer balance cap when you move the money into a retirement pension. If your balance is already large, the downsizer amount may have to stay in accumulation phase rather than moving to the tax-free pension environment.
The Age Pension catch
The family home is exempt from the Age Pension assets test, whatever it’s worth. Sell it and invest the proceeds, and that money starts to count. A couple who downsizes from a $2 million home into a $1.2 million one frees up $800,000, and all of it now sits inside the Age Pension assets test. For a couple near the thresholds, that can cut their pension or end it.
That doesn’t make downsizing a bad move. The freed capital can produce far more income than the lost pension, especially if part of it funds a lifetime income stream, which itself gets concessional means-test treatment. But it changes the maths, and it needs to be modelled before the house is on the market, not after.
The other costs
Money aside, downsizing is a large life decision, and the practical costs are real:
- Transaction costs. Agent fees, marketing, stamp duty on the new home, and moving costs can run well into five figures. They come straight off the capital you’re trying to free.
- The new home. Downsizing only frees capital if the new place costs meaningfully less. Buying a smaller but pricier apartment in a better suburb can release nothing.
- Lifestyle and location. Leaving a long-held home, a suburb, and a network of neighbours has a cost that doesn’t show up in a spreadsheet. It’s worth being honest about before the financial case is made.
Getting the timing right
Downsizing works best as a planned step in a wider retirement strategy, not a reaction to a quiet housing market or a single good offer. The sale, the contribution deadline, the Age Pension impact, and how the freed capital is invested all interact, and the 90-day window leaves little room to fix a mistake.
If you’re weighing whether your balance is enough, our guide on whether $2 million is enough to retire at 60 shows where freed home capital fits in the drawdown plan. To model your own numbers, including the pension impact and the best way to hold the proceeds, talk to an AGS retirement planner.