For Australians aged 55 and over, downsizing the family home can open the door to a powerful, and often overlooked, tax planning strategy: the ‘downsizer contribution’.
We see people quite rightly releasing money from, at times, their biggest asset – the family home.
This can be because current up-keep is unsustainable; money might be needed to top up the retirement investment pool; they’re cashing up well before any extra care may be needed; or they’re just looking to put some money aside in case the kids get themselves in a crisis.
Whatever the aim, rather than just adding those monies to existing taxable investments, eligible individuals can redirect a substantial portion of their home sale proceeds into super and convert to tax free pensions; even if they’re already retired.
When used thoughtfully, the ‘downsizer contribution’ can assist with:
- Strengthening Retirement Savings: A one off opportunity to move up to $300,000 per person ($600,000 for eligible couples) into your super, helping bolster balances later in life.
- Improving Long Term Tax Outcomes: Funds inside super benefit from concessional tax treatment, supporting efficient and often tax-free retirement income.
- Flexibility & Diversification: Shifting wealth from property into super can turn a concentrated and illiquid asset into a highly accessible and balanced portfolio.
- Avoiding Costly Mistakes: Eligibility rules, strict timing requirements, and flow on impacts (including Centrelink and estate planning considerations) mean careful advice is essential, as this strategy is not for everyone.
Downsizing isn’t just about reducing the size of your yard and cashing up. With some forward planning it can deliver some fantastic tax benefits for people already in retirement.
* This article contains purely factual information and/or general advice and does not constitute personal financial product advice. The content of this article does not take into account your personal objectives, financial situation or needs and you must determine whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.
