Downsizer super contributions in Australia: the eligibility playbook

The Downsizer Contribution scheme is currently available to eligible individuals aged 55 or older at the time the contribution is made. This age threshold has been progressively lowered over recent years and may change again; confirm current rules with the ATO or a licensed adviser at the time of your sale.

The property being sold must have been owned by you, your spouse, or your former spouse (or a combination) for at least 10 years immediately before the sale. Ownership is generally counted from the date of settlement of the original purchase.

The property must have been your main residence for at least part of the ownership period, and be entitled to at least partial main residence exemption from capital gains tax. Investment properties never occupied as a main residence do not qualify.

Both spouses can contribute up to $300,000 each from a single home sale, even if only one spouse is on the title. This is a specific concession of the scheme and materially increases the value for couples.

The Downsizer Contribution must be made within 90 days of settlement of the sale of the qualifying home. This is a hard deadline and cannot be extended except in limited circumstances (typically ATO discretion for exceptional circumstances).

The 90 days runs from settlement, not from contract exchange. On a typical Adelaide sale with a 6-week settlement, this means the contribution can be timed against the new build settlement or land purchase if that follows quickly. On longer settlements with delayed possession, plan the contribution timing before signing the sale contract.

The contribution can be made to a public superannuation fund or a self-managed super fund. If a self-managed fund is used, the fund must be complying and the trustee documentation must be in order at the time of the contribution. Delays in SMSF administration have caught out several Adelaide downsizers.

A Downsizer Contribution to superannuation counts toward assessable assets and income for Age Pension purposes if you are already in receipt of the pension, or if you would otherwise qualify.

Selling a family home (which is exempt from the assets test) and moving the proceeds into superannuation (which is assessable if the account holder is over Age Pension age) can significantly reduce Age Pension entitlement, sometimes eliminating it entirely.

This is not a reason to avoid the Downsizer Contribution, but it is a reason to model the outcome carefully with a financial adviser before committing. In some cases the loss of Age Pension outweighs the tax benefit of the contribution. In many cases the reverse is true. The exact answer depends on the individual circumstances.

Several eligibility traps catch out first-time Downsizer contributors. First, the 10-year ownership test can be tricky where the property has been held in a trust or company structure. Only individual ownership qualifies; trust ownership generally does not.

Second, the main residence test requires the property to have been your main residence at some point during the ownership. A home held for 12 years as an investment property before being briefly moved into does not usually qualify.

Third, subdividing land and selling only a portion can complicate eligibility. If you are considering subdividing a large block and selling one portion while retaining another, the eligibility is not automatic. Get advice before subdivision, not after.

Fourth, you can only make one Downsizer Contribution in your lifetime. Selling a second home later and hoping to contribute again is not permitted. Time your Downsizer Contribution for the sale that maximises the benefit.

For most Adelaide downsizers, the Downsizer Contribution is one part of a larger financial reshaping that includes selling the existing home, moving cash through superannuation, and settling the new build. The sequencing matters.

A common pattern is to sell the existing home first, rent for the construction period, contribute to super within the 90-day window, and then draw on retirement savings to settle the new build. This maximises the contribution timing but requires 12 to 18 months of rental accommodation.

An alternative is to time the sale of the existing home closer to the new build handover, with a bridging loan covering any gap. This avoids the rental phase but can compress the contribution timing and may reduce the total contribution if settlement dates do not align.

A third option is to build first and sell the existing home last, retaining the existing home as the primary residence during construction. This is only feasible where cash flow allows both dwellings to be held simultaneously. It usually simplifies the contribution timing but requires more capital.

Each pattern has different tax, financial and lifestyle implications. Choose the pattern with your financial adviser at the start of the downsizing journey, not partway through.