SMSF and Superannuation

The downsizer contribution to superannuation can be an effective way for a member to minimise tax and increase superannuation balance. There are numerous contribution caps and limits on how much money an individual can save in super. However, the benefit of the downsizer contribution is that it is not impacted by any of these restrictions.

Below outlines the criteria to eligible to utilise this concession:

1. Individual is aged 55 years or older at the time of the contribution.
2. Contribution is proceeds from disposal of ownership interest in a property in Australia, not a caravan, houseboat or motor home.
3. Individual or their spouse held interest just before the disposal.
4. The sale qualifies for the main residence exemption, either fully or partially.
5. Must have owned the home for 10 years.
6. Contribution must be made within 90 days of the property selling.
7. You complete the ‘Downsizer contribution in super’ form and provide to your superfund.
8. Individual has not previously made a downsizer contribution.
9. Maximum contribution is $300,000 per individual.

The tax benefit of putting this money into super may minimise additional taxable income that could be generated in your personal name, should the same amount be invested outside of super.

It must be noted that additional money placed into super where an individual’s balance exceeds $3 million, the tax effectiveness of doing so may be diminished with the new Div 296 tax to apply from 1 July 2026.

An example of how this can be utilised:

A couple who are both over the age of 75 and are no longer working. There is effectively no way for them to make further concessional or non-concessional contributions to super based on current rules. However, the downsizer contribution is not impacted by this age restriction and allows up to $300,000 to be contributed to each individual’s super balance (assuming criteria above is satisfied).

If this $600,000 were to be invested in joint individual names, a return of 5% would generate taxable earnings of $30,000. Assuming other investment earnings in their names accumulated over their working life, it may result in them being over the tax-free threshold with tax payable. The balances in super are likely to be converted to pension and a tax-free income can be withdrawn under normal pension rules.

Read our latest superannuation articles.

Find more information about downsizer contributions on the ATO's website.

This article should purely be considered from a tax minimisation perspective and compliance requirements per s.292-102 of the ITAA 1997. Please seek a financial adviser to consider whether putting money into super suits your personal circumstances.