Downsizer contributions and main residence exemption
Selling the family home can be an emotional milestone — but it can also be a powerful planning opportunity.
If you’re aged 55 or over, the downsizer contribution rules may allow you to move some of the sale proceeds into superannuation, even if you’ve already maxed out your normal contribution caps.
Sounds simple? It can be — but there are a few important rules to get right.
What Is a Downsizer Contribution?
A downsizer contribution lets eligible individuals contribute up to $300,000 per person from the sale of a home into superannuation.
For couples, that means up to $600,000 in total — and it doesn’t count toward your normal concessional or non-concessional contribution limits.
But eligibility is key.
Who Can Make a Downsizer Contribution?
To qualify, all of the following conditions must be met:
- You must be 55 years or older at the time you make the contribution
- The property must be located in Australia
- You must have owned the property for at least 10 years
- The sale must be eligible for the main residence exemption — at least in part
- The contribution must be made within 90 days of settlement
- A downsizer election form must be lodged no later than when the contribution is received by the fund
You can only use the downsizer rules once in your lifetime, and the maximum contribution is the lesser of the sale proceeds or $300,000 per person.
Does the Property Have to Be Fully CGT-Exempt?
This is a very common question — and the answer often surprises people.
No, the property does not need to be fully exempt from capital gains tax.
As long as some part of the gain is eligible for the main residence exemption, the property may still qualify for downsizer purposes.
For example, a home that was lived in for several years and later rented out may still meet the test.
Do You Have to Be Living There When You Sell?
Also no.
The property does not need to be your main residence at the time of sale.
What matters is your ownership and occupancy history. If the facts support at least a partial main residence exemption, the downsizer rules may still apply.
What About Very Old (Pre-CGT) Properties?
Special rules apply where a property was acquired before capital gains tax began.
In these cases, the test looks at whether part of the gain would have been disregarded under the main residence rules if CGT applied.
One important catch: there must be an actual dwelling that qualifies as a main residence.
The sale of vacant land will generally not meet the downsizer requirements.
Can a Non-Owning Spouse Contribute?
Yes — in some cases.
Even if only one spouse is listed on the title, the non-owning spouse may still be eligible to make a downsizer contribution, provided all other conditions are met.
However, if a spouse never lived in the property and couldn’t reasonably treat it as their main residence, eligibility is unlikely.
When Can You Access the Money?
Downsizer contributions are not automatically accessible.
Once contributed, the funds are subject to normal super preservation rules. You can generally access them when:
- You reach age 60 and retire, or
- You reach age 65, regardless of whether you’re working
It’s important to consider future cash-flow needs before locking money away in super.
Final Thoughts: Get the Timing and Details Right
Downsizer contributions can be a valuable strategy — but they come with strict timing rules and technical nuances.
Missing the 90-day window, misunderstanding the main residence test, or completing the paperwork incorrectly can mean losing the opportunity altogether.
If you’re considering selling a long-held home and want to explore whether a downsizer contribution makes sense for you, we recommend getting advice before settlement.
Call us at 07 34830100 or send a message if we can help
