The rules are reasonably strict, and the process can become complex. We recommend you seek advice before you start. But you should remember that it is the transaction of selling of the family home that is the trigger and the contributions do not count towards your contribution caps.  

The contribution must relate to the proceeds of the disposal of your principal place of residence. This ensures your contribution is less than the gross proceeds received for the house. The funds for the actual contribution can come from anywhere, and the transaction does not require you to buy another house.  

There are a number of practical scenarios where this can add material value to your financial situation, as outlined in the following examples.

Jack and Diane are 69 and 68 and both retiring in August. They choose to sell their home valued at $1.3 million and move to a regional community where their children live and purchase a home for $480,000. They have very little super or other savings.  They can both make a ‘downsizer’ super contribution of $300,000 and a ‘non-concessional’ super contribution of $100,000 because they had worked in the current financial year. They now have $800,000 to fund their retirement. Also, they will meet the eligibility tests allowing a modest age pension but more importantly the concessions and discounts that come with the age pension.

Ross and Rachael, aged 64, have done a little better and are considering selling their home and moving to the beach house they have recently purchased. Waiting until they turn 65 will allow them to contribute $600,000 to their already large superannuation balances. They don’t need to use the funds to buy another house.

Danny and Sandy, aged 65, each have a superannuation pension account of $1.6 million and jointly hold a $2.5 million portfolio of managed funds. To simplify their affairs, they choose to sell their $600,000 house, contributing $300,000 each into superannuation and then purchase their dream home on the waterfront using the $2.5 million (from the sale of their managed funds). They each have a super balance of $300,000, a pension of $1.6 million and never have to do a tax return again!

These examples are simplified but this measure can be used to restructure your finances and when used effectively, it can add a lot of value to your situation. Whilst the sea change or tree change is not for everyone, if you are thinking about selling your home, the downsizer provisions may be a very real solution for you!