Selling the family home usually frees up more money than any other single event in retirement. The downsizer contribution rules let you move a large slice of that money into superannuation, up to $300,000 per person, or $600,000 for a couple, without affecting your normal contribution caps.

It sounds simple. It mostly is. However, the eligibility rules are strict, the contribution window is only 90 days, and the Age Pension consequences can surprise many households.

This guide explains how the downsizer contribution works, who qualifies, and when leaving the money outside super may actually be the smarter move.

What is a downsizer contribution?

A downsizer contribution is a one-off super contribution made from the proceeds of selling your home. Each eligible person can contribute up to $300,000, meaning a couple can contribute up to $600,000 between them.

The combined contribution cannot exceed the total sale proceeds.

The measure commenced on 1 July 2018, and the eligibility age was reduced to 55 from 1 January 2023.

Despite the name, you do not have to downsize. There is no requirement to buy a smaller home, a cheaper home, or any home at all. You could sell a five-bedroom house and move into a rental property, a retirement village, or a family member’s granny flat and still qualify.

If the decision itself is still up in the air, the lifestyle side of downsizing, where to move, when to move, and how to declutter a house full of memories, is covered separately on our site.

Who is eligible?

The ATO applies five main tests. You must pass all of them.

Age. You must be 55 or older when you make the contribution. There is no upper age limit, and no work test applies.

Ownership. You or your spouse must have owned the home for 10 years or more, generally measured from settlement of the purchase to settlement of the sale. Only one of you needs to have been on the title. Both spouses can still make a downsizer contribution if each meets the other eligibility requirements.

The property. It must be located in Australia and cannot be a caravan, houseboat, or other mobile home.

Main residence. The sale must qualify for the main residence CGT exemption, either in full or in part. A home that was rented out for a period can still pass this test if the exemption partially applies.

One time only. You can only use the downsizer contribution rules once. If you have previously made a downsizer contribution from the sale of another home, you cannot do it again.

Two procedural rules also matter. The contribution must reach your super fund within 90 days of receiving the sale proceeds, usually the settlement date, although the ATO may grant an extension in limited circumstances.

You must also provide your fund with the ATO Downsizer Contribution form (NAT 75073) before, or at the time of, making the contribution. If you do not submit the form, the fund may treat the money as a standard contribution, which could cause you to exceed your contribution caps.

The caps it skips, and the caps it doesn’t

Here is what makes the downsizer contribution unusual. It does not count towards your concessional or non-concessional contribution caps. Your total super balance is also irrelevant to your eligibility. Someone with $3 million already in super can still contribute another $300,000.

However, the money does not disappear from the system.

Once inside super, the contribution counts towards your total super balance, which can affect your ability to make further non-concessional contributions in future years.

If you move the money into a retirement income stream, it also counts towards your transfer balance cap, which is $2.1 million from 1 July 2026.

The contribution is not tax-deductible. It goes into super as after-tax money, similar in character to a non-concessional contribution, but measured against a different limit.

The Age Pension trap

This is where downsizing decisions most often go wrong.

Your principal home is exempt from the Centrelink assets test. Money held in super or in the bank, once you reach Age Pension age, is generally not.

So, when you sell a $2 million home and buy a $1.2 million apartment, roughly $800,000 has moved from the exempt column to the assessed column.

To put that in context, a homeowner couple can hold around $499,000 in assessable assets and still receive the full Age Pension, while the pension cuts out entirely at about $1,102,500.

For a single homeowner, the full Age Pension threshold is around $333,000. Above the threshold, the pension reduces by $3 per fortnight for every $1,000 of additional assessable assets.

Apply that taper rate to $600,000 of freed-up capital and the pension can fall by up to $1,800 per fortnight, more than the maximum Age Pension rate for a couple. Put simply, a large enough surplus can eliminate Age Pension eligibility altogether.

There is a partial reprieve. For homes sold from 1 January 2023, the portion of the sale proceeds intended for the purchase of a new home is exempt from the assets test for up to 24 months, extendable to 36 months in limited circumstances. During that period, you are still treated as a homeowner, and the exempt proceeds are deemed at the lower deeming rate only.

Deeming also matters for the income test. Financial assets are currently deemed to earn 1.25 per cent up to $66,800 for singles and $110,600 for couples, and 3.25 per cent above those thresholds.

The exemption applies only to money set aside for the new home. Any surplus you retain, including a downsizer contribution once you have reached Age Pension age, is assessed under the normal means-testing rules.

One structural point can help some couples. Super held in the accumulation account of a spouse who is under Age Pension age is not counted under the older partner’s means tests. Directing sale proceeds into the younger spouse’s super can preserve pension entitlements for years.

Case study: Helen and Peter sell in Sydney

Consider Helen, 68, and Peter, 70. They sell their family home on Sydney’s North Shore for $2.6 million and buy a two-bedroom apartment nearby for $1.6 million. After agent fees, stamp duty and moving costs of roughly $130,000, they have $870,000 left over.

Before the sale, they held $400,000 in super and received a near-full Age Pension because the family home did not count towards the assets test. They now contribute $300,000 each as downsizer contributions and keep $270,000 in the bank.

Their assessable assets jump from around $400,000 to about $1.27 million, plus the value of their contents and car. That places them above the Age Pension cut-off, so their pension stops entirely.

In exchange, they hold $1 million in super that can be converted into account-based pensions with tax-free earnings, plus cash for travel and renovations.

Is that a good trade-off? For Helen and Peter, probably yes, because the investment income generated from $870,000 comfortably exceeds the pension they lost. For a couple with a smaller surplus, however, the answer could be very different.

The maths must be done on a case-by-case basis before the auction, not after.

An alternative: borrow against the home instead

Downsizing is not the only way to turn housing wealth into retirement income. The Government’s Home Equity Access Scheme allows eligible people of Age Pension age to draw a voluntary loan secured against Australian real estate, paid as fortnightly instalments or capped lump-sum advances, at an interest rate of 3.95 per cent per annum, compounding fortnightly.

Because you keep the home, its assets test exemption remains intact and the loan payments do not count as income for Age Pension purposes.

For pension-sensitive households that love where they live, it can be a better option than selling. The scheme’s mechanics, limits and risks are covered separately on our site.

Where it fits in a retirement income strategy

For most people, the downsizer contribution is a means to an end: converting home equity into a tax-effective retirement income.

The usual path runs from the sale proceeds into a super accumulation account, then into an account-based pension. Earnings within a retirement-phase pension are tax free, and pension payments to anyone aged 60 or over are also tax free.

The amount you can transfer into retirement phase is limited by your transfer balance cap of $2.1 million. How account-based pensions compare with annuities is covered separately on our site.

The strategic questions are rarely about eligibility; they are about allocation.

How much of the surplus should go into super versus remaining accessible as cash? Whose name should it go in, especially if one spouse is younger? And when should each account be converted to pension phase?

Small changes to those decisions can alter pension entitlements and tax outcomes by thousands of dollars each year.

When a downsizer contribution does not make sense

Sometimes the right amount to contribute is less than the maximum, or nothing at all.

Pension-sensitive households: If your assets sit near the Age Pension assets test thresholds, every $100,000 added to super can reduce your pension by up to $7,800 a year under the taper rate. The investment return required just to break even can be substantial.

Aged care later on: If one of you eventually enters residential aged care while the other remains in the family home, the home is either exempt or assessed only up to a capped value under the aged care means test. Super is generally assessed in full. Shifting wealth from the home into super today can result in materially higher aged care contributions later, particularly under the fee settings that apply to residents entering care from 1 November 2025.

Transaction costs: Stamp duty on the next property, agent commissions and moving costs can easily absorb $100,000 or more from a Sydney property sale. That is money gone before any strategy even begins.

Flexibility: Some people simply value flexibility. Money inside super is subject to preservation and pension rules. Money held in your own name is not.

Getting the decision right before you sell

The downsizer contribution is one of the few genuinely generous opportunities left in the superannuation system. It is also a one-off decision wrapped inside a much bigger one, the sale of your home, with a 90-day deadline attached.

The Alteris Wealth Advice team models the whole picture: contribution amounts, spouse splits, Age Pension entitlements, deeming, and what today’s choices could mean for aged care costs years from now.

If a home sale is on your horizon, a conversation before you list the property is worth far more than one after settlement.

Frequently asked questions

Do I have to buy a smaller home to make a downsizer contribution?

No. The rules only consider the home you sold. You can buy a larger home, rent, or move in with family and still qualify, provided you meet the eligibility requirements.

Is there an upper age limit?

No. There is no maximum age and no work test. A 90-year-old who meets the ownership and main residence requirements can make a downsizer contribution.

Can my spouse contribute if the home was only in my name?

Yes. Only one member of a couple needs to have owned the home for the required 10-year period. Each spouse who wishes to contribute must separately meet the age requirement and lodge their own downsizer contribution form.

Will a downsizer contribution reduce my Age Pension?

It can. The family home is exempt from the Age Pension assets test, but super is generally not once you reach Age Pension age. Modelling the potential pension impact before you sell is one of the most valuable pieces of advice a downsizer can receive.

Alteris Financial Group Pty Ltd (ABN 59 133 479 115) holder of AFSL No.402370. The information contained in this article is general in nature and does not take into account your personal circumstances. We recommend you consult a financial adviser whose advice will take into account your particular objectives, financial situation and individual needs.

Last updated: July 2026