The idea of downsizing can be very appealing to empty-nesters. There will be less cleaning, gardening and maintenance, more time for hobbies and travel, and the icing on the cake comes if you can use the cash surplus you created to give your super a significant tax-effective boost.
But is the picture totally rosy, or are there some drawbacks to downsizing?
Advantages of putting downsizer contributions into super
1. Boost your super. Since January 2023 it’s been possible for both members of a downsizing couple to contribute, from the proceeds of the sale of their home, up to $300,000 each into their superannuation accounts, and therefore $600,000 for a couple. But there are some eligibility requirements:
- You must be aged 55 or older.
- You (or your spouse) must have owned the home for 10 years or more.
- The sale must be wholly or partially exempt from Capital Gains Tax. (Generally speaking, this means you must have lived in it as your main residence and not used it to earn income for some of those 10 years.)
- You must make the contribution within 90 days of the sale, unless you’ve been granted an extension.
- You cannot have previously made any downsizer contributions.
- You must provide a Downsizer contribution into superannuation form to your super fund.
2. Contributions cap not affected. Downsizer contributions don’t count towards your concessional or non-concessional super contribution caps. You can make a downsizer contribution regardless of your total super balance.
3. Age limit does not apply. Ordinarily, you cannot make voluntary super contributions after you turn 75, but downsizer contributions are exempt from this rule.
4. Tax advantage. You may choose to put your downsizer funds into super, rather than in a savings account or share investment portfolio, because superannuation is the most taxeffective place for your retirement savings. In the accumulation phase (pre-retirement and pre-pension) a super fund’s earnings are taxed at only 15%, and both the fund’s earnings and your withdrawals are likely to be tax-free once you retire and start taking a pension.
Disadvantages of putting downsizer contributions into super
1. Impact on Age Pension. Once you reach retirement age, Centrelink will assess your income and assets in order to determine whether you qualify for a full or part Age Pension. Your family home is exempt from the Centrelink assets test, but once you sell it and put all or part of the proceeds into super, the proceeds will count towards both the assets and income test.
You may receive a lower Age Pension as a result.
2. You may have to wait a while. In order to access your super you must reach preservation age and retire, or turn 65. So, if you’re under preservation age, or under 65 and not retired, your downsizer funds may be locked away for a few years.
3. Investment risk. Depending on the investment option you choose within superannuation, your money may be invested in assets such as shares and property, which means its value can fluctuate with market movements. Individuals who are highly risk-averse, and who are comfortable forgoing capital growth and potential tax concessions on their investments, may consider lower-risk options such as fixed interest, cash or term deposits.
4. Cost to your estate. Your beneficiaries can usually inherit your home tax-free after your death, but tax is payable on superannuation death benefits, at a rate of up to 17% (including Medicare levy) on the taxed element of your super, and up to 32% on any untaxed element.
Weigh the pros and cons and get professional advice
Downsizing won’t automatically generate a cash bonanza, as you may decide to move to a more expensive area or choose a higher-end property. A smaller residence can mean less work, but it may also make family visits harder and reduce your connection to your current community.
If you’re weighing up these lifestyle factors alongside the superannuation and tax considerations, it’s important to understand how the rules apply to your situation. This article provides general information only and doesn’t take your personal circumstances into account. If you’re considering a downsizing strategy and want clarity on your options, you’re welcome to book a complimentary 20-minute chat via our contact page: Contact Us.
Key facts and figures in this article are sourced from the Australian Taxation Office (ATO):
- https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/downsizer-super-contributions (retrieved 29 August 2025)
- https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/tax-on-super-benefits (retrieved 29 August 2025)
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