A downsizer contribution can be made in respect of one or both members of a couple, even if only one spouse held an ownership interest in the relevant dwelling (e.g. where the title was only in one spouse’s name).

If there is a change in the ownership of a dwelling between spouses or former spouses during the 10-year period that preceded the sale of the dwelling (e.g. as a result of the death of one spouse or as a result of divorce), the ownership interest held by the spouse who no longer holds an ownership interest (e.g. a deceased spouse or a former spouse) is still counted and included when applying the 10-year ownership test to the other spouse who makes the contribution on the disposal.

A word of warning: This is a one-off

This is a once-only opportunity. Therefore, Australians at the younger end of the eligibility spectrum (particularly people who now find themselves eligible in their late fifties because of the change in the law on January, 1 2023) need to consider if this is the right decision for them – because they can’t claim a second downsizer contribution later in life.

Younger people also need to bear in mind that they may not be able to access their superannuation until they meet a condition of release, which at a minimum won’t happen until they reach the age of 60 and could well be substantially later (possibly up to 65 if they don’t retire earlier).

That means that funds contributed through the downsizer scheme could be “locked away” in their superannuation fund for several years – something to think about if you actually need to access the funds.

There may also be Centrelink implications for someone choosing to make use of the downsizer contribution.

Superannuation assets held by those who have already reached their Age Pension age (67 years) are broadly assessed under the Centrelink asset and income tests, although a person’s principal home is exempt from the Centrelink asset and income tests.

Unfortunately, there are no special Centrelink means test exemptions applicable to amounts contributed to super under this ‘downsizing’ measure.

As such, individuals who sell their home (i.e. a non-assessable asset) and use some/all of the proceeds to make a superannuation contribution, may see a reduction in their social security benefits due to all or part of the asset becoming accessible.

Questions about salary sacrifice and superannuation? Read H&R Block's FAQs for answers via https://www.hrblock.com.au/faq/super/

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