Older Australians aged 55 and above could significantly increase their retirement savings by using a little-known superannuation rule when selling their family home. The downsizer contribution scheme allows eligible homeowners to deposit up to $300,000 each into super, potentially helping couples combine different contribution rules to add as much as $1.38 million to their retirement accounts.
New figures from Colonial First State (CFS) show growing interest in the strategy as Australians approaching retirement look for ways to strengthen their financial position.
$300,000 Super Rule
The downsizer contribution scheme allows eligible Australians aged 55 or older to contribute proceeds from selling a qualifying property directly into superannuation.
An eligible individual can contribute up to $300,000, while a couple may contribute a combined $600,000, provided the sale proceeds are sufficient.
Unlike ordinary voluntary contributions, downsizer contributions are not counted towards the standard concessional or non-concessional contribution caps.
The scheme was introduced in 2018 and originally targeted older homeowners. Its minimum eligibility age has since been reduced to 55.
Importantly, there is no upper age limit, employment requirement or total super balance restriction specifically preventing an eligible downsizer contribution.
$1.38 Million Boost
The biggest opportunity arises when homeowners combine downsizer contributions with ordinary after-tax super contributions.
Colonial First State’s Head of Technical Services, Craig Day, explained how eligible couples could potentially contribute substantially more than the basic downsizer limit.
Under the contribution settings described for 2026–27, an eligible person could make:
- $300,000 through a downsizer contribution.
- $390,000 through non-concessional contributions using the three-year bring-forward arrangement.
- $690,000 in combined contributions for one person.
- $1.38 million in combined contributions for an eligible couple.
However, accessing the full non-concessional bring-forward amount depends on factors including age, total super balance and previous use of the arrangement.
The $390,000 figure assumes a $130,000 annual non-concessional cap and eligibility for the full three-year bring-forward period.
These are contribution limits, not guaranteed investment returns or government payments.
Who Qualifies?
Homeowners must satisfy several conditions before using the downsizer scheme.
Generally, the property must have been owned by the individual or their spouse for at least 10 years before the sale.
The property must also satisfy the relevant main residence capital gains tax requirements.
This does not necessarily mean the owner must have lived there continuously throughout the ownership period.
A former family home that later became an investment property may qualify, depending on its history and the applicable tax treatment.
Other important conditions include making the contribution within the required timeframe, generally 90 days after receiving the sale proceeds, and submitting the appropriate downsizer contribution form to the super fund.
The downsizer contribution opportunity can only be used once.
Contributions Surge
Australians are increasingly taking advantage of the scheme, according to figures supplied by Colonial First State.
The major super fund reported a 22 per cent annual increase in members making downsizer contributions during the 2025–26 financial year.
The total value of these contributions increased by 23 per cent over the same period.
CFS also recorded a 46 per cent increase in direct member downsizer contributions, although this growth came from a relatively small starting point.
Day indicated that many contributions continued to involve financial advisers, suggesting professional retirement planning remains an important driver.
Australian Taxation Office figures cited in the reporting also show substantial growth since the scheme began.
Downsizer contributions increased from approximately $1.55 billion in 2018–19 to $5.37 billion in 2024–25, followed by around $5.23 billion in 2025–26.
Pension Warning
Despite the potential tax advantages, downsizing can create complications for Australians receiving or expecting the Age Pension.
Under Centrelink rules, a person’s principal residence is generally excluded from the assets test.
However, money transferred into superannuation may become assessable once the individual reaches Age Pension age, potentially affecting payment eligibility.
For example, selling a valuable family home and purchasing a cheaper property could release hundreds of thousands of dollars.
Although contributing that money to super may improve retirement savings, it could also increase assessable financial assets.
Some retirees may consequently receive a reduced Age Pension or lose eligibility altogether.
The impact depends on their age, relationship status, other assets and income.
Tax Advantages
Superannuation can offer favourable tax treatment compared with holding investments personally.
Investment earnings in the accumulation phase are generally taxed at a maximum rate of 15 per cent, while eligible capital gains on assets held longer than 12 months may receive a one-third discount.
This can produce an effective capital gains tax rate of 10 per cent within a complying super fund’s accumulation phase.
Day said growing interest in additional contributions reflected Australians reviewing where they hold their investments.
CFS reported a 28.7 per cent year-on-year increase in additional contributions during the first two months of the 2026–27 financial year.
MLC also reported a substantial increase in additional concessional contributions following the federal budget.
However, proposed changes to personal capital gains taxation should not be treated as enacted legislation without confirmation.
Retirement Planning
The downsizer scheme can be particularly useful for homeowners who want a smaller property and have surplus sale proceeds available for retirement.
However, contributing money to super does not automatically make it immediately accessible. Superannuation preservation and withdrawal conditions may still apply.
Selling a property can also involve agent fees, moving expenses, stamp duty on a replacement home and other financial considerations.
For couples considering the maximum contribution strategy, professional advice can help determine whether the benefits outweigh potential pension and liquidity consequences.
The key advantage is the ability to move up to $600,000 per eligible couple into super through downsizer contributions, with a potential combined total of $1.38 million when other contribution rules permit.
For older homeowners, careful planning could turn a property sale into a substantial retirement savings opportunity.
