Downsizing and Super Contributions: What Retirees in Australia Need to Know in 2025–2026

As retirement approaches, many Australians begin to re-evaluate their housing needs. Whether it's to simplify life, free up equity, move closer to family, or reduce maintenance, downsizing is an increasingly popular option for people in their 50s, 60s, and beyond.

What many don’t realise is that downsizing can also bring significant financial benefits, especially when combined with the right superannuation strategies. The federal government’s Downsizer Super Contribution scheme provides a unique opportunity to boost your retirement savings — and it works alongside standard concessional and non-concessional contribution options.

Here’s what retirees and pre-retirees should know about downsizing and super contributions in 2025–2026.

Why Downsizing?

Downsizing isn't just about moving into a smaller home — it’s about right-sizing your lifestyle for the next chapter.

Common reasons Australians downsize include:

• Reducing upkeep and household expenses

• Unlocking equity from a large family home

• Moving closer to services, healthcare, or family

• Transitioning to a single-level or age-friendly home

• Embracing a retirement lifestyle in a community environment

Whether you're relocating to a coastal town, downsizing to a unit in town, or moving into a retirement village, the benefits go beyond convenience — particularly when combined with smart super planning.

What Is the Downsizer Super Contribution?

The Downsizer Contribution scheme allows older Australians to put a portion of the proceeds from selling their home directly into their superannuation — even if they’re over the usual age or contribution caps.

Key features:

• You can contribute up to $300,000 from the sale of your home

• Couples can contribute up to $600,000 combined

• It does not count toward normal super contribution caps

• It is available to those aged 55 and over

• The home must have been owned for 10 years or more and used as your main residence

• Contribution must be made within 90 days of settlement

The Downsizer Contribution is particularly powerful because it provides an opportunity to significantly boost your super, even if you're no longer eligible for other types of contributions due to age, super balance, or employment status.

How It Works

Let’s say you're 66 and sell your family home for $850,000. You and your partner can each contribute up to $300,000 into your individual super funds — a total of $600,000 — regardless of your current super balances or work status.

These contributions can then be used to generate retirement income within the tax-advantaged super system.

Important: While the contribution itself won’t affect your concessional or non-concessional caps, the money will count towards your Age Pension assets test after a 90-day exemption period.

Concessional and Non-Concessional Super Contributions Explained

To understand why the Downsizer Contribution is unique, it helps to know how normal super contributions work.

Concessional Contributions (before-tax)

These are contributions made into super before tax is applied, and they are taxed at 15 percent inside your super fund.

Examples:

• Employer super guarantee payments

• Salary sacrifice from your wages

• Personal contributions that you claim as a tax deduction

• Annual cap for 2025–2026: $30,000 per person

  
  

If you go over this cap, the excess is taxed at your marginal rate (with a tax offset) and may count toward your non-concessional cap.

Non-Concessional Contributions (after-tax)

These are voluntary contributions from your savings or other post-tax funds. They're not taxed on the way in because you've already paid income tax.

Examples:

• Transferring money from your savings account into super

• Using inheritance or investment returns to boost your super

Annual cap for 2025–2026: $120,000 per person Or up to $360,000 under the three-year bring-forward rule (if you’re under 75 and eligible).

Note: If your total super balance is over $1.9 million, you may not be allowed to make non-concessional contributions at all.

How the Downsizer Contribution Is Different

• It is not subject to concessional or non-concessional caps

• You can make it even if your super balance exceeds $1.9 million

• There’s no upper age limit

• It doesn’t require you to be working

This makes it one of the most flexible ways to top up your super after selling your home.

Tax and Centrelink Implications

While downsizing and contributing to super can be tax-effective, it’s important to consider the impact on Centrelink benefits.

• Principal residence is exempt from the assets test — but once you sell and deposit proceeds into super, those funds may be counted.

• Downsizer contributions are included in your Age Pension assets test after 90 days.

• If you're planning to apply for the Age Pension, or already receiving it, this could affect your entitlements.

A financial adviser or Centrelink’s Financial Information Service can help you assess the impact on your pension and eligibility.

Retirement Living and Downsizing Options

In Tasmania and across Australia, retirees are choosing from a wide range of downsizing options:

• Small homes, units or villas in local suburbs

• Coastal or regional lifestyle towns

• Purpose-built over-55 communities or lifestyle villages

• Retirement villages with communal facilities and support services

  
  

Each option has different legal and financial structures — for example, some retirement villages operate on leasehold or license agreements, with deferred management fees and conditions on resale.

Always get legal and financial advice before signing a retirement village or lifestyle contract.

Downsizing Tips for Retirees

1. Start early — downsizing is easier when it’s planned, not rushed

2. Declutter over time — reduce moving stress by sorting belongings gradually

3. Visit communities and locations before you commit

4. Understand your cash flow and super strategy

5. Review legal documents and retirement village contracts carefully

6. Talk to a financial planner about tax, super, and pension implications

For retirees looking to simplify their lifestyle and strengthen their financial position, downsizing presents both a practical and strategic opportunity.

The Downsizer Super Contribution is a powerful incentive that can help you transition into retirement with greater security — especially when combined with smart use of concessional and non-concessional contributions.

Before making any decisions:

• Talk to your super fund

• Seek advice from a licensed financial adviser

• Review potential impacts on tax and government benefits

With the right planning, downsizing could be the key to unlocking a better lifestyle and a more flexible financial future.