Downsizer Contributions – Inverse Gender Contribution Gap Found!

Normally, in the superannuation world, gender gaps mean that females have less super than males. However, this is not the case with Downsizer Contributions as shown by recently released ATO contributions data.

With almost $20b of downsizer contributions (and rising) since such contributions were introduced in the 2018/19 financial year the ATO has discovered that there is a gender imbalance in favour of females: more females than males have the benefit of downsizer contribution. However, the average size of downsizer contributions for females and males are almost identical (the difference is less than 1% albeit in favour of females).

However, possibly the most surprising aspect of the data is that of the total downsizer contributions made - $19,858m – 44.55% were in respect of males while 55.45% were in respect of females.

In terms of age brackets (based on 5 year brackets from 55-59; 60-64 and so on until 95 plus) 64% of all taxpayers who received downsizer contributions were in the age brackets 60-64 (20.5%); 65-59 (22.3%) and 70-74 (21.2%). If the age bracket of 75-79 were also included, the 64% would rise to about 83%.

Another surprising result is that across all age brackets the average downsizer contributions were remarkably similar in amount – ranging from the lowest average contribution of $247,000 for 90-94 age bracket to the highest average contribution of $285,710 for the 95 plus age bracket.

Briefly, a downsizer contribution is a personal super contribution equal to the sale proceeds of a current or former family home where the home has been held for 10 years or more – but capped at $300,000 per individual. Typically, the sale of the family home is associated with retirement and relocation – a sea change or tree change – which retirees are apt to undertake. While typically, the money to make the downsizer contribution is generated by the sale of the current or a former family it is not always the case.

The main rules relating to such contributions is that they can only be made once you attain age 55 (higher ages applied in previous years), they must generally be made within 90 days of the completion of the sale and only one family home (current or former) can be treated as being the relevant “source” of the contribution. As previously noted the maximum contribution is $300,000 per taxpayer.

Downsizer contributions have two significant advantages and one significant drawback. First, the advantages – downsizer contributions can be made at any age above age 55 – including age 95 or more. Secondly, downsizer contributions are not subject to the normal cap on non-deductible personal contributions of currently $120,000 per year. The drawback is that if the downsizer contribution is sourced from the cash proceeds of the sale of the current home then, so far as the Centrelink assets test is concerned, value has been moved from an exempt asset (ie current home) to a counted asset (being the superannuation balance).

Article based upon information published on 9 September 2024 by the ATO – QC102997