The $600,000 super hack for over 55s: downsizing done right

May 23, 2025

Downsizing for the future. Why this matters now

Many Australians over 50 are living in homes that are bigger than they need. At the same time, they may not have enough superannuation to retire comfortably. Downsizing—selling a large family home and moving into a smaller, more manageable place—can unlock wealth tied up in property and boost retirement savings.

And thanks to Downsizer Contributions, people aged 55+ can put up to $300,000 into super per person (so $600,000 per couple) without impacting contribution caps.

Just to note; downsizer contribution is made from after-tax money, but it doesn’t count towards your normal super contribution limit. It won’t impact your total super balance straight away — it only gets added when your balance is recalculated at the end of the financial year.

However, it does count towards your transfer balance cap, which limits how much super you can move into your retirement (income stream) phase. It’s also considered when working out your eligibility for the age pension.

Key reasons to consider downsizing 

  • Free up equity: Sell your home, buy a smaller one, and use the leftover money to invest or add to your super.

  • Boost super tax-free: From age 55, eligible homeowners can contribute up to $300,000 each from home sale proceeds into super.

  • Lower living costs: Smaller homes often mean lower utilities, maintenance, and council rates.

  • Simplify lifestyle: Less upkeep = more time and freedom.

  • Access age pension sooner: Downsizing smartly can help you become eligible for the pension, depending on how assets are structured.

Real-life case study:

The Thompsons (validated with 2023 data)

Names: Greg (67) and Sue (65) Thompson
Current situation:

  • Own a 4-bedroom house in Sydney, debt-free, worth $1.6M

  • Super balances: $220,000 (Greg), $180,000 (Sue)

  • Annual living costs: $60,000

What they did:

  • Sold their home for $1.6M

  • Bought a modern 2-bedroom apartment in Newcastle for $850,000

  • After stamp duty and moving costs, they had $700,000 net left

How they used the money:

  • Each made a $300,000 downsizer contribution into their super (total $600,000)

  • Put the remaining $100,000 into a high-interest savings account for emergencies

Result:

  • Their combined super grew from $400,000 to $1 million

  • They reduced living costs by ~20%

  • They’re eligible for a part Age Pension, thanks to how their assets are structured

Source: Australian Government Treasury / ATO Downsizer Contribution Guide (2023)
More infoWhy this matters?

Steps to take if you’re thinking about downsizing

  1. Check your eligibility

    • Must be 55 or older

    • Must have owned your home for 10+ years

    • Must make the downsizer contribution within 90 days of settlement

  2. Do a cost-benefit analysis

    • Factor in stamp duty, moving costs, legal fees

    • Will you actually come out ahead?

  3. Speak with a financial adviser (especially important for Age Pension implications)

  4. Review lifestyle needs

    • Do you want to live closer to family, health services, or in a retirement-friendly community?

  5. Consider your estate plans

    • Will adding to your super affect how you want to leave assets to your family?

What could go wrong if you don’t plan it well?

  • Moving costs and property fees might eat into the sale profits

  • May lose Age Pension eligibility if you don’t structure it wisely

  • Emotional regret if you downsize too early or to the wrong area

Tip for the day!

Over 55 and sitting on a large family home? You could unlock up to $600,000 into your super without affecting your usual contribution caps. This is thanks to the Downsizer Contribution.

Here’s how it works:

If you're 55 or older and have owned your home for at least 10 years, you can sell it and contribute up to $300,000 per person ($600,000 per couple) into super — from the sale proceeds. This doesn’t count towards your standard annual cap and there’s no upper age or work test required!

The win?
• More money in your super (tax-advantaged environment)
• Lower living costs if you move into a smaller home
• Potential Age Pension eligibility, if done strategically

But wait!
You must make this contribution within 90 days of settlement and tell your fund it’s a “downsizer contribution” using the correct form.

Also, it’s from after-tax money, so no salary sacrifice here!

➡️ Search “ATO Downsizer Contribution” for full details or visit ato.gov.au

MAKE SURE YOUR SUPER FUND KNOWS IT’S A DOWNSIZER CONTRIBUTION – and that they have your TFN!

The most common super questions and answers

  • Can I put money from selling my house into superannuation?
    Yes. If you're aged 55 or older, you may be eligible to make a downsizer contribution of up to $300,000 per person (or $600,000 per couple) into your super from the proceeds of selling your home. This is in addition to your normal contribution caps, and it’s a great way to boost your retirement savings tax-effectively.

    👉 Learn more from the ATO

  • What are the benefits of downsizing before retirement?

    • Unlock equity to invest or boost super

    • Lower ongoing living expenses (rates, utilities, maintenance)

    • Simplify your lifestyle with a smaller, more manageable space

    • Access government support like the Age Pension, if assets are structured well

    • Move closer to amenities, family, or retirement-friendly communities

  • Will downsizing affect my Age Pension?

    Possibly. If you free up money and don’t contribute it to super or spend it within reason, it may count toward your assets test, which could reduce your Age Pension. But with the right strategy—such as using downsizer contributions to put it into super (if you're under age pension age)—you may reduce the impact.

    Tip: Speak to a financial planner before selling to avoid unintended consequences.

  • What costs are involved in downsizing?

    Common costs include:

    • Stamp duty (varies by state, but some offer concessions for seniors)

    • Agent commissions & legal fees

    • Moving costs & renovations

    • Possible strata fees for apartments or townhouses

    Always do a full cost-benefit analysis to ensure you actually come out ahead.

  • Is downsizing right for everyone over 55?

    No—it depends on your financial goals, emotional readiness, and lifestyle needs. Some people feel deeply connected to their family home or need the space. Others find great relief in reducing physical and financial burdens. The key is to plan carefully and make the move on your terms, not under pressure.