Downsizer Contributions and the Main Residence Exemption
Posted 09 February 2026
When a person or couple sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules.
Basic Eligibility Conditions
To qualify, the seller must meet a number of conditions:
- They must have reached the eligible age of 55 years (at the time of making the contribution).
- The eligible dwelling must be located in Australia and have been owned for at least 10 years.
- The disposal of the dwelling must be exempt from CGT under the main residence exemption to some extent (full exemption not required).
- The contribution must be made within 90 days of settlement, and an election form must be lodged with the fund no later than when the contribution is received.
The downsizer contribution can only be used once per individual and is limited to the lesser of the gross sale proceeds or $300,000 per person.
Does the Sale Need to be Fully CGT-exempt?
A common question is whether the sale must be fully exempt as the main residence.
Importantly, a full exemption is not required.
Even if only part of the capital gain is exempt under main residence rules, the property may still qualify — provided all other conditions are met.
Is the Property Required to be the Main Residence at Sale?
Equally important: the property does not need to be the seller’s principal residence at the time of sale.
Living in the property for some years and renting it out later does not disqualify it, as long as the ownership and residence history supports at least a partial main residence exemption.
Special Rules for Pre-CGT Properties
Where a property was acquired before CGT began, the rules look at whether part of the gain would have been disregarded had CGT applied.
A key requirement is that there is a dwelling that qualifies as the main residence. Disposal of vacant land will generally not satisfy the test and therefore will not meet downsizer requirements.
Eligibility of a Non-Owning Spouse
It is common for only one spouse to be listed on the property title.
A non-owning spouse may still qualify for a downsizer contribution if all other requirements are met, apart from ownership.
However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to be eligible.
Preservation and Access to Funds
A downsizer contribution is subject to the standard preservation rules. Once contributed, the amount cannot be accessed until:
- You reach preservation age (60) and retire, or
- You reach age 65, regardless of retirement status.
Consider future cash-flow needs before making the contribution.
Before you Contribute
Although seemingly straightforward, downsizer contributions involve several nuances. Please contact us if you have any questions.
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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 9 February 2026, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.
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