Selling your home, downsizing and the Age Pension
Your home is exempt from the assets test, so selling it can change your pension more than anything else. Here is how sale proceeds, the 24-month exemption, renting and downsizer contributions are treated.
Your home is the one big asset the Age Pension ignores, so selling it is the point at which the assessment can change most. Downsizing can free up money, but it can also turn an exempt asset into an assessable one. Here is how the rules work and what to look out for.
Your principal home is exempt
The home you live in, and up to two hectares of the land it is on, is not counted under the assets test, regardless of its value. That is why homeowners have a lower assets free area than non-homeowners: from 1 July 2026 a single homeowner has a free area of $333,000, compared with $600,000 for a single non-homeowner, a difference of $267,000.
Sale proceeds you plan to reinvest in a new home
When you sell your home and intend to buy, build or renovate another, the portion of the proceeds you plan to use for the new home is exempt from the assets test for up to 24 months, and can be extended to 36 months in some circumstances beyond your control. During that time you continue to be assessed as a homeowner.
The proceeds are still deemed under the income test, but only at the lower deeming rate of 1.25%, however large the amount. The advanced estimator has a separate field for home-sale proceeds so this concession is applied correctly.
Money you do not put back into a home
Any part of the proceeds you keep, whether in the bank, invested or added to super, becomes an ordinary financial asset. If you move from a $1.2 million house to a $700,000 unit, the $500,000 difference is now assessable. For a single person already at the free area that reduces the pension by up to $1,500 a fortnight, which is more than the maximum rate, so the pension may cut out entirely.
Renting or moving in with family
If you sell and do not buy again, you become a non-homeowner. The higher free area softens the effect, but the full sale proceeds are assessed. You may also qualify for Rent Assistance if you pay private rent. Moving into a retirement village or aged care has its own rules, depending on the entry contribution you pay.
Downsizer contributions to super
From age 55 you can contribute up to $300,000 each ($600,000 for a couple) from the sale of a home you have owned for at least 10 years into superannuation, outside the usual contribution caps. This is a tax measure rather than a pension measure: once you are over Age Pension age, money in super is assessed as a financial asset just like money in the bank. The downsizer contribution does not shelter the proceeds from the means tests.
Run the numbers before you sell
Because the outcome depends on how much you release and where it ends up, model it before committing. Use the simple estimator to compare your current position with the position after the sale, remembering to switch between homeowner and non-homeowner if that changes.
This article is a general guide to how the Age Pension is worked out and is not financial advice. Rates and thresholds are those current at the time of writing and change on 20 March, 1 July and 20 September. Your entitlement can only be determined by Services Australia; for decisions about your finances, contact their free Financial Information Service on 132 300 or a licensed financial adviser.
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