There's a moment, usually somewhere in your fifties, when the house starts to feel like more than you need. A spare bedroom that has been a storage room for six years. A lawn that eats a Saturday morning. Stairs you have started to notice. And behind all of it, a quieter thought: there is a lot of money tied up in this place, and we could probably use some of it.
Then the thought gets complicated. Where would we go? Would we really be in front? What would it do to the pension? So the idea goes back in the drawer for another year.
It is worth taking out of the drawer properly. Downsizing is one of the few decisions available in your fifties and sixties that can genuinely change the shape of your retirement, for better or for worse. The good news is that you can work out which it would be at the kitchen table, long before an agent walks through the door.
Start with what's left over, not what the house is worth
The number that matters is not the sale price. It is the sale price, minus the price of what you buy, minus everything the move costs you along the way.
Take a couple who think their home would sell for around $1.35 million and have their eye on a low-maintenance place at about $900,000. On the back of an envelope that looks like $450,000 freed up. It is a good starting point, and it is also the most optimistic number they will see all year.
Write that figure down. Then work through what comes off it.
The costs that quietly eat the gap
Selling costs come first: agent's commission, marketing, conveyancing, and whatever you spend on paint, repairs and presentation to get the price you want. These vary a great deal by agent and by suburb, so get three written quotes rather than working off a rule of thumb.
Buying costs are more predictable, because the biggest one is set by your state. Transfer duty (most people still call it stamp duty) is charged on what you buy, and on a home in the $900,000 range it is a serious number. In Queensland, a buyer claiming the home concession pays $10,150 plus $4.50 for each $100 above $540,000, which works out to $26,350 on a $900,000 purchase. Other states have their own scales and their own concessions for seniors, so check your own revenue office rather than assuming.
Then add conveyancing, building and pest inspections, removalists, and the unglamorous tail of a move: blinds, a smaller lounge suite, a new mattress, the storage unit you need for three months.
There is one large cost most people expect and do not have to pay. Selling your own home is generally free of capital gains tax (CGT), the tax on the profit you make when you sell an asset. The full main residence exemption applies where the home has been the residence of you and your family for the whole period you owned it, you have not used it to produce income by renting it out or running a business from it, and it sits on two hectares or less.
Our couple's $450,000 might realistically land somewhere closer to $380,000 or $390,000 once everything is paid. That is still a substantial sum. It is simply not the sum they started with, and knowing that before you commit is the whole point of the exercise.
What Centrelink makes of the money
Here is the part that catches people out. The family home is exempt from the age pension assets test. Money that used to be the family home is not.
From 1 July 2026, a homeowning couple can hold $499,000 in assessable assets and still receive the full age pension; for a single homeowner the figure is $333,000. Above that, the pension reduces by $3 a fortnight for every $1,000 of assets, which is $300 a fortnight, or about $7,800 a year, for every extra $100,000 you are holding. A couple already near the limit who free up $380,000 are not just gaining $380,000 in the bank. They may also be giving up a meaningful slice of pension income to get it.
You do get breathing room. Where you intend to put the proceeds into another home, that money is exempt from the assets test for up to 24 months from settlement, and can be extended to 36 months if you have genuinely been trying to buy or build and have been held up by things outside your control. During that exemption period the money is still counted under the income test, but only at the lower deeming rate.
If you are 55 or older and have owned the home for 10 years or more, the downsizer contribution lets you and your spouse each put up to $300,000 of the sale proceeds into super within 90 days of settlement, and it does not count towards your normal contribution caps. It is a genuinely useful provision. Just be clear about what it does and does not do: it moves money into a tax-friendly environment, but once you are age pension age, super is assessable too. The downsizer contribution is a tax decision, not a way to become invisible to Centrelink.
The questions the spreadsheet can't answer
Plenty of downsizing decisions go wrong for reasons that never appear in the numbers. Will the new place still hold everyone at Christmas, or will you be hiring a hall? Are you moving towards your children and friends, or twenty minutes further away from them? Is there a lift, or will the new stairs be a problem in fifteen years? And if you found you had made a mistake, could you afford to get back into the market you just left?
Noel Whittaker devoted an entire book to this decision rather than a chapter, largely because the financial half is the easier half. Give the human questions the same evening you gave the spreadsheet.
If the numbers don't stack up
Sometimes you do the sums and the gap is thin. That is useful information, not a failure, and you have options other than staying put and resenting it.
You can move sideways rather than down, to a cheaper suburb at a similar size. You can wait, because the concessions above are not going anywhere and the decision gets easier once one of you stops working. You can stay and spend a fraction of the moving costs on making one part of the house work properly. And it is worth remembering that a smaller, newer, better-insulated home cuts rates, insurance, power and maintenance every year, which is real money even when the lump sum is modest.
For context on what you are aiming at: the ASFA Retirement Standard for the June 2026 quarter puts a comfortable retirement at $56,166 a year for a single person and $78,998 for a couple, assuming you own your home outright and are in reasonable health. Compare the freed-up money against that gap, not against the sale price.
Three things to watch. Do not buy before you sell unless you can genuinely afford to carry both. Do not guess at transfer duty; look up your state's rate before you set a budget. And do not let the proceeds sit in a cash account by default for two years because no one decided what they were for.
Do the arithmetic first. Then call the agent.
If you want to walk through this properly, Downsizing Made Simple (2nd Edition) by Noel Whittaker takes you through the sums, the Centrelink rules, the downsizer contribution and the practical side of the move itself. It's $19.99, you buy direct from the author, and you get it in PDF and EPUB so you can read it on anything.
This article is general information only and doesn't take account of your personal circumstances. Figures are current at time of writing and change each financial year. Consider seeking advice before acting.