The house made sense when there were four of you and a dog. Now there are two of you, three bedrooms nobody sleeps in, and a set of gutters you have no business climbing up to clean. Something smaller and simpler would suit you better.
And then someone at a barbecue says it: "Careful — sell the house and Centrelink will take your pension off you." So you stay put, in a home you have outgrown, because of a rule you have never actually had explained to you.
The rule is real. It is also more workable than the barbecue version, and it rewards people who understand it before they call an agent.
Why the family home changes everything
Your home is exempt from the age pension assets test. It does not matter whether it is worth $600,000 or $6 million — Services Australia does not count it. Almost everything else you own does count: super, savings, shares, the car, the caravan, the contents of the house at second-hand value.
Because of that, homeowners get a smaller assets free area than renters. From 1 July 2026 the free areas are:
- Single homeowner: $333,000. Single non-homeowner: $600,000.
- Couple homeowner (combined): $499,000. Couple non-homeowner: $766,000.
The gap is $267,000 either way. Above the free area, every extra $1,000 of assets cuts your pension by $3 a fortnight — $78 a year, or 7.8 per cent of the amount that tipped you over.
That is the whole problem in one sentence. Selling turns an asset nobody counts into money everybody counts.
What actually happens when you sell and buy again
If you sell and buy another home, the new home is exempt too. Only the leftover is assessed.
Take a couple who own their home and have $250,000 in super, savings and personal effects. They are comfortably under the $499,000 free area, so the assets test is not touching their pension. They sell for $1.1 million and buy a townhouse for $750,000. The $350,000 difference is now sitting in the bank.
Their assessable assets become $600,000 — $101,000 over the free area. At $3 per fortnight per $1,000, that is $303 a fortnight, or about $7,878 a year less pension.
Worth knowing before you list. But notice what else happened: they are $350,000 better off in money they can actually spend. Losing part of a pension is not the same as losing money.
The 24-month rule most people have never heard of
Here is the part that changes the timing of everything.
If you sell your home and intend to use the proceeds to buy, build, rebuild, repair or renovate another home, that portion of the money is exempt from the assets test for 24 months from settlement. Not the whole sale price — only the part you genuinely intend to put into the new home. Sell for $650,000, intend to spend $550,000, and $100,000 is assessed from day one.
The exemption can be extended by up to a further 12 months — three years in total — if you made real attempts to secure a new home within the first 12 months (a contract, a builder's agreement, quotes) and the delay was outside your control: construction hold-ups, approvals, industry capacity.
The money is still assessed under the income test while it sits there, but only at the lower deeming rate. From 20 September 2026 the deeming rates are 1.75 per cent below the threshold and 3.75 per cent above it. So our couple's $350,000, parked while their new place is built, is assessed as earning about $6,125 a year instead of closer to $11,000.
None of this happens automatically. Tell Services Australia what you are doing with the money and what you intend to buy.
Selling and renting is a different question
People often assume selling up and renting must be the flexible option. On the assets test it is usually the hardest one.
You become a non-homeowner, so your free area rises by $267,000 — but the entire sale price is now assessable. Sell for $1.1 million, rent, and you are counting $1.1 million against a free area that only moved by a quarter of that. For most people that is enough to end the pension altogether, at least until the money is spent down.
The offset is Commonwealth Rent Assistance, which you may become eligible for as a renter, and the fact that you are holding money rather than bricks. It can still be the right call — particularly if you want to move around, or live near different children at different times. Just go in with the numbers, not the hope.
Does the downsizer contribution help?
It is the most misunderstood part of this. If you are 55 or older and have owned the home for at least 10 years, you can put up to $300,000 each — $600,000 for a couple — into super from the sale, within 90 days of settlement. It does not count towards your concessional or non-concessional contribution caps.
That is a genuinely useful tax and structure decision. It is not a pension strategy. Once you have reached age pension age, your super counts in the assets test exactly the same whether it is in a super fund or a savings account. Moving money into super does not hide it.
The one real exception: if one of you is under age pension age, super held in that younger partner's accumulation account is not assessed until they reach pension age. For couples with a gap in ages, that timing is worth advice.
If the numbers look bad
First, get them properly. Noel Whittaker's age pension calculator, or a call to Services Australia's Financial Information Service — which is free — will tell you what your payment would look like after a sale. Guessing is what keeps people in the wrong house.
Second, remember what the pension is for. It is a safety net, not a scoreboard. A couple who release $350,000, lose $7,878 a year of pension and gain a home with no stairs, lower rates and lower bills have not gone backwards.
Third, watch the thresholds. Assets free areas are indexed on 1 July each year and payment rates on 20 March and 20 September, so the figures above will move. Check them at the time, not from an article you read years earlier.
If you want the whole process laid out — the timing, the Centrelink treatment, the emotional side of leaving a house you raised a family in, and the questions to ask before you sign anything — Downsizing Made Simple (2nd Edition) by Noel Whittaker covers it in plain English. You can buy direct from the author for $19.99, and it comes as both PDF and EPUB so you can read it on any device.
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.