Downsizing in Retirement: The Complete Australian Guide

The Financial Impact of Downsizing

For most Australians, the family home is their largest asset. A couple selling a $1.2 million house and buying a $700,000 unit releases $500,000 in equity, minus transaction costs. That released equity can fund years of retirement spending, boost your super balance through a downsizer contribution, or sit in a savings account earning interest.

But the financial picture is more complicated than “sell high, buy low, pocket the difference.” Your home is exempt from the Age Pension assets test. Sale proceeds are not. Depending on your total asset position, downsizing can reduce or eliminate your pension entitlement entirely.

The maths differs for every household. A single homeowner with $400,000 in super who releases $300,000 in equity faces a very different outcome from a couple with $800,000 combined who releases the same amount. Your age at the time of sale, your spending rate, and whether you make a downsizer contribution all change the numbers.

Model your exact numbers with the Downsizing Calculator →

How Downsizing Affects Your Age Pension

Your home is exempt from the Centrelink assets test while you live in it. It does not matter if it is worth $500,000 or $5 million. Once you sell, the proceeds become assessable assets.

If you buy a cheaper property, the new home is exempt again, but the difference in value (minus costs) is added to your assessable assets. Centrelink reduces your Age Pension by $3.00 per fortnight for every $1,000 of assets above the lower threshold. For a single homeowner (as at March 2026), that threshold is $321,500. For a couple, it is $482,500.

Here is a worked example. A single homeowner with $350,000 in super and $50,000 in savings sells for $1.1 million and buys for $650,000. After $60,000 in transaction costs, they have $390,000 in released equity. Their assessable assets jump from $400,000 to $790,000. The single homeowner cutoff (zero pension) is $722,000 (as at March 2026). At $790,000, this person is over the cutoff and would receive no Age Pension at all.

That does not mean downsizing is a bad decision. The $390,000 in released equity, invested at even 4% per year, generates $15,600 annually. The full single pension is worth about $29,754 per year. Whether you come out ahead depends on the size of the equity released, your total asset position, and how long you live.

There is a 24-month asset test exemption for principal home sale proceeds if you intend to purchase a new home. During this period, the sale proceeds can be excluded from the assets test while you search for and purchase a new property. For the first 12 months, the exempt proceeds are also excluded from deeming. From months 13 to 24, the proceeds remain exempt from the assets test but are deemed for the income test.

Full guide: How downsizing affects the Age Pension →

The $300,000 Downsizer Super Contribution

The downsizer contribution lets you put up to $300,000 per person ($600,000 for a couple) from the sale of your home into superannuation. The key rules:

• You must be aged 55 or older at the time of the contribution.
• The home must have been owned by you or your spouse for at least 10 years.
• The home must have been your main residence at some point during ownership.
• You can only use the downsizer contribution once in your lifetime, for one home.
• The contribution must be made within 90 days of settlement (extensions available).
• There is no work test and no upper age limit.

The downsizer contribution does not count toward your concessional ($30,000) or non-concessional ($120,000) contribution caps. It also does not attract the 15% contributions tax that applies to concessional contributions. However, when you later move your super into a retirement income stream, the total amount (including the downsizer contribution) counts toward your transfer balance cap ($1.9 million in 2025-26).

For a 62-year-old couple selling a $1 million home and buying a $600,000 apartment, the $400,000 in gross equity (before costs) could see $300,000 each contributed to super, or $300,000 from one partner and the remainder kept in cash. The right split depends on each person's existing super balance, their proximity to the transfer balance cap, and their pension eligibility.

Full guide: Downsizer super contribution rules and strategies →

What Downsizing Really Costs

People consistently underestimate the costs of buying and selling property. For a $1 million sale and a $650,000 purchase, typical costs look like this:

In this example, the gross equity released is $350,000 ($1M minus $650K), but $64,157 goes to costs. The net equity is $285,843. That is 18% of the gross equity consumed by transaction costs. In states with senior stamp duty concessions (Victoria, ACT, South Australia), the total cost drops significantly.

Agent commission is the largest single cost and is negotiable. The difference between a 2.0% and 2.5% commission on a $1 million sale is $5,000. Marketing costs vary widely. Some agents include basic marketing in their commission, others charge $8,000 or more for premium campaigns.

Full guide: Downsizing costs breakdown with state-by-state stamp duty →

Your Downsizing Checklist

A downsizing timeline typically runs 6 to 12 months from first decision to settled in the new home. The five phases:

Full downsizing checklist with detailed steps →

Stamp Duty by State

Stamp duty on the new property is often the second-largest cost after agent commission. Several states offer concessions for seniors or pensioners. The table below summarises senior-specific concessions as at June 2026. General first-home buyer concessions are excluded.

Victoria and the ACT offer the most generous concessions for retirees. In Victoria, a pensioner buying a $550,000 unit pays zero stamp duty, saving approximately $28,000 compared to the standard rate. In NSW, the same purchase attracts over $20,000 in stamp duty with no senior concession available.

Related Scenarios

Sources

• ATO: Downsizer super contributions
• Moneysmart: Retirement planner
• Services Australia: Assets test for Age Pension
• Services Australia: Income test for Age Pension