What Happens to Your Pension If You Sell Your Home?

Your home is exempt from the Centrelink assets test. The moment you sell it, the proceeds stop being exempt. This is one of the most significant financial factors in a downsizing decision, and understanding it before listing your property matters.

A $1.2 million home contributes exactly $0 to your assessable assets while you live in it. Sell it, and every dollar of the proceeds counts. For many retirees, that shift alone is enough to wipe out their entire Age Pension entitlement.

How the Assets Test Works

The Age Pension uses two tests: the assets test and the income test. Centrelink applies whichever produces the lower pension. For most retirees who sell property, the assets test is the binding constraint.

A single homeowner receives the full pension if their assessable assets are below $321,500. For a homeowner couple, the threshold is $482,500. Above those amounts, the pension reduces at a taper rate of $3.00 per fortnight for every $1,000 over the threshold. That works out to $78 per year for each extra $1,000 in assets.

The pension cuts out entirely at $722,000 for a single homeowner and $1,085,000 for a homeowner couple. Above those amounts, you receive nothing.

Your home, the one you live in, is fully exempt from this test regardless of its value. A $500,000 unit and a $3 million house are treated identically: $0 assessable.

A Worked Example

Jan and Steve are a homeowner couple, both 68. They own a house worth $1.2 million in Sydney, have $400,000 in super between them, and $50,000 in a savings account. Their total assessable assets are $450,000 (super plus savings). That sits below the $482,500 homeowner couple threshold, so they receive the full Age Pension of $44,855 per year combined, plus the Pensioner Concession Card.

They sell the house for $1.2 million and buy an $800,000 apartment. Transaction costs (agent commission, stamp duty on the new place, conveyancing, moving) total $80,000. That leaves $320,000 in cash from the sale. They each make a $160,000 downsizer contribution into super. Their new position:

• Super: $400,000 + $320,000 (downsizer) = $720,000
• Savings: $50,000
• New home: exempt (principal residence)
• Total assessable assets: $770,000

Their assessable assets of $770,000 are below the $1,085,000 couple homeowner cutoff, but well above the $482,500 full-pension threshold. The reduction: ($770,000 − $482,500) ÷ $1,000 × $3.00 = $862.50 per fortnight. The maximum couple pension is $1,725.20 per fortnight, so they would receive about $862.70 per fortnight ($22,430 per year).

That is a drop from $44,855 per year (full pension) to around $22,430 per year (part pension). They keep the Pensioner Concession Card (any pension above $0 qualifies). If they had each contributed the maximum $300,000 instead, their assessable assets would have been $1,050,000 and their pension would have dropped to around $590 per year. The difference between contributing $160,000 each and $300,000 each is roughly $21,840 per year in pension payments.

The 24-Month Exemption

Services Australia provides a temporary exemption for sale proceeds if you intend to use them to buy a new home. The proceeds can remain exempt from the assets test for up to 24 months from the settlement date.

To qualify, you need to show genuine intent. That means evidence such as a signed contract, a deposit paid, or documentation that you are actively searching for a property. Simply holding the money in a bank account without taking steps toward purchase will not satisfy Centrelink.

For the first 12 months, the exempt proceeds are excluded from both the assets test and deeming. From months 13 to 24, the proceeds remain exempt from the assets test but are deemed as a financial asset for the income test. After 24 months, the full amount is assessable under both tests.

After 24 months, the full amount becomes assessable regardless of whether you have purchased a new home. There are no extensions. If the property market or your circumstances delay the purchase, the pension reduction hits at the 24-month mark.

How Deeming Applies to Sale Proceeds

Centrelink does not look at the actual returns on your financial assets. Instead, it calculates a “deemed” income using fixed rates, regardless of whether your money sits in a savings account earning 0.5% or a share fund returning 10%.

For a single person, the deemed income rate is 1.25% on the first $64,200 of financial assets and 3.25% on everything above that. For a couple, the lower threshold is $106,200.

Here is what that looks like on $400,000 in sale proceeds for a single person:

• First $64,200 at 1.25% = $803 per year
• Remaining $335,800 at 3.25% = $10,914 per year
• Total deemed income: $11,716 per year

That deemed income feeds into the income test. If the income test produces a lower pension than the assets test, it becomes the binding constraint. For most downsizers with large lump sums, the assets test bites harder, but the deeming calculation still matters during the 24-month exemption window when proceeds are exempt from the assets test but still deemed for income.

What If You Rent Instead of Buying?

If you sell your home and choose to rent rather than buy, Centrelink reclassifies you as a non-homeowner. The asset test thresholds for non-homeowners are significantly higher: $543,750 for a single person and $704,500 for a couple.

That extra headroom ($222,250 more for singles, $222,000 more for couples) means you can hold more assessable assets before the pension starts to taper. You may also qualify for Rent Assistance of up to $188.20 per fortnight for a single person, or $177.20 per fortnight for a couple (as at March 2026, rates are indexed), on top of your pension.

The trade-off is real. You gain a higher pension threshold and Rent Assistance, but you lose the capital growth on property, the security of owning your home, and the assets test exemption that owning provides. You also pay rent from your savings, which accelerates the drawdown on your super and investments.

Whether renting produces a better outcome depends entirely on your sale price, the rent in your area, your super balance, and how long you expect to live. There is no universal answer. The numbers need to be modelled for your specific situation.

Calculate Your Exact Impact

Every downsizing decision involves a different combination of sale price, purchase price, super contributions, and pension entitlements. The only way to know what happens to your pension is to run the numbers with your actual figures.

Modelled outcomes only. Not financial advice. Thresholds and rates change periodically. Check Services Australia for current figures before making decisions.