Key Takeaways
- Downsizing is more than a property transaction. Consider the home’s suitability for your future lifestyle, accessibility, location, family connections and ongoing costs, not simply its sale price.
- Calculate the true amount you may retain. Include agent and marketing fees, repairs, transfer duty or stamp duty, legal costs, removalists, insurance and any future strata or body-corporate fees before deciding how much equity a move may release.
- A Downsizer Super Contribution can be valuable, but eligibility is strict. Eligible people aged 55 or over may contribute up to $300,000 each from a qualifying home sale, subject to the ATO’s ownership, CGT, timing and paperwork requirements.
- A home sale can affect the Age Pension in more than one way. Qualifying proceeds intended for a new principal home may receive a temporary assets-test exemption, but they can still be assessed under the income test through deeming.
- Downsizing is not the only option. Home modifications, Support at Home services, renting out space, and carefully considered home-equity arrangements may suit some people better; get appropriate financial, tax, and legal advice before acting.
- Approved Financial Planners in Floreat helps Western Australians work through these complexities before a costly mistake is made, not after.
For many Australians, the family home represents far more than an asset on a balance sheet. It may hold decades of memories, provide a connection to friends and community, and offer the comfort of familiar surroundings. It can also be one of the largest parts of a retirement plan.
As retirement approaches, you may start to ask whether your home still fits how you want to live. Perhaps the garden is becoming harder to manage, the stairs no longer feel ideal, or you would prefer to be closer to family, transport, shops or health services. You may also wonder whether selling could free up money for retirement. Approved Financial Planners can help you reach the right decision.
Downsizing can be a worthwhile option, but it is rarely a simple calculation. The financial outcome depends on the value of the home you sell, the cost and suitability of the one you buy, the costs of moving, your superannuation, and any effect on Age Pension eligibility. The lifestyle side matters too. The right decision is the one that works for your circumstances—not the one that looks best in a headline.
Start with the life you want, not just the size of the house
Moving to a smaller or more efficient home may reduce some maintenance and household costs. It may also mean less to manage and put you in a location that better suits your retirement plans. But savings should not be assumed. Apartments and townhouses can bring strata or body-corporate fees, and buying and selling costs can significantly reduce the money left after a move.
It is worth thinking about the next five, 10, or 15 years, not just the next 12 months. Consider steps, bathrooms, parking, access to services and public transport, the distance from friends and family, and the ongoing cost of looking after the property. In some cases, practical home modifications may make the current home safer and more comfortable without the disruption of moving.
A downsize is first a home-and-lifestyle decision. Its financial effects need to be worked through carefully, rather than assumed.
The real cost of a move
The difference between a sale price and a purchase price is only the starting point. A realistic budget should also include agent fees, marketing and repairs before sale, transfer duty or stamp duty, legal and conveyancing costs, removalists, insurance changes and any new strata or body-corporate fees. Moneysmart recommends considering these costs before deciding whether downsizing makes financial sense.
For example, a home sold for $1.4 million and a replacement home bought for $900,000 produces a $500,000 difference before costs. In Western Australia, general transfer duty on a $900,000 purchase is currently $37,465.50, assuming the general rate applies and no concession is available. Agent fees and other expenses will vary, so it is better to obtain written quotes than rely on a standard percentage or a generic estimate.
The key question is not simply, “How much equity will I release?” It is, “What will be left once all the costs are paid, and how will that change my cash flow, Age Pension position and future plans?”
The Downsizer Super Contribution: useful, but rule-based
The Downsizer Super Contribution is an ATO measure that may allow eligible people to add money to super after selling a qualifying home. Despite the name, you do not need to buy a smaller home—or another home at all—to use it. What matters is whether you meet the ATO’s conditions.
If you are 55 or older when you make the contribution, you may be able to contribute up to $300,000. If both members of a couple are eligible, each may contribute up to $300,000. The total contributions between them cannot exceed the total proceeds from the sale of the home.
There are several other conditions. You or your spouse must have owned the home for at least 10 years before the sale. The property must be an Australian residential building, rather than a caravan, houseboat or other mobile home. The sale must qualify fully or partly for the main-residence capital gains tax exemption—or satisfy the ATO’s rule for a home acquired before 20 September 1985. You also cannot have made a downsizer contribution previously.
The timing and paperwork are important. You normally need to make the contribution within 90 days of receiving the sale proceeds, which is usually settlement day. You must give the fund an ATO Downsizer contribution into super form before or when you make the contribution. If you make several contributions, you need a separate form for each payment.
If you need more time, you may apply to the ATO for an extension where your circumstances warrant it. Apply as soon as possible, ideally within the original 90-day period. Do not make a late contribution unless the ATO has approved an extension. You cannot use an extension simply to meet the age requirement.
A valid downsizer contribution does not count towards the usual concessional or non-concessional contribution caps. However, it becomes part of your total superannuation balance and counts towards the transfer balance cap if it later moves into a retirement-phase account. It may also affect eligibility for income support, including the Age Pension.
What happens to your Age Pension after a sale?
Your owner-occupied principal home is generally excluded from the Age Pension assets test while you live in it. Once you sell, the treatment of the proceeds depends on what you do with them and whether you genuinely intend to establish a new principal home.
For a principal home sold on or after 1 January 2023, the portion of proceeds that you genuinely intend to use to buy, build, rebuild, repair or renovate a new principal home may be exempt from the assets test for up to 24 months from settlement. The exemption may end earlier if you buy or complete the home, or if you stop intending to use the money for that purpose.
In limited circumstances, the exemption can be extended by up to a further 12 months, for a maximum of 36 months. This is not automatic. You need to continue intending to establish a new principal home, make reasonable attempts to do so within a reasonable time, and experience delays outside your control. You may need to provide evidence of those attempts or delays.
Only the qualifying amount can receive the exemption. Money you retain for another purpose—such as travelling, investing or general spending—may be assessed under the assets test. You also generally cannot receive a principal-home exemption for another home that gives you reasonable security of tenure while also receiving the former-home sale-proceeds exemption.
The assets test is only one side of the picture. Sale proceeds held in a financial investment can still be assessed under the income test through deeming. Deeming uses set rates to work out income from financial assets, regardless of the actual return. For home sales from 1 January 2023, qualifying proceeds intended for the new principal home are deemed at the lower rate during the exemption period; extra proceeds held in a financial asset are assessed at the regular deeming rates.
This is why it is important not to assume that an assets-test exemption means the money is ignored entirely. The combination of the assets test, income test, deeming and the treatment of super can affect a person’s Age Pension rate in different ways.
Timing: give yourself time, not pressure
Property-market conditions can affect both the home you sell and the home you buy, but weekly market headlines should not be treated as a personal forecast. Conditions vary between suburbs, property types and price ranges.
Where possible, it can help to plan before a move becomes urgent. This may give you more time to explore suitable homes, organise your financial information, compare the costs of staying versus moving, and decide whether modifying the existing home is a better option. Planning early does not guarantee a better price or outcome, but it can give you more time and choice.
The emotional side of the decision is also valid. Leaving a long-held home is not merely a financial choice. Connection to family, friends and community, the comfort of a familiar neighbourhood and the practical suitability of a home all deserve a place in the decision.
Alternatives to selling
Downsizing is only one way to adjust a retirement plan. Home modifications may help you stay safely and comfortably in the place you know. Eligible older people may also be able to access the Government’s Support at Home program. Depending on assessed needs and approvals, services may include help with everyday tasks, personal care, nursing, allied health, transport, home maintenance and modifications. Funding availability and participant contributions can apply. Support at Home was introduced in November 2025, replacing the former Home Care Packages Program and Short-Term Restorative Care Programme.
Renting out a room, considering a dual-occupancy arrangement or using other home-equity options may also be worth exploring. These arrangements can have tax and government-payment consequences, so it is sensible to get advice before acting.
Home equity release—including a reverse mortgage—can provide access to some of the equity in your home while you remain living there. It is a significant long-term decision. With a reverse mortgage, interest usually compounds, the debt can grow over time, and the equity left in the home can reduce. Moneysmart recommends obtaining independent advice and considering the possible effect on your Age Pension, aged-care costs, future expenses and estate.
Before you make a move
Before signing a contract or making a super contribution, take the time to compare your options using real numbers. Work out the total cost of moving, check the ATO requirements for any Downsizer Super Contribution, and understand how retained proceeds and super may affect the Age Pension.
A financial adviser who is appropriately licensed or authorised can help you model the potential effects on cash flow, super and government benefits. A tax professional can help with tax matters, while a legal professional can assist with contracts, retirement-village documents or strata issues. Services Australia’s free Financial Information Service can also explain how a proposed sale or change in finances may affect government payments.
For some people, downsizing creates a more practical home and frees up money for retirement. For others, the transaction costs, pension effects, replacement-property costs or lifestyle trade-offs outweigh the benefit. The aim is not to rush the decision. It is to make one that fits your finances, your home and the way you want to live.
For Western Australians weighing this decision, Approved Financial Planners Pty Ltd provides retirement-focused financial advice that covers all of these moving parts, so the timing, structure, and execution of a downsize actually work in your favour.
Approved Financial Planners Pty Ltd
7/437 Cambridge St,
Floreat
WA
6014
Australia
