Downsizing in retirement

Last updated: 22 July 2026

Thinking about downsizing your home? Learn  what to consider and how downsizing affects your Age Pension.

Why people downsize in retirement

Most people think about downsizing when their home no longer suits their needs. 

You may have more space than you use. You may also find the cost and upkeep harder to manage. Some people want to live closer to family, transport or health services. Others want to free up money for in retirement. 

Downsizing does not suit everyone. Some people choose to stay and make changes to their home instead. 

Pros and cons of downsizing your home

Weigh up the pros and cons to decide if downsizing is right for you.

Pros

• More cash flow — you may free up money to pay off debt, invest or spend.
• Easier to maintain — a smaller home can take less time and effort to look after.
• More convenient — you can choose a home that better fits your needs or location.
• Lower costs — a smaller  or more efficient home can reduce household costs.

Cons

• Less space — you may need to reduce your belongings.
• Less flexibility — you have less space for guests or entertaining.
• New area — if you move to a different suburb it can take time to adjust and find new services.
• Emotional impact — leaving your family home can feel difficult.

Consider the costs and your needs before you downsize

Think about the type of home that suits your lifestyle and budget in retirement.  

How much money you free up depends on the property market. If you buy and sell in the same market, the difference in price may be small. 

Moving to a unit or apartment can change your costs. You may need to pay strata or body corporate fees. 

If you decide to move, you may need to pay: 

• real estate agent fees 
• stamp duty 
• legal fees 
• moving costs, such as furniture removal. 

See buying a house for more information.

Alternatives to downsizing your home

If you decide to stay in your home, you have ways to access money or make better use of your space.

• Renting out space — you could rent out a room or taking in a boarder.
• Create dual occupancy — you may be able to convert your home and rent or sell half of it.
• Use your home equity — options like a reverse mortgage or home reversion can give you access to money. There is risk involved and a long-term financial impact, so get independent financial advice first.

These options can affect your tax and government benefits. Check before you decide.

Impact on the Age Pension or other government benefits

Your eligibility for the Government Age Pension depends on the:

• assets test (value of your assets)
• income test (income you receive)

If you live in your home, the assets test does not count it as an asset. 

If you sell your principal home, sale proceeds may be exempt from the assets test. This applies to the portion you plan to use to buy, build, repair or renovate a new principal home. 

If you have money left over after the sale, it may count under the assets or income test. 

Services Australia has more information about how real estate assets affect your payment under the assets test. 

Information on your eligibility for Age Pension and government benefits is also available. And you can contact the Services Australia Financial Information Service to talk things through. 

What to do after you downsize

After you've sold your home, you have options for what to do next, including:

• Invest the proceeds — you could invest any extra money into an income-producing asset. See how to invest to explore your options.
• Get support if you need it — government services like the Commonwealth Home Support Programme can help you to live independently and assist with daily tasks like shopping, cleaning, personal care or home maintenance. See aged care for more options.

You may be able to add up to $300,000 per person, or $600,000 per couple, from the sale of your home to your super if you are aged 55 or older and meet eligibility rules. Find out more about downsizer super contributions. Discover even more info on downsizer super rules on the Australian Taxation Office (ATO) website.

 

 

Get professional advice before you go ahead

Before you downsize:

• check_box Get legal advice — a legal professional can review contracts and manage settlement.
• check_box Get financial advice — a registered financial adviser can explain your options for using the money.
• check_box Check your benefits — ask the Services Australia Financial Information Service how downsizing may affect your Age Pension or government benefits.