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Downsizing in retirement

Decide whether downsizing your home is right for you

Page reading time: 3 minutes

If you're thinking about selling your home and downsizing, consider the pros and cons. Check if selling your home affects your government benefits.

Consider the costs and your needs before you downsize

Take time to consider your needs. Make sure your new home suits your lifestyle, budget and level of independence.

Some of the costs to consider include:

See buying a house for more information.

Pros and cons of downsizing your home

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

Pros

Cons

Alternatives to downsizing your home

If you decide to stay in your home, alternatives to downsizing include:

Before going ahead with any of these options, check the tax impact and whether it will affect your government benefits.

Impact on Age Pension or government benefits

Your eligibility for the Age Pension depends on the:

Your home is not included in the assets test. When you sell your home, the proceeds are exempt for up to 12 months if you plan to use them to buy, build or renovate another home.

The proceeds are 'deemed' in the income test — they are assessed as income from financial assets. This may affect the amount of government benefits you get.

See Age Pension and government benefits for more information.

What to do after you downsize

After you've sold your home:

You may be able to contribute up to $300,000 from the sale of your home to your super. See downsizing contributions into superannuation on the Australian Taxation Office (ATO) website.

Get independent advice before you go ahead

Before you downsize:

Woman using a tablet.

Mary sells the family home

Mary is 67, owns her home, and is considering downsizing. She expects to sell her home for $800,000. She wants to buy a small apartment for $500,000 and have $300,000 left to invest.

Before selling, she contacts Centrelink (Services Australia) to ask how it will affect her Age Pension. A Financial Information Service officer tells her the $300,000 will be included in the pension assets test. This will reduce her pension by a small amount each fortnight.

Mary decides to go ahead with downsizing because, even though she'll get less pension, she'll be more financially secure.