For many Australians, the family home is their largest asset — often larger than their super balance. In retirement, the home and super interact in ways that can significantly affect retirement income, Age Pension eligibility, and estate planning. Understanding the key intersection points helps in making informed decisions.
The Age Pension Home Exemption
The principal place of residence is completely exempt from the Age Pension assets test — regardless of its value. A $3 million home in Sydney and a $400,000 unit in regional Victoria are treated identically: both are exempt assets.
This exemption is one of the most significant features of Australia’s Age Pension system. It means:
- Homeowners with a valuable property but modest super may still qualify for the Age Pension
- Non-homeowners (renters) face higher assessable assets thresholds before qualifying — because their housing costs are higher
- Selling the family home creates a cash asset that is assessable — which can reduce or eliminate Age Pension eligibility
Homeowner vs non-homeowner thresholds (FY2025–26, approximate):
| Full Pension Below | Part Pension Below | |
|---|---|---|
| Single homeowner | ~$314,000 assets | ~$686,000 assets |
| Single non-homeowner | ~$566,000 assets | ~$938,000 assets |
| Couple homeowner | ~$470,000 combined | ~$1,038,000 combined |
| Couple non-homeowner | ~$722,000 combined | ~$1,290,000 combined |
Source: Services Australia. Thresholds indexed quarterly.
The Downsizer Contribution — Supercharging Super by Selling the Family Home
The downsizer contribution allows eligible Australians to contribute up to $300,000 per person (or $600,000 per couple from the proceeds of one property sale) into their superannuation when they sell their principal place of residence. This contribution does not count toward the standard non-concessional contribution (NCC) cap.
Key Rules
| Requirement | Detail |
|---|---|
| Minimum age | 55 (since 1 January 2023) |
| Property type | Principal place of residence |
| Minimum ownership period | 10 years (you or your spouse) |
| CGT eligibility | The property must be at least partially eligible for the CGT main residence exemption |
| Contribution deadline | Within 90 days of receiving the sale proceeds (settlement date) |
| Once per lifetime | You can only use this concession once |
| Balance limit | No general balance limit (unlike NCCs, available even if super balance > $1.9M) |
What the Downsizer Contribution Allows
The contribution enters super as the tax-free component (no tax on the contribution itself). Once inside super, investment earnings are taxed at 15% in accumulation or 0% in pension phase.
A couple who sells a family home for $1.5 million and each contributes $300,000 ($600,000 combined) into super can significantly grow their retirement pool — especially if they move to a lower-cost property or rental.
Transfer Balance Cap Interaction
The downsizer contribution goes into your accumulation account first. You can then transfer it into retirement phase (account-based pension) — but this transfer counts toward your personal Transfer Balance Cap ($2.0M in FY2025–26). If your cap is fully used, the downsizer contribution must remain in accumulation.
Downsizing to a Cheaper Property
Many retirees consider selling a large family home and moving to a smaller, lower-maintenance property. The financial dynamics:
Example: A couple sells a $1.8M Sydney property and buys a $900,000 apartment. They free up $900,000 in cash (less agent fees, stamp duty on purchase, and legal costs).
Options for the freed capital:
- Up to $600,000 into super as downsizer contributions (tax-free component, grows at super tax rates)
- Invest outside super (returns taxed at marginal rate)
- Keep as cash or term deposit
Age Pension impact of downsizing:
- The home was exempt — the freed cash is now assessable
- This could significantly reduce or eliminate Age Pension payments depending on total assets
- Whether downsizing is financially beneficial overall depends on the full picture — not just the super contribution opportunity
Staying in the Family Home vs Releasing Equity
Some retirees want to stay in their home but access its equity without selling. Options include:
| Option | How It Works | Considerations |
|---|---|---|
| Home Equity Release Loan (Reverse Mortgage) | Borrow against home equity; interest compounds; repaid on sale or death | Interest compounds over time; can significantly erode estate value |
| Home Equity Access Scheme (Centrelink) | Government scheme — borrow against home equity at low interest rate; deducted from estate | Maximum loan capped; must be of pension age; low interest rate (currently ~3.95%) |
| Family arrangement | Children or family buy an interest in the home in exchange for support or cash | Complex legally; can affect Age Pension and estate planning |
The Home Equity Access Scheme (previously Pension Loans Scheme) is administered by Centrelink and available to those of pension age who own their home. It allows a fortnightly loan payment on top of (or instead of) the Age Pension, with interest accruing on the outstanding amount. The loan is repaid when the home is sold.
Estate Planning — The Home and Super
The family home and super have different estate planning pathways:
| Asset | Passes Via |
|---|---|
| Family home | Your will (part of the estate) |
| Superannuation | Death benefit nomination (direct to beneficiary or estate) |
Key distinctions:
- Super is not automatically part of your estate — it must be directed via a valid death benefit nomination
- The home (if jointly owned) may pass to the surviving co-owner via survivorship (depending on tenancy structure) — bypassing the will
- CGT main residence exemption may apply to the home transferred to a surviving spouse; children inheriting the home have specific CGT rules
Frequently Asked Questions
Can I downsize and still receive the Age Pension? It depends on your total assets after downsizing. If selling your home frees up significant cash that is then counted as assessable assets, your Age Pension entitlement may be reduced or eliminated. However, if the freed proceeds go into super via a downsizer contribution and your spouse is under pension age (so their super isn’t assessed), the impact may be more limited. This is a complex calculation — financial advice is recommended.
Can I contribute more than $300,000 from my home sale into super? Up to $300,000 per person as a downsizer contribution (not capped by the NCC rules). Additional amounts from the sale could be contributed as standard NCCs (up to $120,000 per year or bring-forward amount), provided you are eligible (super balance under $1.9M). So yes, in theory, a person could contribute $300,000 as a downsizer plus $120,000 as NCCs in the same year — totalling $420,000.
My home was in my name only but my husband lived there for 10 years — can he also use the downsizer contribution? Yes — the 10-year ownership rule applies to you or your spouse. If one spouse owned the property for 10 years, both spouses can use the downsizer contribution from the same sale (up to $300,000 each), even if only one was the legal owner.
What if I have two properties and downsize from one? The downsizer contribution requires the property to be your principal place of residence and eligible for the CGT main residence exemption. If you have two properties (e.g. a main home and a holiday house), only the one that qualifies as your PPOR is eligible. Investment properties are not eligible for the downsizer contribution.
See also: Super Strategies. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.