How downsizing can affect your Age Pension: a Sunshine Coast guide

The Question Behind the “For Sale” Sign

It’s Sunday morning in Palmwoods. You’re on the back deck with a coffee, looking out over the green folds of the hinterland, and the house is quiet in a way it never used to be.

The kids moved out years ago. The spare rooms hold boxes and an exercise bike nobody rides. The gutters need clearing again, the stairs have started talking back to your knees, and the lawn you once loved to mow now swallows most of a Saturday.

Down on the coast, Caloundra keeps calling. You can picture it: a two-bedroom apartment with a lift, a balcony that catches the afternoon sea breeze, an early walk along the coastal path and a flat white by the water before the day warms up. You could lock the door, head off for a month and come home to nothing that needs fixing.

Then someone at the Men’s Shed says the thing that stops you cold. “Careful. Sell the house and Centrelink will take your pension.” You worked for forty years to own that home outright, and suddenly the plan feels risky.

Here’s the honest truth: that warning is half right. Selling up and buying smaller can reduce your Age Pension, sometimes by a fair amount. But ruin is rarely the right word. And there’s a lot you can shape before you sign.

If you’re still deciding whether to move at all, the Should I downsize for retirement? guide covers the lifestyle side. This piece is about the pension.

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Your Home Is Invisible to Centrelink. The Cash Left Over Is Not.

While you live in your home, Centrelink leaves it out of the assets test. That covers the home and the first two hectares it sits on. It doesn’t matter whether the Palmwoods house would fetch $900,000 or $2 million.

Cash is different. The moment that equity lands in your bank account, it’s an ordinary asset. Whatever doesn’t go into your next home is counted in the assets test, and in the income test too, through deeming.

So the real question isn’t “will selling ruin my pension?” It’s “how much of my home equity turns into counted money, and for how long?”

How much you can own and still be paid

For homeowners, Services Australia’s limits on everything apart from the home are:

• Single: a full pension up to $333,000, and a part pension until $745,750.
• Couple (combined): a full pension up to $499,000, and a part pension until $1,121,000.

Between those two numbers, your pension doesn’t switch off like a light. It works more like a dimmer, easing down as your counted assets rise. For scale, the most you can be paid is currently $1,237.70 a fortnight single, or $1,866 a fortnight for a couple combined. (Figures as at 2 October 2026. Part-pension cut-offs and maximum rates apply from 20 September 2026.)

Deeming: Centrelink assumes a rate

Centrelink doesn’t ask what your savings earn. It assumes a rate, whatever the bank is actually paying. That’s deeming.

For a single person, the first $66,800 of savings is assumed to earn 1.75% a year, and the rest 3.75%. For a couple where at least one of you gets a pension, the lower rate covers the first $110,600 combined. That assumed income goes through the income test.

So a big pile of sale money shows up twice: more counted assets, and more assumed income. If your money genuinely earns more than the deemed rate, Centrelink ignores the extra.

What Happens to the Money While You Wait for the New Place?

Sales rarely line up neatly. You might sell in Palmwoods while the Caloundra apartment is still a crane on the skyline.

For homes sold from 1 January 2023, the sale money you plan to put into your next home is left out of the assets test for up to 24 months, and sometimes up to 36. While it waits, it’s deemed at the lower rate only. Money you aren’t planning to put into the new home is counted from day one.

Two small details carry a lot of weight. Tell Services Australia within 14 days of selling. And money spent renovating the new place after you’ve moved in is no longer exempt, so if a new kitchen is part of the plan, the order really counts.

The Choices That Change How Much You Keep

You can’t make the equity disappear, and you shouldn’t try. These are ordinary rules, each with a catch.

Put more into the home you’ll actually live in

Because your home isn’t counted at any value, money you spend on the right apartment isn’t either. One with a lift, a second bathroom or a spare room for the grandkids may leave you with less counted cash and more pension. The catch: a home you can’t spend is the problem you’re moving away from. An apartment that leaves no buffer is just a smaller version of the same squeeze. And as Moneysmart points out, agent fees, stamp duty, legal fees, removalists and strata fees all come out of the pool.

The downsizer contribution

If you’re 55 or older, the ATO lets you put up to $300,000 each from the sale into super, outside the normal contribution caps. The home generally needs to have been owned by you or your spouse for at least 10 years, and the money must go in within 90 days of receiving the sale proceeds. The catch: Centrelink leaves your super, or your partner’s, alone while that person is under Age Pension age, which is 67, and it’s still sitting in super rather than paying them an income. If it’s paying a pension, it’s counted as an income stream at any age. From 67, it’s counted in both tests, just like money in the bank, even if that partner isn’t getting the pension themselves. So for most retirees, this is about tax and long-term income, not the pension. The retirement income streams hub explains how super becomes a regular pay packet.

Gifts to the family

Downsizing often brings a quiet question about a house deposit or school fees. You can give away up to $10,000 a financial year, and no more than $30,000 over five financial years, without affecting your pension. The catch: anything above that is still counted as your asset, and deemed, for five years from the gift. Give your daughter $100,000 and, for pension purposes, most of it may as well still be in your account.

Accept a smaller pension when it buys a better life

Sometimes the right answer is to take a little less from Centrelink. Moneysmart’s own downsizing example ends with a retiree accepting a lower Age Pension because she’ll have more of her own money. A smaller pension beside a larger pool, and a home you can leave for a month, can be a better life than a full pension and a house you can’t keep up.

One Move, Two Ways: Sue and Mark

This is an illustration, not a recommendation. Sue and Mark are made up, and the numbers are rounded, so please don’t read them as a price guide.

Sue is 67 and gets the Age Pension. Her husband Mark is 63 and still consults two days a week. They sell their Palmwoods home of 22 years and buy an off-the-plan apartment in Caloundra, a short stroll from the water, due in 14 months.

They tell Centrelink straight away, so the apartment money is set aside while they wait. After the apartment and the costs of moving, about $400,000 is left over. Their other counted assets (Sue’s super, the car, the caravan and the contents) come to about $250,000. Mark’s super doesn’t count yet, because he’s under 67 and it isn’t paying him an income.

Way one: they leave it in the bank. The $400,000 is counted straight away, taking them to about $650,000. That’s well past the full-pension limit for a couple, but a long way short of the cut-off. Sue’s pension doesn’t vanish. It becomes a part pension.

Way two: Mark makes a downsizer contribution. Within 90 days of the Palmwoods settlement, Mark puts $300,000 into his super, where it isn’t counted for now. Only the remaining $100,000 is. Their counted assets sit around $350,000, back under the full-pension limit. Mark’s consulting income still goes through the income test, though, so how much more pension Sue keeps depends on what he earns.

The trade-off is real. That $300,000 is locked under super’s normal access rules until Mark retires or turns 65, and the day he turns 67 it’s counted like everything else. Way two buys them about four good years, not a permanent escape.

Either way, their pay packet becomes some pension plus regular draws from their own savings, with room for the grandkids’ swimming lessons and a winter trip north. Less from Centrelink, perhaps, yet they’ve never felt so free to say yes.

A single-person variant

Also an illustration, with rounded numbers. Leanne is 70, single and on the full pension, with about $150,000 in counted assets. She sells her house in the hinterland and buys a two-bedroom unit near the water in Caloundra. The $250,000 left over takes her to roughly $400,000: over the full-pension limit for a single homeowner, nowhere near the cut-off. Her pension eases down rather than stopping. With no younger partner’s super to buy time, her real choice was how much went into the unit and how much stayed in the bank. She chose the buffer.

Why the Same Person Matters

Selling the family home feels like a single event: the auction, the signatures, the removalist truck in the driveway. For your pension, the move plays out over years. The clocks above keep running long after the agent has moved on. A partner turns 67. The limits are reviewed every March, July and September.

That’s why it helps to have a person beside you, and why it matters that it’s the same person each time. When the next date comes around, you want someone who already knows your story: why you chose the apartment with the lift, why you kept a cash buffer, and what you promised the grandkids. You shouldn’t have to start from scratch with a stranger every time the rules shift.

Sunlit Path is a small practice by design. We keep client numbers limited so you deal directly with your adviser, for the chapters after the move too.

“Simon was able to present his recommendations in a “down to earth” manner that particularly resonated with my wife and me”

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Before You Sign

I’m Simon. I work with Sunshine Coast families at the point where the family home, super and the Age Pension meet. You worked for decades to own that home, and you deserve a clear picture before you sell it.

If it would help to talk it through, a Fit Check is a short 30-minute conversation to see whether we’re a good fit, at the office, in your home or by secure video. It isn’t personal advice, and there’s no pitch. Bring the questions still keeping you up at night:

• If we buy the place with the lift, will there be enough left for the years we haven’t planned yet?
• Are we giving up pension for a buffer we’ll never actually touch?
• What happens to our income the year the younger one of us turns 67?
• Can we help the kids with a deposit now without regretting it later?
• What if we move and miss the old house more than we expected?

Book a 30-minute Fit Check with Simon. Not personal advice.