How Downsizing Affects Pensions and Government Benefits

For many older Australians, downsizing from a family home to a smaller, more manageable property can free up equity and simplify day-to-day living. However, selling your home and unlocking that wealth can also have an impact on your eligibility for government pensions and benefits.

If you are considering downsizing, it is essential to understand how your finances will be assessed and how you can make the most of the available incentives without affecting your retirement income.

Understanding the Age Pension Asset Test

The Age Pension in Australia is means-tested. This means your assets and income are both assessed to determine your eligibility and the rate of your payments. While your primary residence is generally exempt from the asset test, any money you free up by selling that home may not be.

For example, if you sell your home and put the extra funds into savings or investments, those funds may count toward your assessable assets and could reduce your pension payments.

De Burgh | from $509,837 | Lyneham, ACT | Secure with $10k and $738 x 21 weeks

The Government’s Downsizer Contribution Scheme

To encourage older Australians to move into homes that better suit their needs, the government introduced the Downsizer Contribution Scheme. If you are over the age of 55, you can contribute up to $300,000 from the sale of your home into your superannuation, without affecting your non-concessional contribution cap.

Some of the key rules include:

• The home must have been owned for at least 10 years
• The home must have been your primary residence
• Contributions must be made within 90 days of settlement

This can be a smart way to move funds into a tax-effective environment, especially if you are not relying heavily on the pension or if your superannuation is already a major income stream.

Rouse Hill, Bathla | from $519,990 | Rouse Hill, NSW | Secure with $10k and $263 x 61 weeks

How It Can Affect Your Pension

While putting funds into super can be beneficial for tax and investment purposes, it is important to remember that superannuation is still considered part of your assets once you reach pension age.

That means even with a downsizer contribution, the additional value could still impact your eligibility for the Age Pension or reduce your payments under the asset test.

Working with a financial adviser is the best way to weigh your options. They can help structure your finances to minimise the impact on your pension while taking advantage of the benefits of downsizing.

Auburn Square, North Village | from $525,000 | Auburn, NSW | Secure with $10k and $335 x 127 weeks

Hidden Benefits of Downsizing

Beyond the financial implications, downsizing can also offer practical and lifestyle benefits:

• Lower maintenance and utility costs
• Easier access to public transport, shops, and services
• Improved safety and convenience
• More time and energy for family, travel, or hobbies

Modern developments often include community features, energy-efficient appliances, and smart designs that make them ideal for older Australians who want to enjoy retirement without the burdens of a large home.

The Grande on London | from $544,900 | Canberra, ACT | Secure with $10k and $959 x 18 weeks

Flexible Buying Options Like Coposit

Some older buyers may be surprised to learn that off the plan properties are not just for first-home buyers. Coposit is a platform that allows eligible buyers to purchase new off the plan properties with just $10,000 upfront, then pay the balance in weekly instalments during construction.

This can be particularly appealing for downsizers who want to sell their current home, secure their next one early, and time their move with confidence. Coposit’s approach helps you lock in today’s price while giving you time to manage your finances and transition smoothly into your new home.

Brooklyn Square | from $600,000 | Wollongong, NSW | Secure with $10k and $633 x 79 weeks

Planning Ahead for a Comfortable Retirement

Downsizing can be a great financial and lifestyle decision, but it is important to plan carefully to avoid unexpected reductions in your pension or benefits. By understanding how the Age Pension asset test works, making the most of government incentives, and considering flexible purchase options like Coposit, you can take control of your retirement journey.

For more guidance and to explore off the plan options designed for every stage of life, visit coposit.com.au.

Florence & Capri | from $643,000 | Wentworth Point, NSW | Secure with $33k and $2,474 x 13 weeks