What happens to your Age Pension when you sell your home

Selling the family home can be a significant financial and emotional decision, particularly when you are downsizing, moving closer to family, or considering your future aged care needs.

Normally, Centrelink assesses money held in a bank account or financial investment. Special rules may apply when you sell your principal home and intend to use some or all of the proceeds to secure another principal home.

How the exemption works

The portion of sale proceeds you intend to use to purchase, build, rebuild, repair, or renovate a new principal home may be exempt from the Centrelink assets test for up to 24 months.

In certain circumstances, the exemption may extend for a further 12 months, giving a maximum exemption period of 36 months. This extension may apply where delays fall outside your control and you continue to have a genuine intention to use the proceeds for your new home.

During the exemption period, Centrelink will generally continue to assess you as a homeowner.

The exemption only covers the amount you genuinely intend to use for the new principal home. Any surplus proceeds will generally be assessed as an asset immediately.

When does the exemption period begin and end?

The exemption generally begins from the settlement date of the sale of your principal home.

It ends when the earliest of the following occurs:

• You purchase, build, rebuild, repair, or renovate your new principal home.
• You no longer intend to use the sale proceeds for one of these purposes.
• The 24-month exemption period expires.
• If an extension has been granted, the maximum 36-month period expires.

What about the income test?

Eligible sale proceeds may be exempt from the assets test, but Centrelink can still assess them under the income test through the deeming rules.

While the assets test exemption applies, Centrelink deems the eligible sale proceeds at the lower deeming rate. The lower deeming rate is currently 1.25 per cent (expected to be 1.75% in September’s changes). Centrelink assesses any surplus proceeds not intended for the new home under the normal assets and deeming rules.

This means selling the home can still affect your Centrelink entitlement, even when the proceeds are temporarily exempt from the assets test.

Planning ahead is important

Before selling your home, consider the following:

• How much of the sale proceeds you intend to use for your next home.
• How you will invest or use any surplus proceeds.
• The potential effect of deemed income on your Age Pension.
• Whether the move forms part of a broader aged care funding strategy.
• What may happen if purchasing, building, or renovating the new home takes longer than expected.
• The importance of keeping Centrelink informed about your intentions and any changes to your circumstances.

These rules can interact with Age Pension entitlements, aged care fees, accommodation payments, and your longer-term cash flow. The best approach depends on your personal circumstances and future plans.

To discuss how selling your home may affect your Centrelink entitlements or aged care planning, contact our Aged Care Specialist, Dan Marks.