ASK AN EXPERT: Retirees and property

In a new series, Tim Howard from BT’s Technical Services team offers guidance on a range of personal finance topics, from superannuation and tax to social security payments. 

Tim is a technical consultant with BT, with close to 20 years of experience assisting financial advisers and their clients with all aspects of financial planning. BT’s Technical Services team receives around 8,000 queries a year from financial advisers on superannuation, tax, social security and regulatory topics.

This time, Tim tackles a retiree’s question about selling their primary residence. 

Q. Does selling and buying a new home affect my age pension?

I’m a single pensioner and looking to relocate closer to my daughter and her young family. If I sell my home, does that mean I will lose my age pension immediately? I plan on buying a new home, however I’m not sure for how much, or how long, this process might take.

Tim: Your principal home is an exempt asset for income support means testing. This means that while you are living in the property it won’t count as an assessable asset when determining your rate of age pension. 

For various reasons, there are times where you might look to sell your home to move closer to family, or perhaps to upsize, downsize, or even travel for an extended period.

When you do sell your home, in the first instance, the proceeds of sale would be assessable. Depending on your circumstances, you might look to contribute some of the proceeds to superannuation, purchase an income stream, or simply keep your cash in the bank until you find a new home.

Each of these actions will have a different impact on your age pension, depending on a few varying factors. However, there is a specific concession which can apply to the sale proceeds from your former home.

Where you intend to purchase, build, repair or renovate a new principal home, your former home sale proceeds are exempt for a period under the assets test.

Importantly, this exemption only applies to the proceeds you intend to use for this purpose.

For example, let’s say you sell your home for $850,000. You intend to buy a new home near your daughter for around $550,000 and save the remainder. In this case the $300,000 you are not intending to spend on a new home would be assessed as an asset immediately.

For home sales from January 1, 2023, the asset test exemption can apply for up to 24 months (and up to 36 months under limited extensions), or until such time as you purchase a new home; the sale proceeds you intended to apply to building, renovating or repairing are completed; or you no longer intend to buy a new home.

Under the income means test, there are additional concessions. The amount of sale proceeds intended for the above purpose held in a financial investment, such as cash at bank, are subject to deeming, which is the method the government uses to determine income from your financial investments. It’s based on the assumption that your financial assets earn a particular rate of return, regardless of the actual income earned by the investment. The rate that applies to sale proceeds is capped at the lower deeming rate (currently 0.25 per cent).

You may also continue to be assessed as a homeowner during the exemption period.

In your case, if you don’t know how much you might spend, you may be able to apply the exemption to the entire sale proceeds, and for up to 24 months. This would limit the impact to your age pension under the asset means test, however your assessable income would increase under the deeming rules. If you are income-tested, this may result in a reduction in your age pension. 


The information provided in this article is factual only and does not constitute financial advice, tax advice or legal advice. Before acting on any information provided in this article, you should seek independent advice about its appropriateness to your objectives, financial situation and needs.