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Downsizing your home to upsize your super

Retirement  |  8/01/2018  |   7 min read

Australia’s skyrocketing real estate market has had an unexpected impact on many retirees. They’ve suddenly found themselves living in million dollar homes while having to rely on a Government pension to meet their living expenses.

Downsizing the family home and shifting some of that equity into your pension fund is one way of balancing things out, and enjoying a better retirement lifestyle. But there are rules and tax implications you need to be aware of. We’ve outlined some of the basics below.

Selling the family home

From July 1 2018 you can sell the family home and contribute up to $300,000 per partner to your pension fund. So for a married couple that’s $600,000.

There are a couple of caveats to keep in mind.

  • You must have owned the house for at least 10 years
  • It must be your primary place of residence for at least 10 years
  • You must be 65 years of age or older
  • The contribution to superannuation must be made within 90 days of settlement
  • The $1.6 million superannuation Pension cap still applies

That being said, you’re not required to buy another home with the proceeds of the sale (so the money can go towards rent or Aged Care instead).

Will this affect your pension?

It’s important to note that the proceeds of the sale will count towards the Federal Government’s assets and income tests, which are used to determine a person’s eligibility for the Age Pension and other benefits.

When you downsize you’ll be moving money from the family home (which is exempt from the assets test) into an assessable environment. That may mean you lose part, or all of your pension payments.

We strongly recommend you speak with a financial planning expert to understand what impact selling the family home may have on your pension payments.

Taxes and earnings

If you invest the funds from the property sale and commence a pension fund, you’ll benefit from paying no tax on the earnings and the income payments remain tax-free non-assessable income.

Proceeds from the sale of the property invested in an accumulation fund will have the earnings taxed at up to 15%, however, any withdrawals will not be subject to tax. So potentially, you could be converting a tax-free asset into a taxable asset within the superannuation environment.

In either case, you’ll need to provide your super fund with a special downsizing contribution form.

Getting the balance right

When it comes to the family home, retirement and the Age Pension everyone’s situation is different. The new rules make it easier to downsize and contribute the proceeds towards your retirement, but this may impact your Age Pension, so it’s important to find a balance that gives you the best possible income and benefits.


Learn more about your retirement options and if downsizing is right for you by speaking with an Equip financial planner. Learn more here.


This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.  MySuper Authorisation Numbers 33813823017672 and 33813823017518  (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).

Equipsuper Financial Planning Pty Ltd (“EFP”) (ABN 84 124 491 078, AFSL 455010) is licensed to provide financial planning services to retail and wholesale clients. EFP is owned by Equipsuper Financial Holdings Pty Ltd (ABN 11 604 515 791). You can obtain the EFP Financial Services Guide and/or Privacy Statement by contacting our Helpline 1800 682 626.

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