← Back Sellers · 11 min read

Centrelink Asset Test and Age Pension When Downsizing Your Brisbane Home

Your home is exempt. The cash from selling it is not. How the assets test, deeming, and the home sale proceeds exemption interact for Brisbane downsizers, and what to plan before settlement.

For Brisbane homeowners on a part or full Age Pension, selling and downsizing is rarely just a property transaction. It is a financial event that interacts directly with the way Centrelink measures your assets and income, and it can change your fortnightly pension payment from the date settlement clears. The intent of this article is not to give you Centrelink or financial advice, but to explain how the rules fit together so you can plan the timing and structure of a downsize without unwelcome surprises after settlement.

Most Brisbane inner-east downsizers I work with are in a similar position. They have lived in a family home for 20 or 30 years, the home is now worth substantially more than what they need in retirement, and the plan is to release some equity to fund their lifestyle while moving into something smaller, easier, and more suitable. The mechanics of doing that well, from a pension perspective, depend on three Centrelink concepts working together: the assets test, the deeming rules under the income test, and the home sale proceeds exemption.

Your principal home is exempt. Cash from it is not.

The starting point is that the principal home is an exempt asset under the Centrelink assets test, regardless of its value. A retiree in Camp Hill or Bulimba in a $2.2 million Queenslander on the family block is treated, for assets test purposes, the same as a retiree in a $500,000 unit. The home itself does not count toward the assets test thresholds. What changes the moment you sign a contract is what happens to the proceeds. Cash, term deposits, managed funds, shares and any new investments funded from the sale all sit inside the assets test and inside the deeming calculation for the income test.

This is the structural shift that catches a lot of downsizers off guard. While the family home was the most valuable thing they owned, none of it counted toward Centrelink's thresholds. After settlement, the cash from that home does count, often pushing them well past the assets test cut-off until they buy a replacement home and the new principal home becomes exempt again. Between sale and replacement purchase, Centrelink offers a temporary exemption on a portion of the proceeds, but the rules around that exemption are specific and worth understanding before you list.

The home sale proceeds exemption

Centrelink applies a temporary asset exemption to the portion of your home sale proceeds that you genuinely intend to use to purchase, build, rebuild, repair or renovate a new principal home. The standard exemption period is up to 12 months from settlement, and it can be extended to a maximum of 24 months if you are making genuine and continuous efforts to acquire or build the replacement home and circumstances outside your control have caused the delay. Common examples of acceptable delays include construction or settlement delays on the new property, an inability to find a suitable home in your preferred area at the price you can afford, or health-related delays.

Two things are important to understand. First, the exemption only applies to the portion of proceeds that is firmly committed to the replacement home. If you sell for $2 million and you intend to spend $1.4 million on a new townhouse, only the $1.4 million is exempt from the assets test during the exemption period. The remaining $600,000 of surplus cash is a counted asset from the date settlement clears. Second, even the exempt portion is not invisible. It is still subject to the deeming rules under the income test, so it still affects the fortnightly pension calculation, just not the assets side of it.

The exemption is not automatic in the sense that you simply tell Centrelink and forget about it. You need to notify Services Australia of the sale within 14 days, provide evidence of the contract and settlement, declare how much you intend to apply to the new home, and update Centrelink again when the replacement home is purchased or built. If you do not follow through with the purchase within the exemption window, the surplus that is later spent on lifestyle, investment, or super contributions becomes counted from the original settlement date in the way the rules apply at that point.

How deeming changes the picture

Centrelink does not use the actual income you earn on your financial investments to calculate the income test. It applies deeming, which assumes your financial assets earn a notional rate of return regardless of what they actually earn. The deeming rates and thresholds are indexed and change periodically, so confirm the current figures with Services Australia. The point for downsizers is that as soon as you have cash from a home sale in a bank account, term deposit, or any financial investment, that money is deemed to earn income for pension purposes. That deemed income, combined with any other income you have, is what gets tested under the income test.

This means a Brisbane downsizer who sells for $1.8 million, buys a replacement for $1.1 million, and leaves $700,000 in a bank account, faces two simultaneous changes. The $700,000 becomes a counted asset, which may push them past the assets test threshold. The same $700,000 is deemed to earn income, which can also push them past the income test threshold. Centrelink applies whichever test produces the lower pension, so both tests need to be considered, not just the assets test that downsizers most often think about.

Homeowner versus non-homeowner thresholds

The assets test thresholds are structured differently depending on whether you are classed as a homeowner or non-homeowner. Homeowners get a lower threshold because the home itself is exempt. Non-homeowners get a higher threshold because Centrelink recognises that someone renting needs more financial assets to sustain a similar standard of living. If you sell the family home and do not replace it, your status shifts to non-homeowner once the exemption period ends. That shift increases the assets test threshold and can soften the impact of the cash entering your assessable position.

For most Brisbane downsizers, the plan is to replace the home rather than rent, so this shift is temporary or does not occur at all. But for those considering a permanent move into rental accommodation, retirement village arrangements with specific entry contributions, or family arrangements where they no longer own the home they live in, the homeowner versus non-homeowner classification can change the calculation significantly. Retirement village contracts in particular have their own assessment rules under Centrelink, depending on whether the entry contribution is treated as a homeowner contribution or a refundable amount, and you should get specific advice on those before signing.

The Downsizer Super Contribution interaction

One of the most common levers Brisbane downsizers use is the federal Downsizer Superannuation Contribution, which allows Australians aged 55 and over to contribute up to $300,000 each from the proceeds of a qualifying home sale into super, on top of normal contribution caps. The appeal is straightforward: it moves a large chunk of post-sale cash into a concessionally taxed structure without using contribution caps. The Centrelink trap is that super in accumulation phase is not counted under the assets test until you reach Age Pension age, but for those already on the Age Pension, super is fully counted from the day it lands in the fund.

Practically, this means a downsizer already receiving the Age Pension who moves $300,000 into super has not removed that money from the Centrelink calculation. The super balance is a counted asset and is deemed to earn income. The benefit of the Downsizer Contribution in that situation is therefore tax structuring and estate planning rather than pension preservation. For younger downsizers under Age Pension age, the Downsizer Contribution can park funds in super where they are not counted until pension age, which can be a meaningful planning step depending on the timing of the sale and the timing of the pension claim.

Common downsize scenarios in Brisbane's inner east

The most common downsize I see in suburbs like Bulimba, Hawthorne, Camp Hill, Coorparoo and Carindale is a couple in their late 60s or 70s selling a family home worth between $1.6 million and $2.5 million, and moving into a townhouse or low-maintenance unit in a similar area, typically for between $900,000 and $1.4 million. That leaves anywhere from $400,000 to $1.4 million of surplus cash to allocate. For couples already on a part Age Pension, that surplus is almost always large enough to either reduce the pension significantly or remove it entirely under the assets test.

For a smaller subset, the downsize is more modest. Selling a three or four bedroom home in Morningside, Cannon Hill or Murarrie and moving into a smaller two bedroom apartment or villa in the same suburb might release $200,000 to $500,000. That surplus may still push past the lower assets threshold but often leaves the pension intact in some form, particularly for couples. Either way, knowing the assets and income test thresholds at the time of settlement, and modelling the impact at different replacement-home price points, is far more useful than picking a target downsize value first and dealing with the Centrelink consequences afterwards.

Timing matters more than people realise

If you can choose when to sell, the timing of settlement relative to your replacement purchase has a direct financial effect. Settling on the sale before you have committed to a replacement home means the entire proceeds enter the exempt portion only to the extent you can credibly commit them to a future purchase. If you have not yet identified a property, that intent is harder to evidence. Settling on the sale at the same time as, or just before, settlement on the replacement home minimises the period in which large surplus cash sits in your accounts and is fully assessable.

For some downsizers, a related strategy is to use a bridging or settlement structure where the purchase occurs first and the sale follows within a defined window. The Centrelink rules accommodate this scenario through a slightly different mechanism, and the practical effect is that you may be holding two homes briefly without the full assessable cash position. Whether this is the right approach depends on your borrowing capacity, the price gap between the two properties, and whether bridging finance is available on terms that make sense at your stage of life. This is exactly the kind of decision that should be made with both an accountant and a mortgage broker who understands retiree borrowing, not with a property agent alone.

What to plan before you list

Before you sign an agency agreement, work through five practical questions with appropriate advice. First, what is your current Age Pension entitlement and what would it become at different surplus-cash levels after a downsize? Second, what is the realistic replacement home budget in the suburb and property type you actually want, including transfer duty, moving and minor works? Third, what is the surplus cash you would expect, and where would it sit between settlement on the sale and settlement on the replacement? Fourth, what is the exemption period you can realistically work within, given the local market and your purchase plans? Fifth, is the Downsizer Super Contribution a useful structuring tool for your situation, or does it simply move counted assets from one place to another?

Working through those questions with a financial adviser who understands Centrelink rules, an accountant who understands CGT and super interactions, and an agent who understands the local downsizing market produces a far better outcome than treating the sale as an isolated property decision. The actual sale price you achieve matters enormously, of course, but for many retirees the structure of the transaction and its Centrelink consequences make a larger difference to their net financial position over a 10 year horizon than the last $20,000 or $30,000 on the sale price.

A note on accuracy and limits

Centrelink rules are detailed, change periodically, and are applied based on individual circumstances. Threshold amounts, deeming rates, and exemption periods are indexed or revised by government and you should confirm the current figures with Services Australia or a licensed financial adviser before relying on them. This article describes the structure of how the rules interact for Brisbane downsizers, but it is not a substitute for personal financial advice. The point of getting that advice early is that the right structure is often decided before listing, not after settlement.