What Retirees Should Know About Downsizing and Government Benefits
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Thinking About Downsizing in Retirement? Here’s What
You Should Know
Selling the family home once the kids have flown the
nest can feel like a no-brainer. Less maintenance, a bit of extra cash in the
bank—what’s not to love? For many Australians, downsizing
for retirement seems like the perfect way to simplify life and boost
financial flexibility.
But before you put up that “For Sale” sign, there’s one
important thing to consider: how downsizing could affect your Centrelink
benefits, especially the Age Pension.
What Happens to Your Age
Pension When Downsizing for Retirement?
Here’s the short version: your main residence doesn’t
count toward the Age Pension asset test while you’re living in it. But once you
sell it? That’s a different story.
Say you sell your home for $900,000 and buy a smaller
place for $600,000. That $300,000 difference might sound like a handy
buffer—but Centrelink could count it as part of your assets. And depending on
your total asset and income levels, it might reduce your pension or stop it
altogether.
Now, if you're planning to buy or build another home,
there’s a bit of breathing room. Centrelink gives you up to 12 months where
they don’t count that extra money. But once that window closes? It’s
included in the test.
Downsizing Retirement in
South Australia: What You Need to Know
If you’re 55 or older, there’s a government initiative
called the Downsizer Contribution. It lets you put up to $300,000 from the sale
of your home into your super. For couples, that’s up to $600,000 combined.
And here’s the bonus—it doesn’t count toward your usual
super contribution limits.
Sounds great, right? And it can be. But here’s the
catch: once you reach pension age, the money in your super is assessed
under the income and assets tests. So while it grows in a low-tax environment,
it could still affect your pension down the track.
Smart Strategies for
Retirement Downsizing in SA
If you’d prefer to stay put, that’s totally fine too.
You might want to check out the Home Equity Access Scheme (HEAS). It’s
basically a government-run version of a reverse mortgage.
You get regular payments, using your home as
security—but you don’t have to sell or downsize. And the best part? It usually
doesn’t interfere with your Centrelink payments the way a big home sale might.
A Few Things to Keep in Mind
Before you take the plunge, here are some common traps
to avoid:
- Holding
onto cash? Centrelink might still count it, even
if it’s “just for now.”
- Helping
out the kids? Generous, yes—but if you gift them
money, Centrelink could still count it as yours for up to five years.
- Rules
change. What works today might not work next
year—thresholds and policies move around more often than you’d think.
Final Thought:
Downsizing can absolutely work in your favour—but it’s
not always as straightforward as it seems. If you rely on Centrelink in
retirement, a big sale could have a bigger impact than you expect.
That’s why it’s a smart move to chat with a financial
adviser who really understands the Age Pension, super rules, and retirement
income planning. A little expert advice now could save you a lot of stress
later.
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