How Does Selling My Home to Downsize on the Mornington Peninsula Affect My Age Pension?
- The Principal Home Exemption: The portion of the sale proceeds that you intend to use for your next home is exempt from the assets test for up to 12 months from the date of sale.
- Extensions for Delays: If you experience unexpected delays in buying or building—such as waiting on local council approvals or facing construction delays on the Mornington Peninsula—Centrelink may extend this asset test exemption for up to 24 months.
- The Catch: While these intent-to-reinvest funds are exempt from the assets test during this period, they are still subject to Centrelink's deeming rules under the income test.
- Bank Accounts and Term Deposits: Whether the funds are sitting in a standard bank account or a high-interest term deposit, Centrelink applies standard deeming rates to the money.
- The Impact on Your Pension: If the deemed income from your home sale proceeds pushes you over the income test threshold, your fortnightly Age Pension payments may temporarily decrease, even while you are actively searching for your next property.
- Assessable Assets: If you sell a large family home in Frankston South for $1.2 million and buy a boutique unit in Mornington for $800,000, you are left with a $400,000 cash surplus.
- The Permanent Change: The moment your new home purchase settles, that remaining $400,000 permanently loses its exempt status. It is now counted as a financial asset.
- Pension Reductions: For every $1,000 of assets you hold over the asset test threshold, your Age Pension is reduced by $3 per fortnight. A large cash surplus can significantly reduce—or completely cancel—your pension eligibility.
- Downsizer Superannuation Contributions: Eligible Australians aged 55 or older can contribute up to $300,000 per person (or $600,000 per couple) from the sale of their home into their superannuation fund. While these funds still count toward the Centrelink assets test, they can sit in a tax-effective environment.
- Renovating the New Property: Spending a portion of the surplus immediately on modifying or upgrading your new home (such as adding senior-friendly accessibility features) converts assessable cash back into an exempt principal home asset.
- Gifting Limits: You can choose to help children or grandchildren by gifting funds, but Centrelink strictly limits this to $10,000 in a single financial year, or $30,000 over a rolling five-year period. Anything gifted above these limits is still counted as an asset under your name for five years.
Thinking About Downsizing on the Mornington Peninsula?
You don't have to make the decision today.
But you can start gathering information.
If you're wondering what your home is worth, what homes are currently available, or simply want to understand the process, we're always happy to have a no-pressure conversation.
Free Resources
Download our free Downsizing Guide packed with practical tips to help you prepare before you move.
Or contact us for a confidential discussion about your options on the Mornington Peninsula.
You can also browse more downsizing advice on our website, including our article:
Downsizing or Rightsizing? How to Know Which Is Right for You
Visit our YouTube channel for more practical advice:
https://morningtonpeninsulahomes.com/PeninsulaLiving
Ever thought about moving to the Mornington Peninsula? Reach out to one of our friendly staff members to discuss your options.
For those who have thought about downsizing on the Mornington Peninsula check out our Youtube channel - filled with hints & tips to move you!
PLAYLISTS FOR BUYERS AND SELLERS
Watch our Youtube Renovate or Sell playlist here: https://morningtonpeninsulahomes.com/RenovateOrSell
Watch our Youtube Recognising when its time to Downsize playlist here: https://morningtonpeninsulahomes.com/RecognisingTimeToDownsize
Watch our Youtube Smart Moves for Downsizers playlist here: https://morningtonpeninsulahomes.com/SmartMovesforDownsizers
Watch our Youtube Living on the Mornington Peninsula playlist here: https://morningtonpeninsulahomes.com/LivingontheMPplaylist_YT
About the Authors
Janet McNeill & David Kershaw
Janet McNeill and David Kershaw are experienced Mornington Peninsula real estate agents and the owners of McNeill Real Estate. They specialise in helping homeowners throughout Mornington, Mount Martha, Mount Eliza, Somerville, Safety Beach, Dromana and surrounding suburbs navigate the downsizing process with confidence.
From understanding the local property market to preparing homes for sale, coordinating trades, decluttering advice and helping clients find their next home, Janet and David provide practical, personalised guidance every step of the way.
Whether you're just beginning to think about downsizing or you're ready to sell your home, they're committed to making the journey as smooth and stress-free as possible.
Disclaimer: The contents of this blog do not constitute financial, taxation, Centrelink or legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.. David & Janet encourage homeowners to seek appropriately qualified advice before making financial decisions and works alongside their chosen advisers to help coordinate the property component of the move.
