The Home Exemption, and the Two Hectares Around It
Your principal home is not counted in the Age Pension assets test, whatever it is worth, along with up to two hectares of the land it sits on. Non-homeowners get a higher assets threshold instead, and the gap between those two treatments is the single largest structural feature of Australian retirement policy.
- The answer: The principal residence is fully exempt from the assets test regardless of value, and so is up to two hectares of adjacent land held on the same title.
- The trap: The exemption follows where you live, not what you own. A home you have moved out of stops being your principal residence and becomes an assessable asset, subject to specific timing rules.
- The recommendation: If you are a homeowner near the threshold, count what is exempt before assuming you do not qualify. The exemption is larger than most people's remaining assets.
Where the AI summary above gets this wrong
"Your family home is exempt from the Age Pension assets test, but only up to a certain value."
That's surface-true. Here's what it misses:
- There is no value cap on the exemption — A principal residence worth $4 million is exempt on the same terms as one worth $400,000. Proposals to cap it have been made repeatedly and none has been legislated.
- The land limit is the real boundary, and it is an area — Up to two hectares on the same title is covered. Beyond that the excess land is assessable, which is what affects people on rural blocks rather than people in expensive suburbs.
01 What the exemption covers
The principal home is exempt from the assets test at any value, together with up to two hectares of adjacent land on the same title, provided the land is used primarily for private purposes. Fixtures, fittings and the improvements you make to it are exempt on the same basis, which is why renovating an exempt home converts assessable money into an exempt asset.
Beyond two hectares the excess land is assessable at market value, unless a longer-standing test is met for people who have lived on the property for a long period and cannot readily subdivide. That distinction is what makes rural assessments different from suburban ones rather than a matter of house price.
A non-homeowner receives a higher assets threshold instead. The difference between the homeowner and non-homeowner thresholds is a fixed amount, and it is far smaller than the value of an average home, so the exemption is worth substantially more than the concession that replaces it.
Source: Services Australia — Asset types
02 When the home stops being exempt
The exemption attaches to the home you live in. Move out and the property becomes assessable, with a limited period during which it may continue to be treated as your principal home — most commonly when you have entered residential aged care, where a capped value applies for a set period.
Selling and holding the proceeds is a distinct case. Sale proceeds you intend to use to buy or build a new home are exempt from the assets test for a defined period and deemed at the lower rate in the meantime, which is more generous than the ordinary treatment but is not indefinite.
Renting out the former home makes the rent assessable income and the property an assessable asset once the exemption period ends. That combination catches people who moved into care and kept the house to fund the fees, which is worked through in the aged care costs reference.
Shows: what the principal home exemption is worth each year in retained Age Pension, by applying the assets test taper to the value that is not being counted. Ignores: the higher non-homeowner threshold that partly offsets it, the income test, the maximum payment rate that caps any reduction, and rates and maintenance on the home itself.
03 What the exemption is worth, and what follows from it
Against the $3 per $1,000 fortnightly taper, every $100,000 of home value that would otherwise be assessable is worth $7,800 a year of retained pension. On a median home that is a larger annual figure than most part-pensions.
The consequence people act on is the downsizer decision. Selling an exempt home and holding the proceeds converts an exempt asset into an assessable one, and the pension loss can exceed the income the released capital produces. The contribution rules that soften this are in the downsizer contribution guide, but the contribution does not restore the exemption — super is assessable too.
The consequence that gets less attention is the reverse: money spent on the home leaves the assets test permanently. Repairs, a renovation, or paying down a mortgage against the principal residence all convert assessable capital into exempt capital, and for a household just above the threshold that is the cheapest available improvement in the payment.
Source: Services Australia — How much Age Pension you can get
The home exemption is the reason so much Australian retirement advice quietly assumes home ownership. If you own, your assessable assets are whatever is left after the largest thing you own is removed from the count. If you rent, a threshold uplift worth a fraction of a house is what you get instead. That asymmetry is not a loophole to be worked; it is the shape of the system, and a renter's plan has to be built differently from the start.
FAQ
Does my home count towards the Age Pension assets test?
No. The principal residence is exempt at any value, along with up to two hectares of adjacent land on the same title. Non-homeowners receive a higher assets threshold instead, which is worth far less than the exemption.
How does my home affect the Age Pension if I move into aged care?
It can continue to be treated as your principal home for a limited period, and a capped value applies within that period. After it ends, the property is assessable at market value and any rent from it is assessable income.
Is there a limit on how much my home can be worth?
There is no value cap. The boundary is the land area — up to two hectares on the same title used primarily for private purposes — so the rule affects large rural blocks rather than expensive houses.
Sources
Regulator references
- Services Australia — Asset types · Services Australia · 2026Which assets are counted in the assets test, including real estate, and which are exempt.Last verified: 2026-09-07
- Services Australia — Assets test for Age Pension · Services Australia · 2026The assets test: which assets count, the thresholds, and the taper that reduces the payment.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.