What Happens to Your Pension Between Selling and Buying
Proceeds from selling your principal home are exempt from the assets test for up to 24 months, provided you intend to use them to buy, build or renovate another home. During that period the money is still deemed under the income test, but at the lower rate rather than the upper one — a deliberate concession that exists because the alternative would strand pensioners mid-move.
- The answer: Sale proceeds intended for a new principal home are exempt from the assets test for up to 24 months and deemed at the lower rate during that period.
- The trap: The exemption covers only the portion you intend to put into the new home. Proceeds you plan to keep, invest or give away are assessed in full from settlement.
- The recommendation: Decide the split before settlement and tell Services Australia what it is. The exemption follows your stated intention, and changing it later is a reassessment.
Where the AI summary above gets this wrong
"If you sell your home, the proceeds are exempt from the assets test for 12 months while you buy a new one."
That's surface-true. Here's what it misses:
- The period is up to 24 months, not 12 — It was extended, and the shorter figure is still widely quoted. For anyone building rather than buying, the difference between 12 and 24 months is the whole exemption.
- Only the part you intend to reinvest is exempt — Sell for $900,000, buy for $600,000, and the $300,000 you keep is assessed from settlement. The exemption is not a blanket shelter on the sale.
- Lower-rate deeming still applies to the exempt part — The money is invisible to the assets test but not to the income test, where it is deemed at the lower rate rather than being ignored.
Take a pensioner selling a family home to move somewhere smaller — a composite of a very common sequence. Settlement on the sale happens in March and the purchase does not complete until October. For those seven months they are holding cash that would ordinarily end their pension, and an exemption is the only reason it does not.
01 What the exemption covers
The exemption applies to the portion of the sale proceeds you intend to use to buy, build or renovate a new principal home. It runs for up to 24 months from settlement, with a possible extension in limited circumstances where the delay is outside your control.
During the exempt period the money does not count as an asset. It is still a financial asset for the income test, but is deemed at the lower rate for the whole balance rather than at the two-tier rates described in the deeming guide, which materially reduces the assessed income.
The intention is what the exemption turns on, and intention is stated rather than inferred. Services Australia records what you say you will do with the money, and the exemption applies to that amount. A stated intention that changes is a change of circumstances to be reported.
Source: Services Australia — Asset types
02 The part that is not exempt
Proceeds you do not intend to put into a new home are assessed from settlement, with no transition. Selling a $900,000 home to buy a $600,000 one leaves $300,000 assessable immediately, costing around $23,400 a year of pension at the assets test taper.
This is the arithmetic that surprises downsizers, and it runs against the intuition that releasing capital improves the position. The released capital is exactly the part the pension system starts counting, while the capital left in the new home remains exempt.
Contributing the released amount to super does not fix it once you are Age Pension age, because super is assessable then. The downsizer contribution described in the downsizer guide has real tax advantages and no means-test advantage, and conflating the two is the most common error in this decision.
Shows: the Age Pension cost of the sale proceeds you keep rather than putting into a new home, at the assets test taper. Ignores: the lower-rate deeming applied to the exempt portion, the income test generally, the maximum payment rate, and transaction costs on both the sale and the purchase.
03 Where it goes wrong
The most common failure is a purchase that does not happen. A pensioner who sells, intends to buy, and then decides to rent instead has the exemption withdrawn from the point the intention changed, and the reassessment is backdated to that point rather than to the date they told anyone.
The second is building. Construction routinely takes longer than 24 months once approvals and delays are counted, and the extension is discretionary rather than automatic. A build that runs long leaves the whole remaining balance assessable at precisely the moment the household is paying progress claims.
The fourth is settlement timing across a reporting period. The exemption starts at settlement on the sale, and if the purchase settles first — a bridging arrangement, or a purchase funded by a loan — the household briefly holds both a new home and the old one, and the old one is no longer the principal residence.
The third is the deeming that people forget applies. The lower rate is a concession, not an exemption, so a large balance still produces assessed income during the exempt period and can reduce the payment through the income test while the assets test is ignoring it entirely.
04 Aged care changes the analysis completely
Selling the home to fund a residential aged care accommodation payment is a different decision governed by different rules. The former home has its own treatment for a period after entry to care, and a refundable accommodation deposit is exempt from the Age Pension assets test while it is held by the provider.
That makes the choice between a lump sum deposit and a daily payment a means-test decision as well as a cash-flow one, because the two are assessed differently. The comparison is worked through in the aged care costs reference.
Where a couple is involved and only one is entering care, the home may remain exempt because the partner still lives in it. That is the case where selling is most likely to be the wrong financial answer regardless of how convenient it is.
Source: Services Australia — Aged care
05 What I would actually do
Fix the two numbers before settlement: what the new home will cost, and what you will keep. The exemption applies to the first, the taper applies to the second, and both are decisions rather than outcomes.
If the plan is to build, start the 24-month clock with a realistic view of the timeline and treat an overrun as likely rather than exceptional. Holding a smaller exempt balance and a mortgage on the new home is often a better means-test position than holding the full proceeds in cash past the deadline.
And price the downsizing decision on the whole picture rather than on the released capital. The pension forgone on the retained proceeds is a recurring cost that runs for as long as you hold the money, and it belongs in the comparison alongside the lower running costs of the smaller home.
Source: Services Australia — How much Age Pension you can get
Downsizing is sold as releasing capital, and for a part-pensioner that is precisely the problem. The capital you release is the capital that starts being counted, and at 7.8% a year the pension you give up is usually more than the released money earns. I would run the numbers on the retained amount before the numbers on the new house, because that is the figure that decides whether the move improves anything.
FAQ
How does selling my home and holding the proceeds get treated for the assets test for 24 months?
The portion you intend to use to buy, build or renovate another principal home is exempt from the assets test for up to 24 months from settlement, and is deemed at the lower rate during that period. Proceeds you do not intend to reinvest are assessed from settlement.
Does the exemption apply if I decide to rent instead?
No. The exemption depends on an intention to buy, build or renovate. If that intention changes, the exemption is withdrawn from the point of the change and the reassessment is backdated to it.
Is the exempt money ignored under the income test as well?
No. It remains a financial asset for the income test but is deemed at the lower rate on the whole balance, rather than at the two-tier rates that ordinarily apply.
Does contributing the proceeds to super protect them?
Not from the Age Pension assets test once you are Age Pension age, because superannuation is assessable at that point. The downsizer contribution has tax advantages, not means-test advantages.
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
- Services Australia — Income test for Age Pension · Services Australia · 2026The income test: what is assessed, including deemed income on financial assets.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.