Selling the family home
Downsizing your home
By the time you are considering retirement you may have
substantial equity in your home. You may even own your house
outright. Selling the family home is one way to free up cash for
retirement. The money you receive can be invested in shares, term
deposits, managed funds or superannuation.
In addition to finding a place to live, there are many
financial, practical and emotional factors to consider before
downsizing your home.
The impact on social security
when you downsize
Your Age Pension entitlement depends on the value of your assets
(the assets test) and the income you receive (the income test). Selling your
home may affect the amount of social security benefits you
Your home and the 2 hectares surrounding it are not counted
under the assets test. If you sell your home, the proceeds will be
exempt for up to 12 months, as long as you are planning to use the
money to buy another home. However, the proceeds will be deemed under the income
Case study: Lee Lin sells the family home
Lee Lin is 67 and divorced. She decides to sell the family home
after her children move out because it's too big. She expects to
sell her home for $800,000, buy a cheaper apartment for $500,000
and have $300,000 left to invest.
Before she puts her house on the market, she goes to Centrelink
and asks how the sale will affect her Age Pension. The Financial Information
Service officer tells her that the $300,000 will be counted
towards the assets test for her Age Pension. Lee decides she is
still better off downsizing, even though it will reduce her
Alternatives to downsizing
Selling the home where your children were raised and leaving
behind neighbours and friends can be difficult and stressful. Add
to that the challenges of relocating to a new area, moving into a
smaller space and making new friends and, suddenly, staying put
might seem like a good idea.
Here are some possible alternatives to selling your home:
- Converting your home to dual occupancy so you can live in one
half and rent or sell the other half
- Renting out some rooms; however, this has tax implications and
may affect your Age Pension so seek financial advice before you
- Considering a reverse mortgage if you need extra
cash and have equity in your home - but make sure you understand
the long-term risks.
If you intend to stay in your house for the long term, you may
want to renovate your home so that it's safe and easier to move
around as you get older. The My aged care website has
information on getting help to stay in your own home so you can
maintain your independence for longer.
What to do after you downsize
After you've sold your house, you may have money to invest in
other income-producing assets. There are lots
of options available so seek financial advice on the best mix of investment
products for your needs.
Downsizing into super
In the May 2017 budget, the Government announced that from 1
July 2018, if you are aged 65 or over and sell your principal
residence that you have owned for at least 10 years, you will be
able to make a non-concessional contribution to super of
up to $300,000 from the proceeds. Couples will be able to
contribute $300,000 each.
The contribution will not count towards the non-concessional
contribution cap or the $1.6 million balance test, and you will not
need to meet the existing maximum age or work test rules. See the
ATO website for more information.
Selling the family home is not an easy or simple
decision. Before you do anything, consult a financial adviser on
the tax and social security implications, and speak to family and
Last updated: 27 Aug 2018