Selling the family home? The $300,000 super rule every downsizer should know

The settlement papers land on the kitchen table after the family home finally sells, and with them comes a decision that has nothing to do with removalists or auction reserves: what happens to the money now sitting in the bank. For homeowners aged 55 and over, part of that answer can go straight into superannuation, up to $300,000 for each person, under a provision known as the downsizer contribution. Before any of it moves, though, it pays to understand what a home sale means for an Age Pension payment, because sale proceeds do not vanish from the ledger the pension is measured against just because a smaller place has been bought.

What follows sets out exactly how much can go into super, the deadline that applies once the sale settles, and how Services Australia treats cash from a home sale while it sits in an account waiting for the next move.

What is the downsizer contribution?

The downsizer contribution allows an eligible person aged 55 or older to put up to $300,000 into superannuation from the proceeds of selling their home, under Australian Taxation Office (ATO) rules current as of 20 January 2026. For a couple who both meet the eligibility conditions, that adds up to as much as $600,000 combined moving into super from the one sale.

The contribution sits outside the standard concessional and non-concessional caps that normally limit how much can go into superannuation in a given year. There is no maximum age limit on making it and no requirement to still be working, which sets it apart from several other types of super contributions.

How soon does the money need to move?

A downsizer contribution generally needs to be made within 90 days of receiving the sale proceeds. An extension can be applied for through the ATO where that window cannot be met, and the standard conditions around ownership period and the property qualifying as a main residence are set out in full on the ATO’s downsizer contributions page, worth checking against individual circumstances before lodging any paperwork.

What happens to the money under Age Pension rules?

Once sale proceeds land in a bank account or an investment, they become a financial asset in the eyes of Services Australia, and financial assets are subject to deeming. Deeming assumes a set rate of income on those assets, regardless of what they actually earn, and that assumed income is added to other income under the Age Pension income test to work out the payment rate.

Services Australia describes deeming as a system built for steadiness rather than for chasing returns. It “helps keep your payments steady instead of going up and down based on the performance of your financial assets”, Services Australia said.

The arrangement cuts both ways. Any return earned above the deeming rate “doesn’t count as income” under the pension test, Services Australia said, so a saver who does better than the deemed rate does not lose payment for it. But money sitting in cash while a buyer is found for the next home is still assessed under this test, whether or not a cent of it has actually been spent.

Is there any breathing room between selling and buying?

A temporary exemption can apply to principal home sale proceeds held for a limited period before they go toward a new home, though evidence of the sale and the timeline involved needs to be given to Services Australia. It is not an open-ended arrangement – the exemption runs for a set window, not indefinitely, and current thresholds sit on the Services Australia deeming page.

Because both the assets test and the income test apply to sale proceeds that have not yet been reinvested, whether a payment rate rises, falls or stays the same depends on individual circumstances, and it is confirmed directly with Services Australia rather than assumed from a rule of thumb.

Is downsizing about more than the money?

Moneysmart, the Australian Government’s financial guidance service, frames the decision around fit rather than finance alone. “Most people think about downsizing when their home no longer suits their needs,” MoneySmart said, in guidance last updated on 22 July 2026. A smaller home can lower running costs and free up cash flow, but it also means less space, less room for family to stay over, and – if a move to a new suburb is on the cards – getting used to a different set of shops, doctors and transport links.

There is a further detail worth knowing for anyone who does move money into super this way. Most people aged 60 and over pay no tax on income drawn from a taxed super income stream, including on amounts added via a downsizer contribution, per Moneysmart’s retirement income guidance, last updated on 28 July 2026. Individual eligibility, current caps and payment thresholds are best confirmed directly with the ATO, Services Australia or on MoneySmart before any contribution or pension paperwork goes in.

What the rules add up to, in the end, is a choice rather than a shortcut. Selling the family home can put real money to work in retirement, whether that means a lump sum into superannuation, a smaller mortgage-free place to live, or both. But the figure that matters most is not the sale price on the contract – it is the life someone wants to live in the home they choose next, worked out with clear eyes about what the pension office will and will not count along the way.