What to do with downsizing funds

Jan has sold her house, but her new one is still being built. She wants to know how long her funds are exempt from the assets test.


Q. Jan
We are a retired couple who recently sold our home, settling on 31 October 2018. At the same time, we signed for an off-the-plan apartment, due to be completed in December this year. We invested the proceeds ($475,000) in two fixed deposits, maturing on 1 November this year. All these funds are committed to the new property. The completion date has now been amended to February/March 2020. 

We have had three conflicting opinions from Centrelink staff as to how these funds will be assessed on maturity for part-pension purposes. Two held the opinion that we could get an extension on the 12-month moratorium on proceeds of the sale of our primary residence, as we had already signed to purchase our new home within the 12 months. On those grounds, we could apply for an extension of time. The other opinion was basically, bad luck, your time limit will have expired and your proceeds will be counted as assets from 1 November and your part-pension will be subject to deeming as a result. This would decimate our pension amounts.

Which is correct, and is it possible to be granted an extension in these circumstances? 

A. If you intend to buy another home or have another one built within 12 months of selling your old home, the portion of your sale proceeds. which you intend to use to buy or build your new home, will not be counted as an asset for 12 months, or until you buy or build your new home, whichever happens first.

Although this portion of your sale proceeds is not counted as an asset, income will be deemed to be earned on any part of the sale proceeds that you retain. This will result in an increase in your total assessable income and, depending on your current level of income and assets, most likely reduce your fortnightly pension or payment. It could also change your pension or payment from being asset tested to income tested.

If your home sale proceeds asset exemption expires soon, but your new home is not yet acquired, you may apply for an extension of the asset exemption for up to an additional 12 months.

To be granted an extension, you must satisfy the following requirements:

  • you still intend to buy or build a new principal home
  • reasonable attempts have been made to acquire a home
  • these attempts were made within a reasonable period after the home sale
  • you are experiencing delays beyond your control.


The extended exemption will cease when the new home is acquired or 24 months after the former home was sold, whichever happens first.

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Related articles:
‘Why was my pension cut?’
Terry’s downsizing dilemma
Jack’s deeming rate dilemma

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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