Amanda Hardy Lai

Amanda has worked in the financial services industry since 1998 and has been providing financial advice since 2006. Her career has been driven by a commitment to ensuring the highest standards of financial advice and client care. To book a consultation with Amanda click here.
All about downsizing: What you need to know

All about downsizing: What you need to know

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Downsizing is a major financial and lifestyle decision, offering the chance to free up home equity and boost your super balance in retirement. We regularly explore it because of the unique retirement planning opportunities it presents. 

At its core, downsizing means selling your current home and purchasing a smaller, more affordable property. But it can also mean moving to a rental or a different living arrangement that better suits your needs in retirement.

Downsizer contribution rules allow eligible retirees to contribute up to $300,000 from the sale of their home into super, without impacting their usual contribution caps. This can help boost retirement savings in a tax-effective way, even for those who may not otherwise be able to contribute to super.

We know that downsizing isn’t for everyone. In some areas, selling and buying a smaller home leaves little financial gain, and moving costs add up. Research from the Australian Housing and Urban Research Institute (AHURI) shows that fewer than 20% of older homeowners who sell and buy another property actually reduce their housing equity. 

That said, at Retirement Essentials, we’re often asked about the rules and eligibility for downsizing contributions to super.

Retirees want to understand how it works, what limits apply, and what impact it could have on their Age Pension Entitlements. So, if downsizing on your radar, here’s what you need to know about making a super contribution from the proceeds.

The deeming rates freeze: What happens if it ends in July?

The deeming rates freeze: What happens if it ends in July?

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Why the unfreezing of deeming rates in 2025 matters.

Using deeming rates is the way Centrelink calculates the income you earn from your financial asset, regardless of whether you receive that income or not.

In May 2020, the then Morrison Government froze deeming rates to protect retirees during the economic uncertainty of COVID-19. This temporary measure was extended twice, most recently to July 2025, to help pensioners manage rising living costs.

The most recent freeze is now scheduled to end – but will it? With a federal election approaching and cost-of-living concerns still high, some wonder if the Albanese Government might extend it again.

If the freeze does end, how much might deeming rates rise? And how can (or – is it possible for ?) retirees (to) prepare?

What are deeming rates?

Centrelink uses deeming rates to estimate income from financial assets (excluding homes, home contents, cars, etc.) rather than using actual investment returns or the income you received. 

The current rates are:

Singles: 0.25% on assets up to $60,400, 2.25% on amounts above

Couples: 0.25% on assets up to $100,000, 2.25% on amounts above.

Deeming rates were much higher in the past, but were reduced as interest rates fell. They have remained unchanged since 2020.

Will an inheritance affect your Age Pension?

Will an inheritance affect your Age Pension?

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How will an inheritance affect your Age Pension entitlements? Many Retirement Essentials  ask this question. As life expectancy increases, it’s not unusual for people to receive an inheritance much later in life—often when they are already retired and receiving an Age Pension.

If you do receive a lump sum inheritance (or any lump sum), there are some important things you need to know to avoid unexpected pension reductions or even overpayments that need to be repaid.

You must tell Centrelink

It’s essential to notify Centrelink within 14 days of receiving any lump sum. Failing to do so can result in overpayments that must be repaid, which can be difficult if the funds have already been spent. 

Susan and Terry’s inheritance dilemma

Susan, 70, and Terry, 75, received a $400,000 inheritance. They own their own home with a $180,000 mortgage and have $470,000 in combined super. They also like to keep a cash buffer of $15,000 for emergencies, and value their personal assets at $25,000. 

Currently they are receiving $41,735 in Age Pension as a couple, and they draw down their additional spending needs from their Account-Based Pensions.

Their top three questions were:

Would gifting inheritance money to their children affect  their pension?

Should they pay off their mortgage?

What’s the best way to use the money without losing Age Pension benefits?