Over-55 Home Sale Exemption 2026: Guide for Downsizers

The over-55 home sale exemption refers to two key benefits:

• Capital Gains Tax (CGT) Exemption: Selling your main residence is generally exempt from CGT, which can save you tens (or even hundreds) of thousands of dollars if your home has significantly appreciated.

• Downsizer Superannuation Contribution: Since July 2022, Australians aged 55+ can contribute up to $300,000 (per individual) from the sale of their home directly into their super fund, outside of the normal contribution caps.

Both measures are designed to encourage downsizing, free up larger homes for younger families, and help older Australians improve their retirement savings.

This year, several tweaks to the downsizer rules and ongoing debate over pension eligibility mean it’s more important than ever to know the details:

• Minimum Age Stays at 55: The minimum age for the downsizer super contribution remains 55 in 2026, following the 2022 reduction from 60. This opens the door to more Australians considering a move earlier in their retirement journey.

• Contribution Cap: The $300,000 per person limit (or $600,000 per couple) still applies, and the property must have been your main residence for at least 10 years prior to sale.

• Timing: You must make your downsizer contribution within 90 days of receiving the sale proceeds.

• Age Pension Assessment: The proceeds from your home sale can affect your pension entitlements once they’re no longer exempt under the ‘12-month asset test exemption’ for those intending to buy a new principal residence.

In 2026, the federal government is also reviewing incentives to boost housing supply and encourage more older Australians to downsize, but no further changes to the core exemption rules have been legislated yet.

Let’s look at a typical scenario. Anne and Tom, both 62, sell their Sydney home for $1.7 million after living there for 15 years. Thanks to the main residence CGT exemption, they pay no tax on the sale. They buy a smaller apartment for $1 million, and each contributes $300,000 from the proceeds to their superannuation using the downsizer provision. This move boosts their retirement savings, potentially increases their Age Pension eligibility (depending on timing and total assets), and reduces their living costs.

Key steps they took:

• Confirmed the property met the 10-year ownership rule.

• Completed the downsizer contribution forms and submitted to their super fund within 90 days.

• Reviewed the impact on their Age Pension and planned their move accordingly.

• Timing is Everything: If you plan to buy a new home, the 12-month (sometimes extendable to 24 months) asset test exemption gives you time before sale proceeds count towards the Age Pension means test.

  • Superannuation Impact: Downsizer contributions are not subject to the usual ‘work test’ or total super balance cap, making this a rare chance to top up super later in life.

  • Plan for Retirement Income: Consider how selling your home and boosting your super will affect your cash flow, Centrelink entitlements, and lifestyle.

  • Documentation: Keep records to prove you meet the eligibility criteria for both the CGT exemption and the downsizer contribution.

The over-55 home sale exemption remains a compelling strategy for Australians looking to downsize, access tax benefits, and strengthen their retirement position in 2026. With the right planning, you can maximise your home equity and enjoy greater financial freedom in the years ahead.