Migration Assistant - Not Enough Space?

I know this issue has come up many times in the community but I didn't in my scrolling seem to find an answer that addresses my situation. Basically, I bought a new 27 inch iMac to replace my old 27 inch iMac and have been trying to run Migration Assistant between the two using a thunderbolt cable. My new Mac keeps indicating to me that it does not have enough space to complete the migration, but that simply can't be the case.

My old iMac has a 1 TB hard drive of which I've used about 900 GB (these are the files I have to transfer). My new iMac has a fusion 128 GB SSD and 3 TB HDD, of which only 20 GBs have been used so far. The old iMac still runs on Catalina as I have not been able to successfully update to the latest OS software. My new iMac is up to date with Monterey.

Could this have something to do with the fact that my new drive is a fusion drive? Is it possible that my new iMac is only utilizing the SSD for purposes of the transfer and isn't "recognizing" the additional 3TB of space? At end of the day there seems to be three times the amount of space needed to make the transfer happen so very confused.

Or maybe it has something to do with the operating systems?