Downsizing Your Home in Australia: A Complete Guide

Downsizing — selling your family home and moving to a smaller property — is one of the most significant lifestyle and financial decisions you can make, particularly in retirement. Whether you are an empty nester looking to reduce maintenance, a retiree wanting to free up equity, or simply ready for a change, downsizing in Australia involves careful planning across financial, emotional, and practical dimensions. This guide covers everything you need to consider before making the move.

Why People Downsize

The motivations for downsizing are diverse, but the most common reasons include:

• Empty nest: Children have left home, and the family house feels too large for one or two people
• Reduce maintenance: A large house with a big garden demands significant time, effort, and money to maintain — particularly as you age
• Unlock equity: Selling a high-value family home and purchasing something smaller can release hundreds of thousands of dollars in equity for retirement living, travel, or helping family
• Lifestyle change: Moving closer to the coast, a regional town, family, or medical facilities to better suit your current stage of life
• Health and accessibility: A single-level apartment or townhouse may be more practical than a multi-storey house with stairs and extensive grounds
• Reduce ongoing costs: Lower council rates, insurance, utilities, and maintenance costs on a smaller property

Financial Considerations

Downsizing is often motivated by financial gain, but it is important to understand all the costs involved to ensure the numbers work in your favour.

Selling Costs

Selling your existing property involves several costs that reduce your net proceeds:

• Agent commission: Typically 1.5% - 2.5% of the sale price. On a $1.2 million home, this could be $18,000 - $30,000
• Marketing costs: Photography, floor plans, online listings, and print advertising can cost $3,000 - $10,000+ depending on your campaign
• Conveyancing (sale): $800 - $1,500 for the legal work on the sale
• Styling and minor repairs: $2,000 - $10,000 to prepare the property for market

For a detailed breakdown of selling expenses, see our Selling Property Guide.

Buying Costs on the New Property

When you purchase your downsized property, you will incur the same costs as any buyer:

• Stamp duty: This is often the largest cost. On a $700,000 apartment, stamp duty ranges from approximately $15,000 to $37,000 depending on the state. Some states offer stamp duty concessions for pensioners or seniors — check with your state revenue office
• Conveyancing (purchase): $1,000 - $2,000
• Inspections: Building, pest, and strata reports totalling $500 - $1,200
• Moving costs: $1,000 - $5,000 depending on distance and volume

Capital Gains Tax (CGT)

If the property you are selling is your principal place of residence and has always been your home, it is generally exempt from CGT. However, if the property was used as an investment property for any period, or if you rented out part of it, a portion of the capital gain may be taxable. Consult a tax professional to understand your specific CGT obligations before selling.

Downsizer Contribution to Superannuation

One of the most valuable financial benefits of downsizing is the downsizer contribution. If you are aged 55 or older, you can contribute up to $300,000 per person (or $600,000 per couple) from the proceeds of selling your home into your superannuation fund. Key rules include:

• You must have owned the home for at least 10 years
• The property must have been your principal residence at some point during ownership
• The contribution does not count towards your existing contribution caps
• You can make the contribution regardless of your total super balance or work status
• The contribution must be made within 90 days of receiving the sale proceeds

For many retirees, this contribution can significantly boost retirement savings and provide ongoing income through the super pension phase, where earnings are tax-free.

Where to Downsize

The right downsized property depends on your lifestyle priorities, budget, and health needs:

• Apartment or unit: Low maintenance, often in established suburbs close to shops, transport, and medical facilities. Check strata levies carefully — they are an ongoing cost that can be substantial, especially in buildings with lifts, pools, or gyms.
• Townhouse or villa: A middle ground between a house and an apartment. Often includes a small garden or courtyard without the maintenance burden of a large block.
• Regional relocation: Moving from a capital city to a regional area can unlock significant equity. A $1.2 million house in Sydney could be replaced with a $500,000 property in a coastal or regional town, freeing up substantial capital.
• Retirement village: Purpose-built communities offering social activities, on-site care, and maintenance-free living. However, retirement villages have unique financial structures that require careful evaluation (see below).

Retirement Village Entry and Exit Costs

Retirement villages operate under different financial models depending on the operator and state legislation. Common cost structures include:

• Entry contribution (ingoing price): The upfront cost to secure your unit or villa, which can range from $200,000 to $1,000,000+ depending on location and quality
• Ongoing fees: Regular service fees (similar to strata levies) covering maintenance, management, and shared facilities — typically $400 - $1,000+ per month
• Deferred management fee (DMF): This is the critical cost many people overlook. When you leave the village (or pass away), the operator retains a percentage of your entry contribution or the resale value — typically 2.5% - 5% per year of residence, capped at 25% - 35%. On a $600,000 entry contribution with a 30% DMF after 6+ years, you would lose $180,000
• Capital gain/loss sharing: Some contracts share capital gains with the operator (e.g., 50/50), while others give you 100% of the gain but charge a higher DMF
• Refurbishment costs: You may be required to pay for refurbishment of the unit when you leave, which can cost $10,000 - $30,000

Always have a retirement village contract reviewed by a solicitor who specialises in this area. The financial structures are complex, and the true cost of living in a retirement village is often higher than it first appears.

Emotional Aspects of Downsizing

The financial and practical considerations of downsizing are important, but the emotional dimension should not be underestimated. Selling a family home where you raised children and built decades of memories is a significant life event. Common emotional challenges include:

• Grief at leaving a home full of memories
• Difficulty deciding what to keep, donate, or discard after decades of accumulation
• Anxiety about adapting to a smaller space or new neighbourhood
• Resistance from adult children who are attached to the family home

Give yourself time to process these feelings. Many downsizers find that involving family in the decision, starting the decluttering process early, and focusing on the positive aspects of the new lifestyle helps ease the transition.

Downsizer's Checklist

1. Run the numbers: Calculate your expected sale proceeds minus selling costs, stamp duty on the new purchase, and all buying costs. Ensure the net financial benefit justifies the move.
2. Research your super options: Speak with a financial adviser about the downsizer contribution and how it fits your retirement income strategy.
3. Check CGT implications: If you ever rented out the property or used it for business, get tax advice before selling.
4. Inspect thoroughly: Apply the same due diligence to your downsized purchase as you would any property — building inspections, strata reports, and contract review.
5. Start decluttering early: Begin sorting through belongings at least 3 to 6 months before you plan to sell. This reduces stress and helps you realistically assess how much space you need.
6. Consider accessibility: Think about your needs not just now but in 10 to 20 years. Single-level living, wide doorways, and proximity to medical facilities become more important over time.
7. Get legal advice on retirement village contracts: If considering a retirement village, engage a solicitor to review the contract before signing anything.
8. Plan the timing: Ideally, sell first so you know your exact budget, then buy. If you need to buy and sell simultaneously, consider a bridging loan or a longer settlement period to avoid being rushed.

Timing the Sale and Purchase

Coordinating the sale of your current home with the purchase of your new one requires careful planning. Options include:

• Sell first, rent temporarily: This gives you certainty about your budget and removes the pressure to accept a lower price. The downside is the inconvenience of two moves.
• Negotiate aligned settlement dates: If you can time both transactions, aim for the same settlement date or a short gap. Your conveyancer can help coordinate this.
• Bridging finance: A short-term loan that allows you to buy the new property before selling the old one. Bridging loans carry higher interest rates and fees, so they should be a last resort.

For a complete guide to what happens on moving day and how to prepare, see our Moving House Checklist.

Related Resources

• Selling Property Guide — Complete guide to selling your home including agent selection, marketing, and costs
• Stamp Duty Calculator — Calculate stamp duty on your new purchase by state
• Moving House Checklist — Everything you need to do before, during, and after moving

This article is for general information only and does not constitute financial or legal advice. The downsizer super contribution rules, CGT exemptions, and state-specific costs referenced in this article are subject to change. Always consult a qualified financial adviser and solicitor before making decisions about downsizing.