Downsizing can sound complex, but it’s not impossible. We’ve gathered all the important things – including superannuation benefits – you need to know if you’re looking to go through the process of right-sizing your place to call home.

If cashflow is your concern, you might also consider using a reverse mortgage. This eliminates the need to downsize, but you are essentially taking out a loan product.

What is downsizing?

In the context of housing, downsizing refers to the act of selling a larger home to move to a smaller dwelling. According to the Australian Housing and Urban Research Institute (AHURI), a smaller dwelling may be “smaller in size or lower in value, or both”. This brings us to the two types of downsizing:

Physical downsizing

For homeowners, physical downsizing means selling their current residence to move to a new dwelling with fewer rooms or less floor area. An example would be empty-nesters who sell their multi-room, family-sized home to downsize to an apartment or a house with a small backyard. 

Financial downsizing

Financial downsizing involves selling a home to rent or buy a cheaper but not necessarily smaller house, as may be the case for those moving from capital city dwellings to regional properties. To illustrate, a downsizer leaving their $1.5 million home in Sydney to buy a $600,000 house in rural Victoria may now have a property of lower value but it could be larger than their previous residence. 

Why do seniors and retirees downsize?

The downsizing behaviour of Australians ages 50 and above is generally correlated with specific life events such as changes in health or lifestyle and the departure of children, according to AHURI’s findings.

That is to say, seniors see downsizing as a solution to a crisis or a situation rather than a choice.

A retiree looking for a more manageable home – one with fewer rooms to tidy up or a smaller garden to maintain – may consider downsizing to a two-bedroom luxury apartment or a property with less yard space. 

“Older Aussies perceive downsizing as more than just a reduction of dwelling size. Rather, it refers to internal and external spaces becoming more manageable,” according to AHURI. 

Seniors with mobility issues may likewise opt to downsize from, say, a multi-storey residence to a single-storey house with accessibility modifications that enable them to age in place for longer. 

Aside from moving seniors to more appropriate households, downsizing is viewed by the government as a potential solution to the housing crisis by freeing up housing stock, creating more demand for medium-density units, and accelerating the shift away from dense capital cities.  

…and why they don’t

Studies found seniors who don’t downsize are happy being homeowners. According to AHURI, 33% of Aussies 55 and older said they were satisfied with their current dwelling. 

Research by National Seniors Australia in 2022 revealed that homeownership, rather than savings, makes retirees feel more financially secure. Of those surveyed, 85% own their home while only 33% have more than $500,000 in savings and investments

Downsizing is more than just a simple move. It is a complete lifestyle change that comes with benefits as well as several implications for seniors’ entitlements. 

Downsizing: Implications on the Age Pension

One of the main questions on seniors' and retirees' lips when it comes to downsizing is its implication for pensioners’ entitlements. 

To put it briefly, the proceeds from the sale of your home will be assessed against the Age Pension assets and income tests. The value of your assets and your fortnightly income must fall within the thresholds for you to receive a full or part of your pension once you reach your Age Pension eligibility age. 

Luckily, the proceeds of your home sale are exempt for up to 12 months if you plan to use them to buy, build, or renovate another home. This is extended up to 24 months as a new policy that took effect from 2023. In addition, deemed income from the exempt proceeds will also use the lower deeming rate.

For example, under the assets test, if you downsize from a $1 million house to a $700,000 dwelling, the $300,000 difference will be an assessable asset 24 months from the date of exchange. 

If your assets exceed the limit for your situation, your pension will be reduced. Here are the limits: 

Your situation









Data source: Services Australia

Meanwhile, the income test will calculate the $300,000 deemed income using the current deeming rate of 0.25% until mid-2024. Do note, however, that this rate only applies if you use the funds for a new principal home; if it sits in a financial asset, it will be assessed at the regular rates. 

Your fortnightly income must fall within the threshold for your particular situation to receive your pension. Here are the limits:

Your situation

Income threshold



Couple (combined)


Data source: Services Australia

Tax and superannuation benefits when downsizing your home

To encourage more seniors to downsize, the federal government makes it more financially attractive through incentives. Seniors downsizing are eligible for the downsizer superannuation program and stamp duty discounts:

Superannuation benefits

The Downsizer Contribution Scheme allows individuals over 55 to place up to $300,000 into their super account. Couples can make a combined contribution of up to $600,000. These can be over and above any existing contribution caps and must be made within 90 days from the property settlement date. 

Further, take note that this non-concessional downsizer contribution can only be applied once and that the principal home sold has been owned for at least 10 years. 

Stamp duty discounts

Seniors who downsize are also eligible for stamp duty concessions depending on their state of residence. This incentive allows downsizers to potentially save thousands of dollars in taxes charged by the government for the purchase of their new property. 

Currently, there are three jurisdictions offering stamp duty discounts to eligible pensioners. The Northern Territory allows a refund on duties paid on or before its program ended.


Eligible pensioners in Victoria can get a one-off duty concession for principal home purchases valued up to $750,000. Downsizers moving to homes worth $330,000 and below are exempted from paying stamp duty.


Tasmania provides a 50% stamp duty discount for eligible pensioners who sell their homes and downsize to a property of lower value. To qualify, the dutiable value must be below the $400,000, $500,000, and $600,000 thresholds depending on the date of purchase.  

Australian Capital Territory

Eligible downsizers in the ACT are exempted from paying stamp duty for properties valued up to $550,000 purchased on or after 1 July 2023. The concession thresholds vary depending on the property transfer date. 

Northern Territory

Northern Territory’s Senior, Pensioner, and Carer Concession (SPCC) program offered eligible downsizers, aged over 60, stamp duty discounts worth $10,000 for property purchases valued up to $750,000.

The scheme ended on 30 June 2021, but eligible recipients can file for a refund on paid stamp duty for properties purchased on or before the SPCC closed.

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What are the pros of downsizing your home?

Additional funds

One of the most compelling reasons to downsize is the equity you can unlock from the sale of your larger house. The proceeds can be used for paying off your mortgage if you have one, pumping up your investments, funding your retirement, or spending on things or people you love. 


As mentioned, there are growing incentives to downsizing your home in retirement. You are afforded a more lenient 24-month assets test when it comes to collecting the Age Pension, while also getting additional superannuation contributions, as well as stamp duty exemptions depending on your state of residence.

Lower household costs 

Generally speaking, a smaller dwelling costs less to cool or heat and has lower insurance fees, council rates, and mortgage repayments. 

Easier to maintain

According to AHURI, one of the top reasons pushing seniors to downsize is “because their garden or property required too much maintenance”.

A small residence with fewer rooms and a lesser floor area is easier to clean and maintain compared with a large home with lots of space and a huge garden to boot. 

Convenient living conditions

When you downsize, you can choose a home that meets your needs, suits your lifestyle, and fits into your budget. You have the liberty to configure your dwelling’s fittings and design, move to a location closer to family and services, and live the life you want in your sunset years. 

What are the cons of downsizing

High costs

One of the main reasons barring seniors from downsizing is the associated costs it entails. Downsizing expenses include moving costs, legal fees, inspection fees, and stamp duty. The costs of renovation, storage, and new furniture can also add up.

In some cases, downsizing can potentially leave a downsizer in the red if the proceeds from the sale are eaten up by costs.

Reduced pension

You may have a more lenient 24 month assets exemption test, but at the end of the day, profit from the sale of your home – which you’ve likely lived for many years – can have implications with how much of an age pension you can claim.

Limited space and flexibility

A smaller home means less space and storage, forcing you to let go of some of your material belongings. 

Downsizing can also result in fewer to no spare rooms, which is at odds with the attitude of many older Australians who consider extra bedrooms necessary for loved ones to stay over.

New neighbourhood adjustments

Moving to a new home and neighbourhood entails a couple of adjustments. It may take time to learn how to navigate the area and locate the nearest health care and professional service providers. 

Losing emotional attachment

If you feel sad over the thought of leaving the home where your family lived for years – you are not alone. AHURI found many older homeowners who had not considered downsizing cited emotional attachment to their homes and neighbourhoods as their reason. 

How to downsize

If you’ve committed to make the move or you’re still weighing whether it’s a financially worthwhile undertaking or not, here’s a guide on how to downsize to help you decide: 

Make a plan

Downsizing involves several moving parts, so you must be clear about your reasons and your goals to effectively plan for it. Make a checklist for everything you need to accomplish, then create a timeline to ensure you are on track. 

Some of the things you have to consider in your plan are the timing of selling your property, the city or suburb you want to move to, the type of housing you like, and the financing if needed.

See Also: Home Loan Calculator

Seek professional advice

Get independent advice from a financial advisor or an Age Pension specialist about organising your finances and sale proceeds, seek a legal professional to review sale contracts and oversee the settlement, and consider engaging a buyers agent to help you find and evaluate the property you’re after. 

Enlisting the help of professionals can facilitate your move and offer you a clearer picture of what to expect when you downsize. 

Calculate the costs

It is possible for downsizing to cost you money rather than save. This is especially the case in the short term where upfront transaction costs of buying and selling property can be burdensome.

Before you put your current home on the market, check how its value would fare and if the proceeds would be enough to cover the cost of your new home. Consider having it appraised to have a rough estimate of the amount you may get from the sale. 

Make a list of all the expenses that come with downsizing. Here are the costs to consider:

  • Stamp duty – Also known as land transfer duty, it is a tax charged by the government when you purchase a property. This varies from state to state. As mentioned, several jurisdictions offer stamp duty concessions – within price thresholds – to eligible downsizing pensioners. 

  • Legal fees – These encompass all payments for your hired conveyancer or solicitor and the legal documents required for the sale and purchase of your home.

  • Building inspection – Paying for a comprehensive assessment of the structural integrity and pest infestations at a potential home can save you future stress and costly repairs.

  • Sales and marketing fees – These include expenses for the sale of your current dwelling such as home staging, advertising, real estate commission, and auctioneer fees. 

  • Moving fees – Packing, sorting, storage, and moving expenses go here.

  • Connection fees – If the utilities at your new address are not yet established, you might have to shell out money to set them up. 

Check the financial implications

Freeing up equity from your current home can come at the expense of your Age Pension. 

As mentioned earlier, the proceeds from the sale of your home will be assessed against the Age Pension assets and income tests to determine how much you will receive once you reach your Age Pension age.  

Pump up your retirement

As part of the government’s objective to incentivise older Australians to downsize, you can use the income from the sale of your home to top up your superannuation. 

Get rid of clutter

Since you’re potentially moving to a smaller home, it could be a good opportunity to sort out that back room where you’ve stored random stuff for decades.

This doesn’t mean you have to throw all your children’s baby pictures and holiday souvenirs, you just need to be a little creative in organising your possessions. Digitise photos and music to save more shelf space, choose and keep just one souvenir from every trip, and donate the things you no longer use to charities. 

Be ready to compromise

Having fewer rooms may force you to choose between a guest bedroom or a study. But it is possible to have both. One clever solution is to create a multi-purpose space that, for example, can be transformed from a home office to a bedroom for friends and family members when they come over. 

If you downsize to an apartment, you can take advantage of its communal garden where you can enjoy the fresh air and blooms without the stress of the upkeep. 

Enjoy your new home

Leaving a home you and your family once lived in marks the end of the era. But instead of an ending, think of it as a new beginning. It’s time to enjoy your new home and create new memories. 

Don’t forget to meet your new neighbours, too.

Photo by Cottonbro Studio on Pexels