Downsizer's guide to Australian property: super contributions and concessions (2026)

What downsizing is

Downsizing means selling a larger family home and moving to a smaller, more manageable property. For many Australians, the family home represents their largest financial asset, and downsizing can unlock significant capital at a stage of life when income may be reducing and retirement is approaching or underway.

Motivations for downsizing include:

• Reducing ongoing costs (rates, maintenance, insurance) of a large property
• Moving to a more accessible property better suited to ageing in place
• Relocating closer to family, healthcare services, or lifestyle amenities
• Freeing up capital to supplement retirement income or contribute to super
• Moving to a retirement community or over-55 lifestyle village

Done well, downsizing can significantly improve financial security and quality of life in retirement. Done poorly, particularly with retirement village contracts, it can lock homeowners into unfavourable financial arrangements that are difficult or costly to reverse.

The $300k downsizer super contribution

One of the most powerful financial benefits available to Australian downsizers is the Downsizer Super Contribution. This allows eligible Australians to contribute proceeds from the sale of their home into superannuation, outside the normal contribution caps.

The downsizer contribution is treated as a non-concessional contribution (after-tax) but is exempt from the standard $110,000 a year non-concessional contribution cap. This makes it an exceptionally powerful super-boosting mechanism for older Australians who may have limited other ways to contribute to super.

Example: a couple aged 62 and 64 sell the family home for $1.2 million. They can each contribute $300,000 (total $600,000) into their respective super accounts. The contributions are taxed at just 15% (or 0% in pension phase) on future earnings, far more tax-effective than holding the same funds in their personal names.

Key eligibility rules:

• Both people in a couple qualify if the home is jointly owned or owned by one partner, both can contribute up to $300,000 each, provided both have lived in the home as their principal residence for at least 10 years.
• Only one downsizer contribution per person. You can only make a downsizer contribution once in your lifetime.
• The home must be in Australia.

The 90-day rule is critical: the ATO form must be submitted and the contribution made within 90 days of receiving the sale proceeds. Missing this window means losing the opportunity for that specific property sale.

Stamp duty concessions for downsizers

Several states and territories offer stamp duty concessions for pensioners, seniors, or downsizers. These vary significantly by jurisdiction:

Always verify current eligibility and amounts with the relevant state revenue authority before purchase, as thresholds and eligibility criteria change regularly.

Key considerations before you downsize

Before committing to downsize, carefully consider:

• Net proceeds after costs. Selling the family home involves agent commission (typically 1.5 to 2.5%), marketing costs, legal fees, moving costs, and potentially repairs or staging costs. Total selling costs can easily reach 3 to 5% of the sale price on a large property.
• Buying costs. Stamp duty, legal fees, removalist costs, and any renovation or fit-out of the new property add to the total.
• Lifestyle needs. Will the smaller property meet your needs for the next 10 to 20 years? Consider accessibility features, proximity to health services, social connections, and public transport.
• Aged care planning. If full aged care is a possibility in the medium term, the sale proceeds from the family home and subsequent property decisions will affect aged care means testing. Get specialist aged care financial advice.
• Emotional factors. Leaving the family home can be emotionally significant. Allow adequate time for the decision and involve family where appropriate.

Popular property types for downsizers

• Apartments and units. Low maintenance, good security, often in desirable inner-city or coastal locations. Strata fees can be significant. Consider the lift situation and accessibility.
• Townhouses. A balance of house-like space without the large garden. Many are two-storey, check accessibility for future needs.
• Single-level homes. If remaining in the broader community, a smaller single-level house may offer the best combination of accessibility and space.
• Over-55 lifestyle communities. Purpose-designed communities offering independent living for active older Australians.
• Retirement villages. Managed communities with on-site services, typically for those needing more support.

Over-55 lifestyle communities

Over-55 (or land lease) communities are purpose-built for active, independent older Australians. They typically offer:

• Modern, well-designed homes specifically for older residents
• Community facilities (pool, gym, clubhouse, bowls)
• A social community of similar-aged residents
• Lower purchase prices than surrounding residential property (because you typically pay for the home only, not the land)

Land lease vs title ownership

Many over-55 communities operate on a land lease model: you purchase the home (dwelling) but lease the land from the operator, paying weekly or monthly site fees. This is fundamentally different to owning a freehold property.

• Site fees typically increase annually (often CPI-linked) and can become a significant ongoing cost
• The dwelling can be sold, but the buyer also inherits the land lease obligation
• Capital growth on the dwelling may be limited compared to freehold property
• Centrelink assessment of land lease arrangements differs from standard homeownership, seek advice

Retirement village contracts: what to watch

Retirement villages are not the same as over-55 lifestyle communities. They are more managed environments, often including meals, cleaning, and care services, and typically have far more complex contractual arrangements.

The most important financial concept to understand is the departure fee (also called a deferred management fee or DMF):

• What it is. A fee payable to the retirement village operator when you leave, either on departure or death. Typically calculated as a percentage of the entry price or sale price, accruing over the years you were in residence.
• How much. Departure fees of 20 to 30% of the entry price are common. In some contracts, the fee continues to accrue until it reaches a cap (e.g. 30% after 10 years). This can significantly reduce the capital available to you or your estate.
• Capital gains. Many contracts allow the operator to retain all or part of any capital gain on the unit when it is resold, not the resident.
• Recurrent charges. Ongoing village fees (for maintenance, management, and services) are payable even if you are in hospital or temporarily absent.

CGT and the main residence exemption

For most Australian downsizers, the sale of the family home is a CGT-free event under the main residence exemption. The capital gain on your principal place of residence is generally fully exempt from capital gains tax.

Important exceptions and complexities:

• If part of the home was used for business or investment (e.g. you rented a room or ran a business from the property), a partial CGT liability may apply.
• Six-year rule. If you moved out of the family home and rented it for up to 6 years before selling, you may still be fully exempt under the absence rule.
• Foreign residents. Foreign residents for tax purposes are no longer eligible for the main residence exemption in most cases, seek specialist tax advice.

Consult your accountant to confirm your CGT position before selling, particularly if there has been any period of rental or business use.

Centrelink implications

Downsizing can have significant effects on Centrelink pension eligibility, primarily through the assets test. Key points:

• The family home is assets-test exempt. Under Centrelink’s assets test, the value of your principal residence does not count toward your assessable assets.
• Sale proceeds are assessable. When you sell and receive the proceeds, those funds immediately become assessable assets, potentially reducing or eliminating your Age Pension entitlement.
• A 24-month asset test exemption may apply. Centrelink provides a 24-month assets test exemption on proceeds from selling the principal home if you intend to use the funds to purchase or build a new home. This exemption is time-limited and conditions apply.
• Downsizer contribution to super. Amounts contributed to super under the downsizer contribution scheme are subject to the deeming rules for Centrelink purposes, they don’t disappear from the assets test.

Centrelink rules are complex and interact with each other in non-obvious ways. If you currently receive (or are approaching eligibility for) the Age Pension, seek specialist Centrelink and aged care financial advice before completing a sale.