3 February 2026 | See disclaimer
Downsizing your home can be one of the biggest life decisions you’ll make, and currently, plenty of Australian retirees are taking the leap. But it’s not just about moving into a smaller home, it’s about rightsizing and finding a home that will suit your lifestyle and perhaps free up equity for your future. Usually, downsizing is driven by two top motivators — lower home maintenance and retirement planning.
Why Do Retirees Choose to Downsize?
Choosing freedom over maintaining a large family home is one of the prime reasons why retirees and Australians over 55 choose to downsize their house. In a realestate.com.au GemLife Downsizing Australia Report, it states that 34% want a lower-maintenance property without the need to garden and maintain a large home. [1] And for many families, the home evolves after the kids move out, making it feel too big, empty or quiet, motivating the want to downsize.
While another top motivator is to boost retirement savings and cash flow, with 29% citing retirement as their main reason for downsizing. [1] This is because owning a large family home can chip away at savings. From needing to repair the house due to wear and tear to paying higher rates for a bigger block, these costs can add up. Rightsizing allows Australians who sell their family home to unlock the equity for their retirement years. [2]
Downsizing Your Home?
No matter the size of your property, Home and Contents Insurance is essential to cover your new house.
What Happens to Super & Age Pension When Downsizing?
Downsizer Super Contribution
If you’re selling your home, you may have the option to contribute the proceeds into your superannuation fund depending on your eligibility. You can contribute $300,000 per eligible person into your super, meaning if you own the house with your partner, you can contribute a total of $600,000. [3]
There are plenty of benefits that come with this option such as low-tax money and a place to manage your retirement savings.
To be eligible for the downsizer super contribution you must comply with the Australian Taxation Office (ATO) rules: [3]
- Be 55 years or older at the time of making the contribution
- Own your house for 10 or more years
- Have the sale qualify for the main residence capital gain tax exemption
- Not have made a previous downsizer contribution
- Contribute the money within 90 days of receiving your home sale proceeds (usually at the time of settlement)
It’s best to consult a financial adviser regarding your own financial circumstances, including Super and Pension impacts.
Impact on the Age Pension (Assets Test)
When you live in a home the value of the property doesn’t affect age pension regardless of whether you own a $1 million or $500,000 house.
However, when you sell and if you’re at pension age, the money becomes assessable under the assets and income test. Services Australia states that making a sum contribution of your proceeds to super (at pension age) may affect your age pension and other Government payments. [4]
Although, there is one exception to this. If you use this money within 12 months after selling your family home and purchase, build or renovate another house with it, the proceeds are exempt from the assets test. [2]
Dealing with downsizing, superannuation and age pension entitlements can be complex. Depending on your individual circumstances and if you own other assets your situation can vary. It’s best to consider consulting a financial adviser regarding your circumstances including the impacts to both your super and pension.
Hidden Costs of Downsizing
Before you consider downsizing, think about your financial situation and the hidden costs that may pop up. We’re talking about the costs of selling one home and purchasing another.
You’ll need to take into consideration the real estate agency fees ranging from 2-3%, the pre-market repairs which may cost anywhere from $100-$25,000 and the marketing fees that may cost from $3,750-$12,500. [5]
It’s also best to think about the other fees involved when buying a new home. This includes stamp duty, conveyancing and solicitor fees, building and pest inspections and potentially body corporate fees.
Insuring Your New Lifestyle
Body Corporate Insurance
If you’re thinking about moving into a retirement village, apartment or townhouse, it could be a good idea to brush up on your body corporate knowledge.
The body corporate’s insurance will only cover the building and up to the internal paintwork, but it won’t cover your property’s fixtures and fittings. This means if your home is damaged inside, the replacement costs for your belongings and fittings including your carpets, floorboards, lights or kitchen cabinetry may not be covered by body corporate.
To protect your belongings, as well as your internal fittings, our Budget Direct Contents Insurance may cover these if an insured event happens as outlined in the Product Disclosure Statement (PDS).
Correctly Valuing Your Sum Insured
You might think that moving from a large house to a smaller home means you need less cover, but this may not be the case. Downsizing your space doesn’t necessarily mean reducing your contents sum insured. The total replacement value of the belongings you take with you could still be significant, particularly if you’ve made recent purchases or are moving more valuable items into a smaller number of rooms. For example, if you move into an apartment with fewer rooms and have more valuable items in each bedroom, this increases the value per room.
This means if an insured event affected a room you may lose more valuables. That’s why it’s important to ensure your contents sum insured is accurately estimated in case an unfortunate event occurs.
Why You Should Create a Home Inventory
Creating a comprehensive list of your personal belongings and their estimated replacement value can help you in calculating how much coverage you’ll need for your contents insurance policy.
Downsizing Options in Australia
There are plenty of downsizing options available within Australia that can suit your lifestyle needs. From retirement villages, land lease communities, small apartments and townhouses.
If you’re looking for a cheaper alternative, Independent Living Units within retirement villages have become a more affordable option compared to buying a standalone house. And they’re becoming increasingly popular with a demand for 7,200 new retirement living units expected to be delivered across the country with a development pipeline in progress. [6] While land lease communities are another option, where you can buy the home and lease the land.
A Downsizing Checklist
Financial Advice
Before you decide to sell your home, we recommend you get professional advice from a financial adviser to discuss your situation and the impacts this may have on your finances, total superannuation balance and age pension.
Decluttering
Once you’ve made the decision to move, it’s time to declutter. Thinking about what to get rid of when downsizing can be overwhelming. However, we suggest separating your belongings into different categories: rubbish, sell/donate, keep and storage. This will help you declutter faster.
Reviewing Your Life and Home Insurance
Before you downsize, it’s important to consider looking into your Life and Home Insurance policies. Update your policies with any new details and ensure your sum insured is accurately estimated.
Updating Your Address With Services Australia
You will also need to update your address with Services Australia as soon as possible for any payments you receive.
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