This guide outlines how to downsize more easily, with a check that will ensure everything is covered.
Checklist: downsize steps
Downsizing can be a great way to reduce your living costs, free up time and energy, and simplify your life. But it’s important to plan carefully before you make the move. Here’s a checklist of what you’ll need to get in order:
Consider your needs and wants
What are your reasons for downsizing? Are you looking to reduce your living costs, move to a more convenient location, or simply live in a smaller space? Once you know why you’re downsizing, you can start to think about what you need and want in a new home.
How many bedrooms and bathrooms do you need? Do you need a home office or a dedicated space for hobbies? What kind of amenities are important to you? Do you want to live in a community with other retirees?
Before you shortlist properties, think about:
- Title type – Will the new property be Torrens title, strata title, community title, or leasehold? Each comes with different rights and obligations under NSW law.
- Planning restrictions – Check with the local council for zoning rules, development controls, and whether there are easements or covenants affecting the property.
Research your options
There are many different types of downsizing options available, from apartments and townhouses to granny flats and retirement villages. It’s important to research your options carefully to find the best fit for your needs and budget.
Visit different types of properties and talk to the residents. Get a feel for the community and the lifestyle that’s offered.
When comparing downsizing choices in NSW consider the following:
- Retirement villages – Governed by the Retirement Villages Act 1999 (NSW) and Retirement Villages Regulation 2017 (NSW). You have rights to disclosure documents, a cooling-off period (7 business days), and a settling-in period (90 days).
- Strata properties – Covered by the Strata Schemes Management Act 2015 (NSW). Review the strata report for levies, special levies, upcoming repairs, and any by-laws that could affect your lifestyle (e.g. pets, renovations).
- Over-55s housing – Regulated by the State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 (NSW). Check eligibility criteria and planning requirements.
- Granny flats – Building or converting for a granny flat must comply with the Environmental Planning and Assessment Act 1979 (NSW) and relevant SEPPs.
Declutter and sell unwanted items
One of the biggest challenges of downsizing is decluttering your home. It can be difficult to get rid of sentimental items, but it’s important to be ruthless. Only keep the things that you love and use on a regular basis.
There are a number of ways to declutter. You can hold a garage sale, sell items online, or donate them to charity. When selling household items online or via garage sales, consumer law generally doesn’t apply to one-off private sales, but avoid misrepresentation.
Please note while you may have the best of intentions in leaving items such as spare bricks, tiles and paint for the person buying your property, they may not appreciate your gesture. If leaving items in the property after sale, confirm in writing with the purchaser or via the contract of sale to avoid disputes.
Estimate your costs
Downsizing can involve a number of costs, such as real estate agent fees, stamp duty, and moving costs. It’s important to estimate your costs carefully so that you can budget accordingly.
You should also consider the ongoing costs of living in your new home. For example, if you’re moving to an apartment, you may need to pay strata fees.
Here’s what to consider:
- Stamp duty (Transfer Duty) – Payable under the Duties Act 1997 (NSW). There is a stamp duty concession for eligible seniors downsizing (Revenue NSW – Over 55s Scheme) if buying a new home after selling your principal place of residence.
- Real estate agent fees – No fixed rate in NSW; negotiate and ensure you understand the terms of the agency agreement under the Property and Stock Agents Act 2002 (NSW).
- Moving costs – If engaging removalists, contracts are subject to the Australian Consumer Law for services.
Get financial advice
If you’re downsizing in retirement, it’s important to get financial advice. A financial advisor can help you to make the most of your money and ensure that you have enough to live comfortably in your retirement years.
They can also help you to understand the impact of downsizing on your government benefits.
If selling your principal place of residence, capital gains tax may be exempt under the Income Tax Assessment Act 1997 (Cth), but seek tax advice. Downsizing contributions to superannuation may be possible under federal rules (Superannuation (Consequential Amendments) Act 2017 (Cth)), but ensure you meet eligibility.
Update your Will
Any major change to your circumstances or assets should be reflected in your Will. Downsizing is a good opportunity to review your Will and make sure that it’s up to date.
You should also look at creating a granny flat agreement if you’re downsizing to a property with a granny flat. This is a legal agreement that sets out the rights and responsibilities of both parties.
Here’s what you should consider:
- Will – Update your Will to reflect your new assets. In NSW, Wills are governed by the Succession Act 2006 (NSW).
- Powers of Attorney and Enduring Guardianship – Review these under the Powers of Attorney Act 2003 (NSW) and Guardianship Act 1987 (NSW) to ensure the appointed people are still appropriate.
- Granny flat arrangements – If moving into a family member’s property, consider a formal “granny flat interest” recognised by Centrelink. Document arrangements in a legally binding agreement to protect your rights and avoid disputes.
Additional considerations for Australian seniors
- Government benefits: Downsizing may affect your government benefits. The proceeds from sale may count towards the assets test under the Social Security Act 1991 (Cth). If you downsize and your assets go below a certain amount, you may be eligible for a higher pension payment.
- Retirement villages: Retirement villages are a popular downsizing option for Australian seniors. They offer a variety of amenities and services, such as on-site care, transport, and social activities. However, it’s important to choose a retirement village carefully and read the contract carefully before you sign. Retirement village exit fees can be significant and are regulated under NSW law. Always obtain independent legal advice before signing.
- Granny flats: Granny flats are another popular downsizing option for Australian seniors. They allow you to live close to your family and friends while still having your own independence. If you’re considering downsizing to a granny flat, it’s important to get legal advice to ensure that your rights are protected.
- Cooling-off rights: In NSW, residential property purchases generally have a 5 business day cooling-off period under the Conveyancing Act 1919 (NSW) unless waived by a Section 66W certificate.
Downsizing can be a great way to improve your quality of life in retirement. But it’s important to plan carefully and get all of your ducks in a row before you make the move. By following these steps, you can ensure that your downsizing experience is as smooth and stress-free as possible.
Tracey Dwyer is a dedicated Wills & Estates Solicitor with over 20 years of experience in the legal industry. Tracey specialises in a wide range of estate planning matters and is passionate about educating her clients on the importance of comprehensive estate planning. Her expertise includes drafting complex wills with testamentary and special disability trusts, advising on aged care and retirement village agreements, and handling deceased estate administration. She also has experience in family provision claims and property law. Tracey holds a Master of Laws from the University of New England. www.owenhodge.com.au
