Welcome to Ask Property, our weekly column where we answer your real estate dilemmas. Our Ask Property columnist Nina Hendy is here to hunt down the answers from leading experts on your property finance questions. To ask your question send an email to media@ninahendy.com.au.
Question: My wife and I are retired and looking at our next move. Our kids have all grown up and left home. My wife would like to stay in the family home in case our kids or grandchildren want to come and stay, but I don't see it happening as two of our three kids live interstate. I'm also tired of mowing lawns and dealing with maintenance on a house that's far too big for us. I have seen a few nice new apartment developments advertised for sale nearby which would suit us. However we are concerned about the tax implications. What do we need to keep in mind?
Answer: Downsizing is a popular option for many retirees, particularly when maintaining a large family home no longer aligns with your lifestyle.
And while I understand that downsizing can be an emotional rollercoaster, it could be free up your time to enjoy your retirement doing things more things that you love.
Buyers' agent and property investor Lloyd Edge has weighed in to your situation and also suggests that downsizing could be a sensible option for you both. However, he wouldn't automatically assume that an apartment is the right fit for you.
"A townhouse or villa could provide the best of both worlds: less maintenance, while still offering a spare bedroom and some outdoor space for visiting children or grandchildren," Edge says.
The good news is that if the family home has been your main residence, the sale will usually be exempt from capital gains tax, he explains.
"But bear in mind that the leftover proceeds from buying a cheaper property may affect any Age Pension entitlements because cash and investments are assessed differently from the family home," Edge says.
And if you do opt for an apartment, make sure you investigate more than just the developer and the individual property, he says.
"Obtain an independent strata report and carefully review the ongoing levies, any planned special levies, the building's maintenance history and how well-funded its capital works fund is," Edge adds.
Dan Cooper, sales agent and auctioneer at Ray White Canberra notes that many downsizers are taking advantage of new legislation removing stamp duty obligations on the purchase of newly built properties such as off plan purchases of apartments, townhouses and free-standing homes.
"As for what you purchase next, that really depends on your financial situation. For example, pensions are exempt from stamp duty on the purchase of the new home provided they buy the new home and sell the old home within a 12-month period," Cooper says.
However, Peter Maloney, CEO of Herron Todd White adds that buyers need to factor in transaction costs, including stamp duty costs where applicable.
This is calculated on a progressive sliding scale based on the property's market value or purchase price.
Of course, downsizing may have broader financial and taxation implications depending on individual circumstances, Maloney adds.
"Downsizing may also open up superannuation opportunities, with eligible individuals aged 55 and over able to contribute up to $300,000 each (or $600,000 combined for a couple) from the sale proceeds into super subject to conditions," he says.
"Eligible pensions purchasing may also benefit from the Pensioner Duty Concession Scheme, which as of 1 July 2026 no longer applies a property value cap, subject to meeting the scheme's residency and eligibility requirements," he says.
If you're unsure, don't make a move just yet. Firstly, get some expert advice from a financial planner or accountant to understand clearly what you qualify for and also how it may impact your pension or super fund.
Then you will know where you stand financially and you can make a decision with all the facts in front of you.
