Why you should consider downsizing
Do you fancy a change in lifestyle and moving to another location? Or simply had enough of managing a big garden every weekend?
How nice would it be to reduce, or even pay off your mortgage, and pay for a smaller house, potentially in cash, and have a bit extra left over, either for investment purposes or to enhance your lifestyle?
Downsizing isn’t just a strategy for older people – there are lots of reasons people downsize to smaller properties.
For those who are retiring, a smaller property is easier to grow old in, and you may look to the benefits retirement living communities offer. Indeed, according to The Retirement Living Council (RLC), the Australian Government should include retirement communities as a key delivery component of achieving the Housing Australia Future Fund (HAFF) target to build 1.2 million new homes by 2029.
As well as lifestyle and maintenance issues, here are some more benefits to downsizing:
Less expensive to run
With cost of living continuing to rise, a smaller house is generally less expensive to maintain, and run than a bigger house. Moving to a smaller home can significantly reduce your electricity bills, water bills, council rates, and time and money spent on maintenance.
The downsizer contribution scheme
You can contribute money from the sale of your home into your super fund via a downsizing contribution. If you are 55 or older, you may be able to contribute up to $300,000 from the proceeds of the sale (or part sale) of your home into your superannuation fund.
A downsizer contribution is a non-concessional contribution, but it doesn’t count towards the contribution cap. It will not affect your total superannuation balance until it is re-calculated at the end of the financial year.
Find out more about the scheme here.
A chance to finally declutter
We’re all guilty of thinking about sorting and decluttering, and moving into a smaller home will make you do it!
But how do you decide what you part with?
Aside from the sentimental value, one suggestion is, if you haven’t used the item in the last five years or the item isn’t essential in your daily living, then get rid of it; if the item is in reasonable condition, you can either sell it or there are plenty of charity shops that would welcome a donation.
What else should I think about when downsizing?
Real estate assets
Changes to your principal home can affect your payments.
- If you sell your principal home
If you sell your principal home, sale proceeds may be exempt from the assets test. This applies to the portion of the sale proceeds you plan to use to buy, build, rebuild, repair or renovate a new principal home.
- Principal home sold from 1 January 2023
For home sales from 1 January 2023, the asset exemption period is up to 24 months. Depending on your circumstances, you could get a further exemption of up to 12 months. The maximum assets test exemption period is 36 months.
Sale proceeds to be used to secure a new principal home will be deemed at the lower rate only. Any extra sale proceeds held in a financial asset will be subject to the regular deeming rates.
More details about real estate assets can be found on the Australian Government Services website here.
Moving costs
There are always moving costs to factor into the budget when moving. These include:
- buying and selling in the same market
- real estate agent fees
- stamp duty
- legal fees
- furniture removal
Whatever the reason for moving, if you are thinking selling your property, get in touch with us and we’ll come round and give you a free, independent and non-obligatory quote. We’ll also suggest ways in which you can add value.
Call in and see us in the Cardiff office or give us a call on 02 4954 8833. Or send us an email to: mail@apnewcastle.com.au.
We regularly update our Facebook page with handy tips on selling your property and what to look for when buying a property.