The real cost of retirement village fees – are downsizers getting a fair go?

Deferred management fees and capital gains fees have made headlines again, with over-50s downsizers feeling like they’re getting a raw deal from retirement village operators.

A news feature last September shone a spotlight on the issue, featuring interviews with homeowners, their families, and industry experts. The big concern? Complicated contracts, hidden costs, and fees that can eat into the money retirees expect to get back when they sell.

What are Deferred Management Fees (DMFs)?

DMFs are often marketed as an affordable way for older Aussies to downsize, with the idea that the retirement village operator recoups costs when the property is sold. That money supposedly goes towards maintaining and upgrading the facilities.

But critics argue that these fees can be a real sting in the tail. The complex formulas used to calculate them are based on how long someone has lived in the village, and they can be as high as 35 percent of the sale price—meaning a big chunk of money goes straight to the retirement village when a home is sold.

How much can it cost?

Let’s break it down with an example:

• You buy a retirement village unit for $500,000.
• Three years later, you sell it.
• The village operator charges a 35 percent deferred management fee—that’s $175,000 straight off the top.
• That leaves you with $325,000, minus any selling costs.

Now, if the village also charges a capital gains fee, the numbers change again:

• You buy for $500,000 and sell for $550,000 three years later.
• The village operator takes 50 percent of the capital gain—that’s another $25,000 gone.
• The 35 percent deferred management fee is now calculated on $525,000 (the original price plus half the capital gain).
• That means the operator walks away with $183,750, and you get $366,250, minus selling fees.

It’s no wonder people are starting to question whether they’re getting a fair go!

Should DMFs be scrapped?

National Seniors Australia, an advocacy group for older Australians, is pushing for DMFs to be banned for new retirement villages altogether.

Adrian Puljich, CEO of Living Gems says there’s a better way.

“At GemLife, we don’t charge deferred management fees or capital gains fees, and on top of that, our contracts are much simpler,” Adrian explained. “There’s just one contract to buy your home and another for the weekly site rental.”

The simpler setup also makes it easier for retirees to budget, including planning for future healthcare needs. Plus, because homeowners rent the land their house is on, they don’t pay stamp duty. Pensioners and veterans who qualify can also receive rental assistance, helping to lower costs even further.

A better way to downsize?

Living Gems resorts are built for active, independent over 50s who want a modern, low-maintenance home in a lifestyle community with resort-style facilities—think high-end pools, gyms, and clubhouses.

For many downsizers, avoiding hidden fees and complex contracts makes all the difference in having a stress-free retirement.

Want to crunch the numbers yourself? You can check out the Queensland Government’s guide to retirement village fees here.