Retirement village brochures lead with a price. A two bedroom unit, $520,000, in a well kept village with a community centre, a bowling green and someone else mowing the lawns. For a couple in their late seventies leaving a four bedroom house on a large block, it can look like a straightforward swap.
It is not a swap. In most cases you are not buying the unit at all. You are paying for the right to live in it, and a substantial portion of what you pay will not come back to you or to your estate. The mechanism that takes it is the deferred management fee, and it is entirely legal, disclosed in the contract, and very widely misunderstood.
Separately, the size of what you pay to move in determines how Centrelink treats you, and it can change your Age Pension and your eligibility for Rent Assistance in ways that surprise people.
None of this makes retirement villages a bad choice. A great many residents are genuinely happier and safer than they were in the family home, and that has real value that no spreadsheet captures. The point is that the financial side should be understood before signing, not discovered by an executor afterwards.
This guide explains what you are actually buying, how deferred management fees work, what the other exit costs are, how Centrelink assesses your entry payment, and what changed in South Australia in February 2026.
What you are actually buying
Retirement village units are held under several different arrangements, and the difference matters enormously.
| Tenure | What you get | Common? |
|---|---|---|
| Loan and licence | You lend the operator money and receive a licence to occupy. You are not on the title. | Very common |
| Leasehold | A long term lease, sometimes registered on the title. | Common |
| Strata or community title | You actually own the unit, but the contract still governs exit fees. | Less common |
| Company share or unit trust | You own an interest in an entity that owns the village. | Uncommon |
| Rental | Periodic rent, no entry contribution. | Uncommon |
Under the most common arrangements you are not purchasing real estate. South Australian law now requires the contract to state clearly at the front whether the right of occupation is a lease, a licence or share ownership, and to say plainly that the resident is not purchasing the residence. That requirement exists because so many people believed they were buying.
The deferred management fee
The deferred management fee, also called an exit fee or departure fee, is the operator’s main source of income from your occupancy. Instead of charging you a large amount up front, they charge you when you leave, by deducting it from what they repay you.
Most contracts accrue it at somewhere between 3 and 5 per cent for each year of occupancy, up to a cap reached after six to ten years. A common structure is 4 per cent per year capped at 30 per cent. Once you hit the cap, staying longer does not increase the fee, which is why very long stays are financially better than medium ones.
The base is more important than the rate
Here is the detail people miss. The percentage is applied to a base, and contracts differ on what that base is. It can be:
- your original ingoing contribution, or
- the price the unit resells for when you leave, or
- the current market value at the date you vacate.
In a rising market, the difference is significant. A 30 per cent fee on a $520,000 ingoing contribution is $156,000. The same 30 per cent on a $650,000 resale price is $195,000. Same headline rate, $39,000 apart.
When comparing two villages, comparing the percentages alone is close to meaningless. You have to compare the percentage, the base, the accrual period and the cap together.
The other exit costs
The deferred management fee is rarely the only deduction. Depending on the contract, you may also face:
- Capital gain sharing. Many contracts split any increase in value between you and the operator, commonly 50/50. Some contracts also share capital losses, some leave the loss entirely with you.
- Reinstatement and refurbishment. Restoring the unit to a saleable condition. Contracts vary widely in whether this means repairing your damage or funding a full renovation.
- Marketing and selling costs. Often charged as a percentage of the resale price.
- Capital fund contributions. Amounts deducted towards the village’s capital replacement obligations.
- Ongoing charges after you leave. Recurrent charges can continue to accrue after you have vacated, since the unit still exists and still costs money to hold. This is one of the most complained about features of the sector and one that recent state reforms have targeted.
What you actually get back
Take a resident who paid an ingoing contribution of $520,000 and stayed eight years. The contract has a 4 per cent per year deferred management fee capped at 30 per cent, applied to the resale price, with 50/50 capital gain sharing. The unit resells for $650,000.
| Amount | |
|---|---|
| Ingoing contribution returned | $520,000 |
| Plus 50% share of the $130,000 capital gain | $65,000 |
| Less deferred management fee (30% of $650,000) | ($195,000) |
| Less refurbishment | ($12,000) |
| Less marketing and selling costs | ($16,000) |
| Exit entitlement | $362,000 |
They paid $520,000 and received $362,000, having also paid recurrent charges every fortnight for eight years. The unit appreciated by 25 per cent over that period and they still ended up $158,000 behind on the capital.
Had the deferred management fee been calculated on the ingoing contribution rather than the resale price, the entitlement would have been closer to $401,000. One clause, $39,000.
Figures are illustrative. The purpose is not to argue that this is a bad outcome, because for some households the years of security and community were worth exactly that. The purpose is to make sure the number is known in advance, particularly by adult children who may be assuming the unit is an asset that will come back to the estate. Our guide on what the executor role involves is worth reading alongside this.
How Centrelink treats your entry payment
This is where the searches usually start, and the rule is more mechanical than most people expect.
Centrelink compares your entry contribution against a threshold called the extra allowable amount, which is the difference between the homeowner and non-homeowner assets test limits. From 1 July 2026 that figure is $267,000. Ongoing fees and charges are not counted in the comparison, only the entry contribution itself.
| If your entry contribution is | Centrelink treats you as | Consequences |
|---|---|---|
| More than $267,000 | A homeowner | The entry contribution is not counted in the assets test. You are assessed under the lower homeowner assets test limits. You are not eligible for Rent Assistance. |
| $267,000 or less | A non-homeowner | The entry contribution counts as an asset. You are assessed under the higher non-homeowner limits, and your recurrent charges may qualify you for Rent Assistance. |
The consequence is genuinely counterintuitive. Two people can move into the same village on the same day, one into a more expensive unit and one into a cheaper one, and be assessed in completely different ways. The person in the cheaper unit has an assessable asset but a higher threshold and potential access to Rent Assistance. The person in the dearer unit has an exempt asset but a lower threshold and no Rent Assistance.
Which is better depends entirely on the rest of your position, particularly how much you hold in super and financial investments. It is a genuine planning point, not a technicality, and it is worth modelling before choosing a unit rather than after. Our guide on how the Age Pension income and assets test works sets out the underlying thresholds.
Your former home
If you move into a village before your existing home sells, the former home is generally exempt from the assets test for a period while you are making arrangements. Once that period ends, it becomes assessable. Sale proceeds sitting in the bank are assessable financial investments and subject to deeming, which is a common reason for a pension to drop unexpectedly during a move.
If you are considering a downsizer contribution to super with the proceeds, note that super counts in the assets test once you are of Age Pension age. Our guides on downsizer super contributions and when downsizing makes financial sense deal with that decision.
What changed in South Australia on 2 February 2026
South Australia amended the Retirement Villages Act 2016, with significant changes taking effect on 2 February 2026. If you are a current resident, or looking at a village here, these matter.
- Faster repayment of exit entitlements. The statutory repayment period was reduced from 18 months to 12 months, plus an additional 30 business day period, running from when the resident delivers vacant possession. The entitlement can become payable earlier if the contract conditions are met or the operator agrees.
- A cap on capital fund contributions. For contracts entered into after commencement, a capital fund contribution deducted from an exit entitlement cannot exceed 1 per cent of the current market value of the residence for each year or part year of occupation, to a maximum of 12.5 per cent. Note carefully that this caps capital fund contributions, not the deferred management fee itself, which remains a matter of contract.
- Recurrent charge increases capped. Increases in recurrent charges within the operator’s control are capped at CPI where the contract does not already address it.
- Charges after you leave. The operator takes responsibility for recurrent charges and outgoings such as council rates, water rates and the emergency services levy once you cease to reside there, but can recover them from the exit entitlement for a period of six months, subject to the entitlement being large enough and to any earlier resale or shorter contractual period.
- A right to an independent valuation. Where a resident disagrees with the operator’s determination of market value for the purposes of the exit entitlement, they can require an independent valuation, with the operator able to recover half the cost.
- Clearer contracts. Expanded disclosure requirements, including the statement at the front of the contract that the resident is not purchasing the residence, and clearer specification of exit fees and reinstatement responsibilities.
Retirement village law is state based, so these provisions apply in South Australia and not elsewhere. If you are looking at a village interstate, or you hold a contract entered into before the changes, the position will differ. This is an area where a solicitor should review the actual contract, and a short review before signing is inexpensive relative to what is at stake.
The aged care timing problem
This is the issue that causes the most distress in practice, and it is rarely raised at the point of sale.
Many people move from a retirement village into residential aged care. Residential care requires either a refundable accommodation deposit, a daily payment, or a combination. The refundable deposit is a large lump sum, and for many families the intended source of that lump sum is the retirement village exit entitlement.
But the exit entitlement may not be paid until the unit is resold, or until the statutory period expires. Even under South Australia’s improved timeframe, that can be a year or more after moving out. In the meantime the family is paying a daily accommodation payment, which is not refundable, on money they are waiting to receive.
It is a solvable problem if it is anticipated. It is a very expensive one if it is not. Our guides on RAD versus DAP, what aged care really costs and means tested care fees cover the choices involved. For households looking to remain at home longer instead, aged care at home sets out the alternative.
Questions to ask before you sign
- What is my tenure, and am I purchasing anything?
- What is the deferred management fee percentage, over what period, capped at what, and applied to which base?
- Do we share capital gains? Do we share capital losses?
- What exactly am I responsible for on reinstatement, and who decides?
- What recurrent charges continue after I vacate, and for how long?
- When must the exit entitlement be paid to me, in the contract as well as under the Act?
- Is my entry contribution above or below the extra allowable amount, and what does that do to my pension?
- If I need residential aged care, where will the accommodation deposit come from and when?
- What happens if only one of us moves into care?
Take the contract and the disclosure statement to a solicitor and to your adviser before signing, and take them during the cooling off or settling in period if you have already signed. The cost of that review is trivial against a six figure exit fee.
Where Professional Advice Adds Value
A retirement village decision is usually made at a difficult moment, often after a health event, sometimes under pressure from a sales process that moves faster than the family does. The contract is long, the terminology is unfamiliar, and the parts that matter most are the ones that will not take effect for years.
At Money Path the work generally covers four things. Modelling the actual cost of the arrangement over a realistic period, including the exit position, so the decision is made on a net number rather than a brochure price. Checking how the entry contribution interacts with your pension and whether a different unit or a different structure produces a materially better outcome. Planning for the aged care transition in advance, particularly the timing gap between leaving the village and being paid. And making sure the family understands what will and will not come back to the estate, which prevents a great deal of later conflict.
We are not contract lawyers and do not review the legal terms, which is a solicitor’s job. What we can do is tell you what the financial consequences of those terms will be for your household, which is usually the question people actually have. Our guide on powers of attorney and advance care directives in South Australia covers the other documents that should be in place before a move like this.
Frequently asked questions
What is a deferred management fee and how much is it?
It is the operator’s fee for your occupancy, deducted when you leave rather than charged up front. Most contracts accrue it at around 3 to 5 per cent for each year of occupancy, capped at somewhere between 20 and 35 per cent after six to ten years. The percentage matters less than the base it is applied to, which may be your original contribution or the resale price.
How does Centrelink treat my retirement village entry contribution?
It compares your entry contribution to the extra allowable amount, which is $267,000 from 1 July 2026. If your contribution is more than that, you are treated as a homeowner and the contribution is not counted in the assets test, but you cannot receive Rent Assistance. If it is equal to or less than that, you are treated as a non-homeowner, the contribution counts as an asset, and your recurrent charges may qualify you for Rent Assistance.
Can a cheaper unit leave me better off with Centrelink?
Sometimes. A contribution at or below the extra allowable amount makes you a non-homeowner, which brings a higher assets test limit and possible Rent Assistance, at the cost of having the contribution counted as an asset. Whether that helps depends on your other assets, so it is worth modelling before choosing a unit.
How long does it take to get my exit entitlement back in South Australia?
Following the changes that took effect on 2 February 2026, the statutory repayment period is 12 months plus an additional 30 business day period from when vacant possession is delivered. It can be paid earlier where the contract conditions are met, typically on resale, or where the operator agrees. Contracts entered into before the changes and villages in other states may differ.
Do I keep paying fees after I move out?
Under the current South Australian provisions, the operator takes responsibility for recurrent charges and outgoings once you cease to reside there, but can recover them from your exit entitlement for a period of six months, subject to limits and to any earlier resale. Older contracts and other states operate differently, so check the contract.
Will my family inherit the unit?
Under the most common arrangements you do not own the unit, so there is nothing to inherit. Your estate receives the exit entitlement, which is what remains after the deferred management fee and other deductions, and it may not be paid for many months. Strata titled village units are different, but the contract can still impose exit fees.
How do I fund aged care if my money is tied up in the village?
This needs planning before it happens. The exit entitlement may not arrive for a year or more, while residential care requires either a refundable deposit or a non-refundable daily payment from the outset. Options include paying by daily payment initially, using other assets, or negotiating an earlier repayment, and the right answer depends on your circumstances.
Taking the next step
If you are considering a retirement village, the single most useful thing you can do is work out, in advance, what you would get back if you left after five years, after ten, and if you moved into residential care. Those three numbers change how the decision feels. They are in the contract, and they can be calculated before you sign.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not legal advice. Retirement village law is state based and this article describes South Australian provisions as at the changes commencing 2 February 2026. Centrelink thresholds are indexed and were current at the time of writing. Contract terms vary substantially between villages and between contracts within the same village. You should have your contract and disclosure statement reviewed by a solicitor, seek personal advice from a licensed financial adviser, and consider speaking with a Services Australia Financial Information Service officer before signing.
