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Do you really need to sell your home to fund aged care?

The most common aged care myth is that you need to sell your home to pay for aged care. People seem to believe that either the government or the aged care home will force a sale, but it’s simply not true. Whether you choose to sell your home to pay for aged care is up to you. So before you decide to sell your home, there are a few things you should consider first.

1. The aged care means test

Your home receives special treatment in the aged care means test. This test includes your assets such as your investments and personal assets at market value but with the exception of your home. Your home is not included in your aged care assets if a protected person lives there. A protected person includes:

  • your spouse
  • a carer who has been living in the home for at least two years who is eligible for an income support payment, or
  • a close relative who has been living in the home for at least five years who is eligible for an Australian income support payment.

If there is no protected person living in the home, then the value of the home up to the capped amount of $175,239 is included in your aged care assets. If your home is worth less than the cap, the market value is used. If the home is worth more, only the first $175,239 is assessed. In most cases the value of the home is far greater than the cap.

So if you decide to sell the home, you are potentially increasing the amount of assets captured in the aged care means test by hundreds of thousands, in some cases, millions of dollars.

2. Pension asset test exemption

The value of your home receives special treatment in calculating your age pension eligibility. While you or your partner live there, the home is exempt from assessment, and that exemption extends for two years after the last person leaves. Beyond the two years, the home is assessed at the market value but your pension assessment changes from a homeowner to a non-homeowner giving a higher asset test threshold.

While the asset value of the home receives special treatment for both pension and aged care means tests, if you receive income (rent) from the home, it is assessable income for both pension and aged care means testing.

3. Special tax treatment

Your home also receives special tax treatment. As a general rule, you can keep the main residence Capital Gains Tax exemption on your home for six years after moving into aged care. If the property is not rented, then you may be able to keep the exemption beyond this. Be careful and seek specialist advice as the tax implications for both you and those who stand to inherit the home are complex.

Deciding to hold or sell the home

So with all these special concessions why are most people so quick to sell the former home?

Often it is a combination of reasons. They believe the myth that they have to sell especially when a lack of liquid funds and an inability to finance the cost of aged care from their cash flow reinforces the decision. It’s an easy conclusion to jump to.

Let’s say you have a home, not a lot of investments and you are receiving the age pension. If there is no protected person living in the house, then you will need to pay the market price for your accommodation which could easily be $500,000 or more in most capital cities depending on location and the size of the room.

The daily payment equivalent of a $500,000 refundable accommodation deposit (RAD) is $54.93 per day ($20,050 per year) which is on top of the Basic Daily Fee of $53.56 per day ($19,549 per year) and then you will need to pay for any additional services, means tested care fees and your personal expenses on top of that. If your only income is the single age pension ($25,155 per year) and a small amount of interest it can seem like the only option is to sell the home.

But for all of the reasons listed above as well as the potential impact on your estate planning wishes it is vital to crunch the numbers or get a Retirement Living and Aged Care Specialist® to crunch them for you. The treatment of your home is unique from any other asset and once it’s sold, it’s too late.


Rachel Lane is the Principal of Aged Care Gurus where she oversees a national network of adviser dedicated to providing quality advice on retirement living and aged care. She is also the co-author of a number of books with Noel Whittaker including the best-seller 'Aged Care, Who Cares?' and their most recent book 'Downsizing Made Simple'. To find an adviser or buy a book visit


January 05, 2022

You say the house value is capped but then you say it is assessed at full market value after 2 years.
Should the first statement then only be made subject to the two year rule?

Philip- Perth
December 21, 2021

The real question that terrifies the aging is HOW they will pay for aged care if they don't sell their home... If it's worth more than (say) $1.5million and you're less than 75 years, it's possible to get a reverse mortgage but if it's worth far less and you're nudging 80-82 years then the options narrow. Care costs are not that different across the country and yet median home values can be less than 50% in some Capital cities and far less in the regions. Catch 22 situations arise and that scares the bejesus out of many - with good reason. Agreed that aging in home and making modifications ahead of need is sensible for many, but they have to be well, well-prepared and have sufficient assets to do so and many - particularly women whio have not acrued superannuation for decades - have not. How would we advise them to managed their finances?

SMSF Trustee
December 22, 2021

Sorry, but I strongly suspect that this is the question that scares the kids. If the home is the only real asset then it has to be sold to fund the final decade(s) of the parents' lives. If that's how they've saved their money then that's what is there to finance their care when it's required. They'll get a decent life, but the kids miss their inheritance. Boo hoo. It's the parents' asset to be used for them. Not for the kids, who got to enjoy it while growing up, but have left home now. My late father-in-law only had his house. We sold it, invested the funds and used them to give him good quality hostel for a few years, then nursing home. We had a garage sale to sell stuff to supplement the funds, warding off siblings who didn't "get it" that this was about their dad, not them and tried whinging about the sofa being sold. In the end, because I invested the funds well, everyone got a reasonable inheritance - to pay for a new car, or an overseas trip - but the important thing was my wife's dad got looked after properly. Selling the home should not scare anyone. Being neglected by greedy children should.

December 17, 2021

It is quite amazing how many privileges home owners get when there is already the privilege in actually owning a home in Australia when increasing numbers of people approaching retirement have fallen out of the housing market for some reason, or never been able to get in.

It will be interesting to see if clever virtual home products are devised for those people so that they can hide their life savings and maximise their access to welfare, aged care subsidies etc etc. Clearly you don't want partners or carers to be homeless when someone moves into aged care but surely it makes sense to treat all assets equally (super, other assets etc) when assessing for the pension, aged care and other welfare types.

December 21, 2021

Owning a home is not always a privilege; for most of us it is the result of sheer bloody hard work!!

C ( the other one )
December 16, 2021

I am surprised more people don’t choose to age in place at home. Certainly, if you have sufficient funds, you can afford the extra assistance you will need. Sadly, many people seem to lose decision-making capacity ( or live in denial ) and don’t plan or won’t spend the money to make their home suitable for them. People won’t pay to get bathrooms modified or ramps or handrails installed or for gardeners, cleaners and home handypersons. Then, if they have too many unplanned hospital admissions, they might be told that their home is no longer suitable for them to live in. I think it is possible there will be a change with the baby boomers being very comfortable buying services and looking to technology to make their lives easier.

SMSF Trustee
December 16, 2021

C, how do you know that "more people" don't want to age (and die) at home? I have relatives working in aged care reporting a boom in demand fir just that.

December 19, 2021

"surprised more people don’t choose to age in place at home":

They have aged in place at home until they leave home because they don't have the energy for upkeep. Laundry, groceries, meals, cleaning, gardening become enervating.

From then decline is rapid.

'Most residents (91 per cent) will die there, 40 per cent of them within the first nine months, but the average length of stay is 2.1 years for males and 3.2 years for females.'

Tony Folland
December 16, 2021

Hi Rachel

Thanks very much for raising this important issue it is not canvassed enough throughout the aged care community
I have been thinking in the same way as I am 81 years old and am very negative in moving into a Retirement Village with all the cost imposts that are placed on the resident. It appears to me that we have two phases of aged care working against each other. Retirement villages want to charge Deferred Management fees amounting to 30% of ones capital over the first six years of occupancy. After ones capital has been eroded the High Care segment then want to charge as you say a minimum of $500,000 per bed to provided an increased level of care. In Sydney one is faced with an ingoing cost of $800k plus to get into a village This amount is eroded to $540kper over 6 years so how is the average couple able to fund High care. Your proposal of not selling your home is spot on particularly as the extended family will at some stage benefit from the increased value of the property. A question I have is what are the implications tax wise if the family home is rented during the time that the residents are in care The income from the home could be used to supplement the costs of care for which there is always the complaint that it is insufficient to meet the needs of the recipient.

David Ireland
January 05, 2022

There is a number of different ownership models in retirement villages. Many of the more modern ones have no deferred management fees, no refurbishment requirements and no exit fees with the whole of the capital gains, (minus sales commission), going to home owners when they sell. For those with adequate means, there are great retirement village options without potential capital erosion. Of course, Initial purchase prices and ongoing fees might pressure some towards the "capital loss" models but even in the new over fifties resorts, rent assistance can apply depending upon means testing so the higher weekly fees can be partly assisted.

December 16, 2021

Great advice thanks.


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