What happens to the family home when a parent moves into aged care

For many families, the home is the biggest question when a parent moves into care. Should it be sold, rented or kept? The answer affects two separate tests that are easy to confuse:

1. the aged care means assessment, which sets aged care fees and contributions; and
2. the Age Pension income and assets tests, which set the pension.

The rules for the home are different in each. This guide is a short overview. Our other guides on the family home go into more detail.

In the aged care means assessment

When the home isn't counted at all

The home isn't counted if one of these people is living there when your parent moves into care:

• your parent's partner;
• a dependent child;
• a carer who has been caring for your parent, has lived with them for the past 2 years, and is eligible for an income support payment (they don't have to be receiving it);
• a close relative (a parent, sister, brother, child or grandchild of your parent) who has shared the home for the past 5 years and is eligible for an income support payment (again, they don't have to be receiving it).

If that person later moves out, the home may start to count, so the change needs reporting. A carer or close relative may need to complete their own assessment with Services Australia.

When the home is counted

Otherwise, the home counts from the day your parent moves in, but only up to a cap of $219,858.40 for each person. If the home is worth less, its actual value counts.

There's no two-year rule in the aged care means assessment. That rule belongs only to the Age Pension.

If the home is sold or rented

• Sold: the cap no longer applies and the sale money counts in full. Money in the bank is also deemed to earn income. Any part paid as a refundable accommodation deposit (RAD) still counts as an asset, but no income is deemed on it.
• Rented: the rent counts as income for anyone who entered care from 1 January 2016. The home still counts up to the cap.

Our guide to selling, renting or keeping the home compares the three choices side by side.

For the Age Pension

The two-year exemption

If the home is left empty, the pension can ignore it for two years from the day your parent enters care. During that time they're still treated as a homeowner.

• If your parent left home earlier, for example after a fall, the time before entry is usually covered by a separate rule for temporary absences of up to 12 months. The two years still run from the entry date.
• A hospital stay of more than 35 days that's mainly for nursing care, rather than treatment, can count as a care situation. That may start the two years earlier.
• Respite in an aged care home before moving in may also start it. This isn't settled, so check with Services Australia.
• Moving to another aged care home doesn't restart the two years.

Our guide to the two-year pension rule explains the start and end dates in more detail.

After two years, or if things change

• After two years, the home counts as an asset at its full value, and your parent is assessed as a non-homeowner. That comes with a higher asset limit, but the whole home now counts.
• Partner still living there: the home isn't counted while the partner lives in it.
• Rent from the home counts as income. An older rule can leave the rent out, and keep the home exempt, but only for people who entered care before 1 January 2017 and are liable for at least part of a daily accommodation payment or contribution. It ends if they spend more than 28 days out of care, not counting leave.
• Sale money counts as an asset and is deemed. Any part paid as a RAD isn't counted in the pension assets test.

So a single decision, such as selling to pay a RAD, can move aged care fees and the pension in different directions at once.

Common situations

A partner stays at home. The home isn't counted in either test while the partner lives there. If the partner later moves out or into care, the position changes.

An adult child has been the carer. If they've lived with your parent for 2 years, given daily care and are eligible for an income support payment, the home may not be counted for aged care fees. They need to give Services Australia their details.

The home is kept empty. It counts up to the cap for aged care fees from day one. For the pension, it's usually exempt for the first two years.

Your parent moves in before the home sells. That's allowed, and daily payments cover the room until a lump sum is paid. See our guide to moving in now and selling later.

Getting the order right

The assessment uses the facts at the time, so timing matters. Families often look at the options before signing an accommodation agreement. The Aged Care Costs calculator estimates the fees with the home counted as it is today, and shows how the home is treated in both tests. It doesn't yet compare keeping, selling or renting the home as separate scenarios.

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