Selling, renting or keeping the home: what changes for fees and the pension

When a parent moves into an aged care home, the house is often the family's biggest decision. Keep it as it is? Rent it out? Sell it?

There's no single right answer. Each choice changes two things in different ways: the aged care fees and the Age Pension. This guide sets out how each choice is treated, so you can see the trade-offs before you talk them through with family or an adviser.

First, the two tests

• The aged care means assessment sets the fees and contributions your parent pays to the home. Services Australia (or DVA) runs it.
• The Age Pension has its own income and assets tests, with its own rules for the home.

The same house can be treated one way in one test and quite differently in the other. That's why the three choices below can push fees and the pension in opposite directions.

Choice 1: keep the home, and leave it empty

Aged care fees. The home counts as an asset from the day your parent moves in, but only up to a cap of $219,858.40. If it's worth less than that, its actual value counts. It isn't counted at all while a protected person lives there, such as a partner, a dependent child, or certain long-term carers or close relatives.

Age Pension. The house is usually not counted for two years from the day your parent enters care, and they're still treated as a homeowner. After that, if it's still empty, it counts at its full value. See our guide to the two-year pension rule.

Day to day. Rates, insurance, utilities and upkeep still need paying. Many insurers have rules about homes left empty, so it's worth checking the policy. If there's no lump sum, the room is usually paid for with a daily accommodation payment, which isn't refunded.

Choice 2: keep the home, and rent it out

Aged care fees. The house still counts up to the cap. On top of that, the rent, after allowable costs, counts as income in the means assessment for anyone entering care now. More income can mean higher means-tested contributions.

Age Pension. Rent from the house is generally counted as income. The house itself is usually still exempt for the first two years after entering care. After that, it counts as an asset at full value.

Older arrangements. Two older rules can leave the rent out, and both are closed to people entering care now:

• Aged care fees: rent counts for anyone who entered care from 1 January 2016. People who entered before then may have it left out.
• Age Pension: rent can be left out only if your parent entered care before 1 January 2017 and is liable for at least part of a daily accommodation payment. It ends for good if your parent spends more than 28 days out of care, not counting leave.

If your parent has been in care for a long time, ask Services Australia which rules apply.

What rent can do. Rental income can help pay a daily accommodation payment. But it can also lift the aged care contributions and reduce the pension at the same time. The net effect depends on the family's numbers.

Not modelled. Our calculator doesn't yet work out the effect of rent from the former home. If you enter rent, the result will say so. For a rented home, check the figures with Services Australia or a licensed adviser.

Choice 3: sell the home

Aged care fees. Once the house sells, the cap no longer applies. The sale money counts in full as an asset. If it sits in the bank or is invested, income is also deemed on it at set rates, currently 1.75% on the lower band and 3.75% above it. Both can raise the means-tested contributions.

If some of the money pays a refundable accommodation deposit (RAD), that part still counts as an asset for aged care fees. Because a RAD isn't treated as a financial asset, it isn't deemed.

Age Pension. The sale money counts from settlement, as an asset and through deeming. Many people see their pension fall, or stop. Any part paid as a RAD isn't counted in the pension assets test.

Reporting. A sale changes the means assessment, so it needs to be reported to Services Australia within 28 days. The pension also needs to know.

Side by side

	Aged care fees	Age Pension
Keep, empty	Counted up to the cap from entry (not counted if a protected person lives there)	Not counted for two years from entry, then counted in full
Keep, rented	Counted up to the cap, plus rent counted as income	Rent counted as income; home not counted for two years, then counted in full
Sell	Proceeds counted in full; deemed unless used for a RAD	Proceeds counted and deemed; any RAD part not counted

Other things families weigh up

The fee and pension rules are only part of the picture. Families also think about:

• how long care may last, and whether the house might be needed again;
• the property market, and whether selling in a hurry costs more than waiting;
• tax, such as capital gains if the house is kept and later sold, which an accountant can explain;
• the estate and family wishes, including who will look after a rental;
• cash flow, meaning how the monthly fees will be paid while the house is kept.

Where to from here

• Use the Aged Care Costs calculator for an estimate of the fees, with the home counted as it is today. It doesn't yet compare keeping, selling or renting as separate scenarios.
• If renting is on the table, ask Services Australia or a licensed adviser to check the figures, as our calculator doesn't model rent yet.
• Before you decide, consider talking it through with a licensed financial adviser who specialises in aged care. Selling, renting and keeping each interact with tax, the pension and fees in ways that depend on your family's numbers.

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