Aged Care for Couples: How the Fees and Pension Work When One Partner Moves Into Care

Aged care fees are means tested, and that test looks at your combined finances.

When Services Australia works out the income and assets of the person entering care, it generally attributes half of your combined assets and half of the combined income to that person, regardless of whose name an asset is held in or who earns the income.

This catches many couples by surprise. People often assume the partner moving into care is assessed only on what they personally own.

In practice, the bank accounts and term deposits, a share portfolio and the financial investments of the spouse who remains at home will all form part of the combined pool that is divided for assessment purposes. The only exception is for superannuation in accumulation phase for a person while they are below Age Pension age.

The means assessment results in a fee letter from Services Australia. That letter sets out what the person in care will be asked to contribute, including whether they must pay means-tested fees on top of the basic daily fee and whether they’ll receive government support to pay their accommodation costs.

Because the calculation is based on half of the couple’s combined financial position, the outcome can be sensitive to how assets are structured before the assessment is completed. This is one of the main reasons couples benefit from specialist advice early, rather than after the fee advice letter arrives.

A quick scenario

Consider Margaret and John. John has advanced dementia and is moving into residential aged care. Margaret, who is 74, will continue living in the family home they own together.

Between them, they own the home, have around $180,000 in savings and shares, and hold modest superannuation balances. When Services Australia assesses John, it does not look only at the small super account in his name. It counts half of the savings, half of the shares and half of the relevant assessable assets held by the couple.

Margaret’s own savings are included in that combined figure, even though she will continue to rely on them to support herself.

What happens to the family home

The family home is usually the largest asset a couple owns, so its treatment matters enormously.

The good news for couples is that, while the partner who remains at home continues to live there, the home is exempt.

A spouse living in the home is what the rules call a “protected person”, and the home is excluded from the aged care cost assessment for as long as that spouse remains there.

This makes a significant difference for couples. Looking at our earlier example, it means Margaret can stay in her home without its value being included in John’s fee calculation. The exemption is open-ended while she lives there, so there is no looming deadline forcing a sale.

Contrast this with what happens if Margaret is no longer in the property and no protected person lives in the home. In that situation, a capped value of the home is counted, set at $214,884 as at 20 March 2026, or the net market value of the home if that is lower than the capped amount. This change will result in an increase in the assessed fees and this can be substantial, particularly if the person in care previously had their accommodation fully supported by the government.

A spouse who remains in the home keeps it out of the assessment entirely, whereas an empty home brings the capped value into play. The financial picture can also change later if the at-home partner moves out, passes away or enters care themselves, so it is worth planning for that possibility rather than being surprised by it.

Why the Age Pension can change, sometimes upward

Many people are surprised that the Age Pension increases for couples when aged care fees start.

When you and your partner live apart permanently because of illness or care needs, Services Australia can treat you as an illness-separated couple.

You are still assessed on your combined assets and income, but you become entitled to the higher single rate of pension rather than the lower partnered rate.

The reasoning is practical. Two separate households cost more to run than one, so the rules lift the rate to reflect that.

As at the 20 March 2026 to 19 September 2026 period, the single maximum base rate is $1,200.90 per fortnight, and an illness separated couple can each be paid at that single level rather than the partnered rate of $905.20 per fortnight.

In dollar terms, the combined pension can increase compared with what the couple received while living together, which can help fund both aged care fees and the living costs of the partner who remains at home.

This does not happen automatically. You need to let Services Australia know that you are living apart for health reasons so your entitlement can be reassessed.

Some couples miss this for months and lose income they were entitled to receive. It is one of the simplest opportunities available and one of the first things we check.

A second point to watch is the pension means tests. Self-funded retirees are often surprised to discover an entitlement to Age Pension due to the higher cutoff thresholds for illness separated couples. In our previous worked example, the home remains exempt while Margaret lives there, but any money freed up from selling can be counted under the assets and income tests and may reduce the pension. The accommodation decision discussed below feeds directly into this.

The accommodation payment decision: RAD or DAP

The home John enters will quote an accommodation price.

He can pay it as a refundable accommodation deposit (RAD), a lump sum that is refunded to him or his estate less retention when he leaves care.

He can pay it as a daily accommodation payment (DAP), an ongoing daily charge calculated by applying a government-set interest rate to the unpaid lump sum.

He can also choose a combination of the two, paying part as a lump sum and the remainder as a daily payment.

The interest rate used to convert a RAD into a DAP, the maximum permissible interest rate, is 8.43% for residents entering care between 1 July 2026 and 30 September 2026.

For a couple, this choice is often more difficult than it is for a single person because the money used to pay a large RAD is money Margaret cannot access to support herself at home. Given that RADs paid to an estate go via John’s Will, this also needs to be considered.

Paying a large lump sum reduces DAP and can improve pension outcomes because the RAD paid is treated as an exempt asset for Age Pension purposes.

But using most of the couple’s savings to do so can leave the at-home partner short of accessible cash. Paying a DAP instead preserves liquidity for Margaret, but it creates an ongoing expense. Paying a DAP means higher monthly bills but keeps money available for Margaret’s needs.

There is rarely a single right answer. The sensible approach is to model each option using your actual numbers: the size of the RAD, how much cash Margaret needs, and the pension impact of each approach.

Because the RAD is refundable, the lump sum is not lost. However, the trade-off between locking money away and keeping it available is exactly the sort of decision that benefits from careful consideration.

Keeping cash flowing for the partner who stays

The risk that tends to be overlooked is the cash position of the partner who remains in the community. Margaret still has rates, insurance, utilities, groceries, car expenses and her own healthcare costs.

If a large portion of the couple’s savings has gone into a RAD, and the remaining funds are being drawn down to cover John’s daily fees, her week-to-week budget can tighten quickly.

A workable plan usually considers several moving parts together. The higher illness-separated Age Pension rate may provide the main source of income and is supplemented with investment income. The care fees John pays are one fixed expense, while Margaret’s household running costs are another.

Mapping these side by side shows whether the household is sustainable under its current arrangements or whether something needs to change, such as how the accommodation cost is paid or how investments are structured to generate income for Margaret.

Consider a second example. Barbara and Ray are in a similar position to Margaret and John, but they paid the full accommodation price as a RAD to reduce Ray’s ongoing care fees.

Six months later, Barbara finds her everyday account running low because most of their money is tied up in the refundable deposit. The solution is not to panic.  We can review all options including whether Ray’s remaining fees can be drawn from his RAD balance and Ray moving rooms in order to release the RAD.

The underlying lesson is that the at-home partner’s cash flow deserves the same attention as the care fees themselves.

Frequently asked questions

Are both partners assessed when only one goes into care?

The person entering care is the one being assessed, but the assessment uses your combined finances. Services Australia counts half of the couple’s total assets and half of the couple’s total income, regardless of whose name they are in. The partner who remains at home obviously is not charged aged care fees, but their assets and income still influence the fees paid by the partner in care.

Will we lose the family home to pay for care?

Not while the partner who remains at home continues to live there. A spouse living in the home is a protected person, so the home is excluded from the assessment for as long as that spouse remains there. The home only enters the calculation, at a capped value, once no protected person lives there. You will need to use your other assets to pay for care. Should that not be possible.

Does the Age Pension go up or down when a partner enters care?

It can go up. When a couple lives apart permanently for health reasons, Services Australia can treat them as an illness-separated couple and pay each partner the higher single rate of Age Pension, while still assessing their combined assets and income. You must tell Services Australia that you are living apart for health reasons for the rate to be adjusted.

Should we pay the accommodation cost as a lump sum or daily?

It depends on how much accessible cash the partner at home needs as well as the resident’s future expenses. A lump-sum RAD can reduce aged care fees and is exempt from the Age Pension assets test, but it ties up money the at-home partner may need. A DAP preserves liquidity but creates an ongoing cost. Fine tuning how much to pay to the RAD to optimise fees and pension while keeping cash available for future needs is where modelling each option using your actual numbers is the most reliable way to decide.

What income will the partner at home have to live on?

The illness separated pension is paid up to a maximum of $1200.90 a fortnight each ($62,446 per annum combined) and supplemented with investment income. The aged care fees combined with the expenses for the person remaining at home and their property costs are likely to be higher than the income being received. To ensure the at home partner is not left short, careful consideration needs to made to how the accommodation cost is funded.

How quickly should we get advice?

Ideally before the means assessment is completed, as the way your assets are structured can affect the outcome, and certainly before committing to a large accommodation payment. Once Services Australia issue a fee letter has been issued, the resident will be classified as whether they will receive government support for accommodation costs. However, even if you are already a resident, it’s not too late to find out whether there are ways to reduce fees and improve your financial position.

Talk to an Alteris Lifestyle and Care adviser

Decisions about aged care fees, the Age Pension and the family home are closely connected. For couples, they affect the financial security of both people at the same time.

An Alteris aged care financial adviser can model your specific circumstances, check that your pension is being paid at the correct rate, and help you choose the most appropriate way to fund accommodation costs without leaving the partner at home short of accessible cash.

Call 1300 366 932 to book an aged care financial advice consultation.

This article is general information only and does not take into account your personal circumstances. The illustrative example is based on rules that apply as at July 2026 for Aged care, Centrelink, and tax. The strategies discussed here may not be appropriate for every family. You should seek personal advice from a qualified financial adviser, accountant, and solicitor before acting on the information contained in this article. Figures referenced in this article are current as at the date of publication and may be subject to change. Alteris Financial Group is licensed to provide personal financial advice in Australia and works with families across the country on aged care, retirement, and intergenerational wealth strategies.

Last reviewed: July 2026