Assessing the former home when moving to permanent residential care

Decisions regarding the family home can be complex. There are strict rules as to how the former home will be assessed when a person moves to permanent residential care. These rules are different depending on if the assessment is in relation to their aged care status and means tested care fees or their Centrelink/DVA pension entitlements.

In this article, we look at the current rules as they apply to a resident entering care and consider their impact to the resident’s aged care costs and pension entitlements.

Aged Care Status and Aged Care Fee Assessment

For a single person, their former home is usually assessed under the age care Assets test up to the home capped rate unless the net market value of the home is lower. The current capped rate is $186,331.20 (as at 1 January 2023). For couples, 50% of the home is generally assessed as an asset, with the capped rate applying individually to each member of the couple.

The exception to this rule is when a protected person is living in the home, in which case the asset assessment value is nil. The exception only applies whenever the protected person remains living in the home and continues to qualify as a protected person. There are no time limits on this exemption.

The aged care rules define a Protected Person to be a:

1. Partner or dependent child
2. Carer, who’s eligible to get an Australian Government Income Support Payment and has lived in the person’s home with them for the past 2 years, or
3. Close relative, who’s eligible to get an Australian Government Income Support Payment and has lived in the person’s home with them for the past 5 years.

If a single person owns a home with no protected person living in it on the day of permanent entry, their Aged Care Status will be assessed as a market/RAD payer so long as the home had a net market value which was greater than or equal to the capped rate.

We often find when a protected person is living in the home on the day of entry, the resident is assessed as a Low Means/Concessional resident at the time of entry. However, if the protected person leaves the former home or they no longer qualify for an income support payment, the value of the former home will increase up to the capped rate. This results in the Resident’s Daily Accommodation Contribution (DAC) increasing up to the facility’s Maximum Accommodation Supplement and they may be required to also pay a Means Tested Care Fee.

If the home is rented, the net rental income is assessed under the income test for the aged care status and aged care fee assessment.

Centrelink and DVA pension entitlement

Importantly for Centrelink and DVA purposes the assessment of the former home is different to what the rules are for the aged care calculations.

In this case the former home will generally be exempt from the Centrelink/DVA Assets test for two years from the date of entry to permanent residential care. On the second anniversary of the resident’s entry to care, their former home will be assessed at the then net market value and the residents homeowner status will also change. With the home now counting as an asset this commonly results in the resident’s pension entitlement being significantly reduced or cancelled.

The main exception to this rule is if a partner remains living in the home. In this situation, the two-year exemption commences on the day the partner ceases living there.

Interestingly as this is different to the aged care rules it is possible for the former home to be exempt for the aged care purposes but not for Centrelink/DVA purposes.

Similar to the aged care rules, if the home is rented, the net rental income is assessed under the income test for the Centrelink/DVA Income test

These matters can be complex. To help you make an informed decision about aged care and age pension considerations please contact us to find out about our specialist Lifestyle and Care division.

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