How to protect the family home when moving to aged care

“Will we have to sell Mum’s house to pay for the nursing home?”

It is the first question most families ask, and often the one that keeps them up at night. The fear is understandable. The family home is rarely just a property. It holds decades of memories, and it is usually the largest asset in the estate.

The good news is that the rules around the family home and the aged care assets assessment are more nuanced than most people realise. Depending on who lives there and what you do next, the home may be fully exempt, partly counted, or fully assessable. Understanding how it works is the first step to protecting your family’s position.

Do I have to sell my home to pay for aged care?

Short answer: no. There is no requirement to sell the family home to pay for aged care.

When entering permanent residential aged care, a resident used to have 28 days to decide how they would like to fund the accommodation costs but now there is no time limit. To pay for care, some families choose to sell, others do not. Providers can charge a Refundable Accommodation Deposit (RAD) unless the resident is assessed as low means, but there is no requirement to pay a RAD in full and upfront. If the cash is not there, a Daily Accommodation Payment (DAP) can be paid instead, or a combination with a part RAD and DAP.

Think of it like the choice between buying and renting a home. The “buy” option is a refundable lump sum (the RAD). The “rent” option is a daily payment (the DAP). A combination of the two is allowed, which often provides the flexibility families need when there are not enough liquid assets to cover the full room price and selling the home is not the preferred path.

How the aged care assessment works

When a loved one enters residential aged care, Services Australia conducts a combined income and assets assessment.

This assessment sets two important things: there is an initial assessment to work out whether the resident will receive government support with accommodation costs, and secondly to assess the fees that are means tested. Get the numbers wrong at this stage and the downstream costs can run into tens of thousands of dollars.

The assets test looks at what you and your spouse own. That includes bank accounts, term deposits, shares, managed funds, investment properties, superannuation (once the owner reaches age pension age), personal effects, and in some cases the family home (capped value).

The income test covers pensions, deemed income from financial assets, and rental income. The two tests run in parallel, and determine the fees that are Means Tested.

When is the family home exempt from the assessment?

The family home will be fully exempt from the assets test if it is occupied by a “protected person”. A protected person is:

• A spouse or partner (including de facto)
• A dependent child or student
• A carer who has lived in the home for at least two years and is eligible for an Australian Government Income Support Payment
• A close relative who has lived in the home for at least five years and is eligible for an Income Support Payment

If any of these people continue to live in the home, it is excluded from the assets test in full, regardless of whether the property is worth $600,000 or $6 million. There is no time limit on the exemption while the protected person qualifies.

One clarification that trips families up: the Carer’s Allowance does not count as an Income Support Payment for this rule. The carer must be on a payment such as JobSeeker, the Disability Support Pension, or the Carer Payment.

If no protected person lives in the home or they no longer qualify as a protected person, the story changes. The home becomes an assessable asset, but its value is capped at approximately $214,884 each. That cap is a critical point. A home worth $2 million and a home worth $400,000 are treated the same way once they both sit above the threshold.

How a jointly owned property affects aged care fees

Joint ownership adds another layer. The “obvious” decision is often not the best one.

When the sole occupant moves to care. If a person living alone enters permanent residential aged care, the net market value of the home is assessed up to the capped amount. The actual property value is ignored for the aged care assets assessment. If the home is later rented, the net rental income becomes assessable under the aged care income test.

When a spouse remains at home. If one member of a couple enters care while the partner remains at home, the home is fully exempt. This exemption often reduces overall aged care costs and, in some cases, allows the resident entering care to be admitted as a low means resident. The important caveat: if the partner later leaves the home or also moves into care, the home becomes assessable up to the capped value and care and the fees that are means tested typically increase particularly for low means residents.

When the second spouse later moves to care. Each resident is assessed on their day of entry. Low Means or RAD payer status is fixed at that point and can only change if the resident moves facility and is re-assessed, or leaves the system for 28 days or more. That means when the second spouse enters care, 50% of the home becomes assessable to each member of the couple up to the capped value. The second spouse will usually be assessed as a RAD payer, while the first spouse remains a low means resident but is no longer “fully supported”. A DAC equal to the facility’s maximum accommodation supplement may then apply, along with a possible Means Tested Care Fee (under the grandfathered rules) or Hotelling Contribution and Non Clinical Care Contribution (under the current rules).

When a carer or close relative on Income Support lives there. The home is exempt from the assets test while the carer (two-year rule) or close relative (five-year rule) continues to live there and continues to receive an Income Support Payment. If either condition stops, the home becomes assessable at the capped value. If the resident is a low means resident, their Daily Accommodation Contribution (DAC) typically increases up to the facility’s maximum accommodation supplement. They may also have other fees that are Means Tested.

Tenants in common and financial hardship. Christine contacted us because her father had to move to permanent aged care. She and her father owned their home together but she didn’t meet the criteria to have the home exempted. With only $35,000 in her father’s bank account, Christine assumed they would have to sell the home. After we worked through the detail of the financial hardship rules, the home was treated as unrealisable and he paid only the basic daily care fee during that period hardship was granted. Hardship must generally be re-applied for each 12 months to prove there’s been no substantial change to the financial situation.

Retirement village units. These are assessed in a similar way to homes in the community. For aged care purposes the value of the unit (the former home) is based on the estimated exit entitlement at date of permanent entry, subject to the capped rate, or exempted if a protected person remains living in the unit.

Case study: what happens when a protected person leaves the home?

Grace is a widow. When she first moved to permanent residential care she was a full age pensioner with $80,000 in the bank and a home worth $825,000. Her daughter Jenny, who is on the Disability Support Pension, had lived with Grace her whole life. When Grace moved to care, Grace’s son John moved back to care for his sister Jenny.

Because Jenny had lived with Grace for more than five years and was on an Income Support Payment, she qualified as a protected person. While Jenny remained in the home, the home was excluded from the aged care assets test. Grace was a low means resident paying a low Daily Accommodation Contribution. The rent Grace’s children paid her ($200 per week) was technically assessable income, but once outgoings were deducted (rates, utilities, maintenance) the net amount was zero. So the rental income had no effect on her aged care assessment either.

Then Jenny moved out to an NDIS-funded group home. John stayed in the house alone, but he did not qualify as a protected person.

At that point, three things happened. The home became an assessable asset at the capped value. Grace’s Daily Accommodation Contribution (DAC) and equivalent Refundable Accommodation Contribution (RAC) were affected. Her Means Tested Care Fee was also likely to start being charged at the next fee review. Importantly, Grace’s original Low Means status did not change, because status is fixed on day of entry. The downstream costs, however, did.

The lesson: the rules that apply on day one do not always apply forever. The moment the protected person no longer qualifies, or moves out, the numbers shift.

Should you sell, rent, or keep the family home?

Once the assessment is done, families usually face three options. Each one carries financial and emotional trade-offs, and the right answer depends on the whole picture.

Option 1: Selling the home. Selling frees up capital to pay a RAD, which can reduce the daily fees and, in some cases, improve the pension outcome. The trade-off is that sale will push up the fees that are Means Tested. There is also the emotional weight of letting the home go, particularly if family grew up there. For a closer look at the RAD decision, see our guide to RAD vs DAP.

Option 2: Renting the home. Renting creates an income stream to help fund care. However, the rental income is assessable for both the Age Pension and the fees that are Means Tested, and the home itself (up to the capped value) remains an assessable asset if no protected person lives there. Landlord responsibilities, maintenance, insurance, and tenant turnover all need to be factored in. Also, if the property is kept for more than 2 years, this will impact age pension.

Option 3: Keeping the home vacant. Some families hold the home in case their loved one is well enough to return, or because the emotional decision is too hard in the early weeks. The home continues to be an asset with favourable means testing, but there is no rental income. The trade-off is no cash flow, plus ongoing rates, insurance, and upkeep.

RAD, DAP, and how the room is actually paid for

The accommodation payment is the largest single cost most families face, so it is worth unpacking the mechanics.

Refundable Accommodation Deposit (RAD). The RAD is a lump sum. It varies between operators depending on the room type. Most sit in the $450,000 to $700,000 range, though some exceed $1,000,000, particularly for premium accommodation in upmarket inner-city suburbs. The median RAD in metropolitan areas is around $585,000. The RAD is exempt from the Centrelink / DVA assets test for age pension purposes, its repayment is guaranteed by the Federal Government, and the balance is refunded to the resident when they leave, move facility or to their estate on death. Funds paid as a RAD are generally not accessible during the stay in care and no interest is paid on the amount.

Daily Accommodation Payment (DAP). The DAP is the “rent” equivalent. It is effectively daily interest on the RAD, calculated at a rate set by the Commonwealth Government that is fixed on the resident’s day of entry. Based on the current interest rate of 7.96% (effective from 1 April 2026), the equivalent DAP for a $585,000 RAD is $127.58 per day ($46,566 per year).

A combination of both. Families can pay a partial RAD and the rest as DAP. They can also elect to have the DAP drawn down from the RAD already paid, which preserves day-to-day cash flow.

Doreen’s example. Doreen, a widow, has a home worth $650,000 and $150,000 in cash. The aged care home asks for a RAD of $500,000. Doreen’s family do not want to sell the home, so they pay a $100,000 part-RAD in cash and cover the rest through DAP. If paying the DAP from Doreen’s cashflow is a concern, she can ask the aged care home to take the DAP out of the partial RAD she paid. That helps cashflow but slowly reduces the RAD. If the RAD is drawn down to zero, she will be asked to pay DAP on the full $500,000.

Three common misconceptions about the family home

Misconception 1: The only option is to sell the home to afford the room price. There is no requirement to sell. Every family’s situation is different, and the first step is understanding the options and how they interact with the Centrelink or DVA and aged care rules. The whole financial position, estate planning goals, the current state of the property, and any future maintenance and management needs all matter.

Misconception 2: Selling the home will mean losing the age pension. Not necessarily. Any impact depends on how the sale proceeds are used. If proceeds are used to pay a RAD, those funds continue to be excluded from Centrelink / DVA means testing.

Misconception 3: The room is unaffordable because it costs more than the home is worth. Many families assume they need assets equal to the room price for the facility to be affordable. They are often relieved to learn that the RAD, DAP and combination options (including part-RAD with DAP drawn from it) give enough flexibility to afford the preferred facility without needing the full room price in cash.

How the former home interacts with the Age Pension

The treatment of the home has a direct flow-on effect to Age Pension entitlements, and the numbers can be significant.

If a protected person lives in the home, it is exempt from the age care assessment but unless the spouse lives in the property then in 2 years the pension may be affected and can even stop.

If no protected person lives there, the home is exempt from the Centrelink / DVA assets test for two years. On the second anniversary of entry, the home is assessed at its full net market value and the resident’s status also changes to a non-homeowner. With the home now counting as an asset this commonly results in the pension being significantly reduced or cancelled. The main exception: if a partner remains living in the home, the two-year clock only starts on the day the partner ceases living there.

If the home is sold, the full sale proceeds become assessable, but paying a RAD effectively converts assessable cash into an exempt asset for Centrelink purposes. If the home is rented, the net rental income is assessable under the Centrelink/DVA Income test, as it is under the aged care income test.

A short example. John’s home is worth $900,000. No protected person lives there, so the capped value of approximately $214,884 is included in his aged care assets assessment. If he sells and banks the full $900,000, the entire amount becomes assessable and his pension may drop sharply. If he sells and uses $500,000 to pay a RAD, only the remaining $400,000 sits in assessable assets. The RAD is refundable if he leaves care, so the capital is preserved for the estate.

Common mistakes families make

• Selling the home in the first few weeks, before the numbers on RAD, pension, and Means Tested Care Fee have been modelled
• Gifting the home or a share of it to children. Centrelink deprivation rules still deem the asset for five years, so the “gift” rarely achieves what the family hoped
• Assuming the full market value of the home is assessed, when in fact the capped value applies if no protected person lives there
• Ignoring the interaction between sale proceeds, RAD payment, and pension, since these three levers move together and adjusting one changes the others
• Assuming the Carer’s Allowance qualifies someone as a protected person (it does not, an Income Support Payment is required)
• Making permanent decisions during an emotionally charged time, without independent advice

How Alteris helps protect your family’s position

Aged care advice is a specialist area, and general financial planners often lack experience, expertise and the tools to model it properly.

At Alteris, we sit down with the family, pull together the full financial picture, and run the numbers on every realistic scenario: sell and pay a RAD, keep and rent, keep and leave vacant, part-sell, or even move in with family under granny flat arrangements. You see the dollar impact on pension, Care Fees, cash flow, and estate value side by side.

Timing matters. Families feel pressure with the bills coming in after entering permanent care to decide how to pay the accommodation , and early advice gives you the room to make a considered decision rather than a rushed one.

If you would like help thinking it through, our team can walk you through the options.

Speak to an Alteris aged care specialist. Book a complimentary consultation to understand how to protect the family home while funding quality care. Book a consultation →

Frequently asked questions

Can the nursing home force me to sell my house?

No. An aged care provider cannot force you to sell the family home. You always have the option to pay a Daily Accommodation Payment (DAP) instead of a lump sum Refundable Accommodation Deposit (RAD), or a combination of both. The decision about what to do with the home stays with you and your family.

Do nursing homes take your house?

No. Nursing homes do not take your house. The value of the home may be counted (up to the capped amount) as an asset in the aged care means assessment, but ownership remains with you. The decision to sell, rent or keep the property belongs to you and your family.

What if my spouse still lives in the family home?

If your spouse, partner, or another protected person continues to live in the home, it is fully exempt from the aged care assets assessment regardless of the property’s value. This is one of the most important protections in the system and is often the single biggest factor in how numbers work out.

How long does the home stay exempt after entering care?

For aged care fee purposes, if no protected person lives in the home, it becomes an assessable asset from the date of entry into permanent residential care, with the value capped at  $214,884. For Centrelink and DVA pension purposes, the home is generally exempt for two years from the date of entry (with a partner exception that pauses the two-year clock).

What if I want to return home after a period in care?

You can leave residential aged care at any time. Some families deliberately keep the home vacant for exactly this reason. If a RAD has been paid, it is refunded within 14 days of leaving care to you. For families where a return home is a realistic possibility, keeping the property can be a valid part of the plan. Having an enduring power of attorney in place before decisions need to be made also helps the family act quickly and confidently.

How is my home treated if my child lives there?

If your child does not receive an Income Support Payment, they will not be considered a protected person. Your share of the home will be assessed up to the capped amount. If selling the property is not practical because your child lives there, the property may, depending on their circumstances, be treated as unrealisable under the financial hardship provisions, provided the other eligibility criteria are met. If financial hardship status is granted, it may reduce fees for a period (typically 12 months). Applications must be resubmitted annually if circumstances remain unchanged.

Are retirement village units assessed the same way?

For aged care purposes, retirement village units are assessed the same as homes in the community. The value is based on the estimated exit entitlement at date of permanent entry, but for the aged care assessment is assessed at the capped value, unless your spouse or a protected person remains living in the unit.

This article is general information only and does not take into account your personal circumstances. Aged care, Centrelink, and tax rules change frequently, and 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.

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