Going into aged care is one of the most significant transitions a person — or a family — can face. Alongside the emotional weight of the move comes a flood of practical questions, and perhaps none is more pressing than this: what happens to your home when you go into aged care?
For most older Australians, the family home is more than bricks and mortar. It represents decades of memories, financial security, and the hard work of a lifetime. So it is completely natural to feel anxious, confused, or even protective when the time comes to consider what might happen to it.
📋 Quick Answer
You do not automatically have to sell your home when you go into aged care. Your home is generally exempt from the Age Pension assets test for up to two years after you move into residential care — and possibly longer if a “protected person” continues living there. The treatment of the family home did not change under the new Aged Care Act (1 November 2025).
This guide explains all your options, the key rules that apply, and what the 2025 reforms mean for you.
Why Your Home Matters So Much in the Aged Care Decision
It is quite common for Australians entering residential aged care to be what financial advisers call “asset-rich and cash-poor.” Your most significant asset is very likely the family home — yet accessing its value is not straightforward, and nor should it be rushed into without careful thought.
When you move into an aged care home, you will face several costs:
📋 Residential Aged Care Fee Summary — From 1 November 2025
- Basic Daily Care Fee: $66.80/day — paid by ALL residents, no means test, no cap. (~$24,382/year)
- Hotelling Supplement Contribution (HSC): Means-tested. Up to $22.15/day. Applies when assets exceed ~$252,000. No lifetime cap — continues while means are above threshold.
- Non-Clinical Care Contribution (NCCC): Means-tested. Up to $105.30/day. Applies when assets exceed ~$532,055. Lifetime cap of $137,917 OR four years — whichever comes first. Then stops permanently.
- Accommodation costs: RAD (lump sum, largely refunded minus 2%/yr retention up to 10%) or DAP (daily, CPI-indexed). Separate means assessment by Services Australia.
- Clinical care: Fully government-funded. No resident contribution required.
With the national average RAD sitting at approximately $573,000 (as at mid-2025) — and higher in Sydney and Melbourne — it is easy to see why so many families turn their attention to the family home. But making that decision without understanding the full picture can lead to unintended financial consequences that are very difficult to reverse.
The Two-Year Exemption Rule: A Critical Window
Here is something many families do not realise until it is too late: your family home is generally exempt from the Age Pension assets test for up to two years after you move into aged care.
This two-year exemption period is one of the most important rules to understand when thinking about what happens to your home when you go into aged care. During this time:
- Your home is treated as an exempt asset for Centrelink’s Age Pension assessment.
- You continue to receive your pension as though the home does not exist as a financial asset.
- You have breathing room to consider all your options before making any permanent decisions.
However, once that two-year period ends — and the home has not been sold or transferred — it moves from being an exempt asset to a fully assessable one. From that point, it is treated as an investment property, not a principal place of residence. For those relying on the Age Pension, this shift can significantly reduce pension payments or eliminate them entirely.
💡 Important
If a protected person remains living in the home, the exemption may extend beyond two years — and in the case of a spouse, it may continue indefinitely. Understanding whether a protected person applies to your situation is one of the most important early steps in aged care financial planning.
What Is a “Protected Person” — and Why Does It Matter?
The concept of a protected person is at the heart of understanding what happens to your home when you go into aged care. If a protected person is living in your home when you enter care, the property may be exempt from both the aged care means assessment and Centrelink’s assets test — not just for two years, but for as long as that person remains.
| Who Qualifies as a Protected Person? | Additional Conditions Required |
|---|---|
| Spouse or de facto partner | Must remain living in the home. Provides the strongest exemption — both aged care and pension purposes. |
| Dependent child or dependent student | Must be living in the home at the time of the means assessment. |
| Close relative | Must have lived with the aged care resident for at least 5 years AND be eligible for Centrelink income support. |
| Carer | Must have lived with the resident for at least 2 years AND be eligible for Centrelink income support. |
When a spouse or de facto partner remains in the home, the property is generally exempt indefinitely — for both pension purposes and the aged care means assessment. This is often the most financially protective scenario available, and it is why planning well before entering care is so valuable for couples.
It is important to note that when a non-spouse protected person (such as a carer or close relative) lives in the home, the exemption applies for aged care fee purposes — but the two-year social security pension exemption operates under separate rules. The moment a protected person moves out or passes away, the home may no longer be exempt, and both pension entitlements and care fees can change.
How Is Your Home Valued for the Aged Care Means Assessment?
Even when the family home is included in the means assessment, there is a home asset cap that limits how much of its value can be counted. As of 2025–26, the assessable value of the family home for aged care purposes is capped at approximately $210,555.20 (indexed regularly).
This cap is significant. A home valued at $900,000 would only contribute $210,555.20 to the aged care assets assessment — not its full market value. This can meaningfully reduce the means-tested fees you are required to pay.
What Counts as an Assessable Asset?
Beyond the family home, other assets typically assessed include bank accounts and term deposits, shares and managed funds, investment properties, motor vehicles, superannuation (if over pension age), and personal property.
📋 RAD and the Assets Test — A Key Distinction
A RAD paid into an aged care home is excluded from the Centrelink Age Pension assets test — but is included in the aged care means assessment. This dual treatment is one of the key reasons professional financial advice matters so much before deciding how to fund accommodation costs.
Your Three Main Options for the Family Home
When you enter aged care, you generally face three broad choices for what happens to your home. Each has its own financial and personal implications, and none is universally “right.” The best choice depends entirely on your specific circumstances.
Option 1 — Keep the Home Vacant (During the Exemption Period)
During the two-year exemption window, you can choose to leave the home vacant while you and your family work out the best path forward. This option preserves your choices and gives everyone time to make a considered, well-advised decision without rushing into something irreversible.
✔ Pros
- Preserves Age Pension during the exemption period
- No irreversible decisions made in haste
- Time to seek proper financial advice
✖ Cons
- Ongoing rates, insurance and maintenance costs continue
- Becomes a fully assessable asset after two years
- Security concerns for a vacant property
Option 2 — Rent the Home Out
Renting the family home is a popular option, particularly when the property is still within its exemption period or when a family member wishes to remain in the area. Rental income can help cover aged care costs or supplement daily living expenses.
✔ Pros
- Generates income to help pay aged care costs
- Keeps property in the family
- Capital growth potential continues
✖ Cons
- Rental income may increase means-tested fees
- May reduce Age Pension payments
- Property management can be burdensome for families
Option 3 — Sell the Property
Selling the family home is often the first option families consider — and sometimes it genuinely is the most practical. However, it deserves far more careful thought than it typically receives in the rush of an aged care transition.
✔ Pros
- Lump sum available to pay a RAD in full
- Eliminates ongoing daily accommodation payment (DAP)
- Removes property maintenance responsibilities
✖ Cons
- Proceeds become fully assessable assets for Centrelink
- May significantly reduce or eliminate the Age Pension
- Irreversible — cannot be undone if circumstances change
💡 Important — Selling the Home Converts an Exempt Asset
While the family home is vacant, it is generally not assessed for the pension during the two-year exemption. However, once it is sold, the proceeds become a fully assessable asset. This can eliminate pension entitlements that the home previously protected. The RAD paid from those proceeds is excluded from the pension assets test — but the remaining cash is not.
Do You Have to Sell Your Home to Pay for Aged Care?
This is the most persistent misconception in Australian aged care: no, you do not have to sell your home to pay for aged care. There are several alternative approaches to funding accommodation costs without selling the property:
- Pay the DAP instead of the RAD: Rather than paying a lump sum, you pay a daily interest-equivalent fee. This keeps the home intact while meeting accommodation obligations.
- Combination RAD/DAP: Pay a partial lump sum and cover the remaining balance through a daily payment. Reduces the total daily fee without requiring the full amount upfront.
- Reverse mortgage: Allows you to access equity in the home without selling it. The loan is repaid when the home is eventually sold or the estate is settled.
- Family loan arrangements: Family members may choose to lend money toward the RAD, with repayment structured when the home is eventually sold or the resident passes away.
- Home Equity Access Scheme (HEAS): The Australian Government’s own scheme allows eligible older Australians to access additional income against the value of their home without selling it.
- Borrowing against other assets: Using other assessable assets as security for a loan to fund the RAD, preserving the property.
Each of these strategies has financial, legal, and tax implications that vary significantly by individual situation. Speaking with an accredited aged care financial adviser before making any decisions is strongly recommended.
New Aged Care Act 2025: What Changed and What Did Not?
Australia’s aged care system underwent its most significant reform in decades when the new Aged Care Act commenced on 1 November 2025. For people already in care before this date, most existing arrangements were preserved under the “no worse off” principle. For those planning ahead, here is what changed — and crucially, what did not.
📋 What Did NOT Change — Family Home Rules Are Preserved
The treatment of the family home did not change under the new Act. The two-year exemption, the protected person provisions, the home asset cap, and the fundamental rules around what happens to your home when you go into aged care are all unchanged. The government made this a deliberate decision to provide certainty to families.
What Changed for New Residents (From 1 November 2025)
| Fee Type | Old Arrangements (Pre–Nov 2025) | New Arrangements (From Nov 2025) |
|---|---|---|
| Basic Daily Fee | ~$63–$66/day | $66.80/day (from March 2026) |
| Means-Tested Care Fee | Up to $403.80/day; lifetime cap $86,185.23 | Replaced by HSC (up to $22.15/day) + NCCC (up to $105.30/day; lifetime cap $137,917) |
| Clinical Care | Partially means-tested | 100% government-funded for all residents |
| RAD Retention | No standard retention rate | Up to 2%/year (capped at 10% over 5 years) |
| DAP Indexation | Fixed at entry | Indexed by CPI twice yearly |
| Reporting Obligations | Report changes when they occur | Legally required within 28 days of any change |
| Family Home Treatment | Two-year exemption + protected person rules | Unchanged — same rules apply |
What Happens When a Couple Enters Aged Care?
For couples, the question of what happens to your home when you go into aged care becomes even more important — because the financial stakes are higher and specific rules apply.
If one partner enters residential aged care while the other remains living in the family home, the property is generally exempt indefinitely from both the Age Pension assets test and the aged care means assessment, for as long as the remaining spouse or de facto partner continues to live there.
If both partners enter aged care at the same time, and no protected person remains in the home, the two-year exemption clock begins. Both are classified as non-homeowners once the exemption ends, and the home becomes assessable for pension and care fee purposes.
Couples in this situation are sometimes referred to as an “illness-separated couple” — where both partners require care but are living separately due to health needs. Specific financial rules apply, including different asset thresholds and pension arrangements, and professional advice is particularly valuable here.
What Happens to Your Home If You Pass Away in Aged Care?
When a residential aged care resident passes away, several important financial events take place:
- Daily fees and care fees cease on the date of death.
- Any RAD paid to the aged care facility must be refunded to the estate within 14 days. If the refund is delayed, interest accrues on the outstanding amount.
- The facility may deduct any outstanding fees or agreed deductions from the RAD before refunding the balance.
- The refunded RAD forms part of the deceased’s estate and is distributed according to the will.
- The family home, if retained, passes to the estate as per the will — or under intestacy laws if no valid will exists.
💡 Estate Planning Tip
If a RAD is refunded into the estate of a surviving beneficiary who already has significant assets, this can affect their own pension entitlements. This is why reviewing estate planning documents — including wills and enduring powers of attorney — before entering aged care is so important.
Frequently Asked Questions
Can I be forced to sell my home to go into aged care?
No. There is no legal requirement in Australia to sell your home to fund aged care. You can fund accommodation costs through the Daily Accommodation Payment (DAP), a reverse mortgage, family arrangements, or other financial strategies — while keeping the home intact.
How long is the family home exempt from the pension assets test after entering aged care?
Generally, up to two years. If your spouse or de facto partner remains living in the home, the exemption continues indefinitely for as long as they are there. Other protected persons (qualifying carers or relatives) can extend the aged care fee exemption, but the social security pension exemption remains capped at two years unless a spouse is present.
Does renting my home affect my aged care fees?
Yes, it can. Rental income is generally assessable for both the Age Pension income test and the aged care means assessment, which may increase your means-tested fees. During the two-year exemption period, rental income may be exempt from the income test if certain conditions are met. Seek professional advice before entering a rental arrangement.
What is the home asset cap for aged care in Australia?
As of 2025–26, the assessable value of the family home for aged care purposes is capped at approximately $210,555.20, regardless of its actual market value. This figure is indexed periodically.
What happens to the RAD if I sell my home?
If you sell your home and use the proceeds to pay a RAD, the RAD itself is excluded from the Age Pension assets test — but is included in the aged care means assessment. The remaining sale proceeds (after paying the RAD) become fully assessable assets for Centrelink and can significantly reduce your pension. This is why selling without professional financial advice can have costly unintended consequences.
Did the new Aged Care Act change what happens to my home?
No. The treatment of the family home — including the two-year exemption, the protected person rules, and the home asset cap — did not change under the new Aged Care Act. However, the new mandatory reporting requirement (within 28 days of any financial change) does affect home-related events such as selling, renting, or changes in who lives in the property.
What if I cannot afford to pay aged care fees?
Financial hardship provisions exist within the aged care system. If you genuinely cannot afford to pay fees — including situations where assets are tied up in a family home that cannot easily be accessed — you or your aged care provider can apply for a hardship determination through Services Australia. If approved, a government hardship supplement can assist with costs.
7 Key Steps to Protect Your Home When Entering Aged Care
- Start planning early. The earlier you begin considering your options, the more choices you have available. Rushed decisions — particularly around the family home — are rarely the best ones.
- Seek a means assessment before making any property decisions. Contact Services Australia to initiate a means assessment before selling or renting the home. The outcome of this assessment significantly affects your fee obligations.
- Work with an accredited aged care financial adviser. Aged care financial planning is a specialist area. An adviser can model different scenarios — keeping, renting, or selling the home — and show you the genuine financial impact of each.
- Identify whether a protected person is involved. If a qualifying protected person is living in or could continue living in the family home, this may preserve important exemptions and meaningfully reduce your aged care fees.
- Understand the RAD vs. DAP choice thoroughly. Do not assume that paying a full RAD — which often means selling the home — is the best approach. In many cases, paying a DAP or a combination is financially superior once all flow-on effects are considered.
- Review estate planning documents. Ensure your will, enduring power of attorney, and any relevant trusts are up to date before the move into care. Major financial events — including the potential sale of a home — deserve fresh legal advice.
- Report any changes within 28 days. Under the new Aged Care Act, this is now a legal obligation. Changes to the home — including tenancy, sale, or changes in who lives there — must be reported promptly to Services Australia or DVA.
Conclusion: Your Home, Your Family, and the Right Support Make All the Difference
The question of what happens to your home when you go into aged care is not one that has a single, universal answer. It is shaped by who lives in your home, the value of your assets, your income, your care needs, the timing of your entry into care, and the wishes you hold for the future of your property and the people who depend on it.
What is clear is this: knowledge is your greatest protection. The Australian aged care system — particularly following the sweeping reforms of the new Aged Care Act commencing 1 November 2025 — is complex, but it is also designed with important safeguards for homeowners. The two-year exemption, the home asset cap, the protected person provisions, and the hardship assistance programs all exist to ensure that entering aged care does not automatically mean losing everything you have worked so hard to build.
We know from working closely with families across Australia that the biggest regrets are not about the decisions people made with full information — they are about the decisions made in a hurry, without advice, in the fog of an emotional and overwhelming transition. Selling the family home on impulse, without understanding how it affects the pension, the means-tested care contribution, or the estate, is a mistake that is very hard to undo.
The family home is often the physical and emotional centre of a family’s life. It deserves to be treated with that same weight and importance when the time comes to make decisions about aged care. Whether you choose to keep it, rent it, sell it, or explore more creative funding arrangements, what matters most is that the decision is yours — made freely, with all the information you need, and with people around you who genuinely care about your wellbeing.
At Superior Care Group, we understand that transitioning into aged care is about far more than accommodation and fees. It is about dignity, family, comfort, and peace of mind. We work closely with residents and their families to ensure that every aspect of the move into care — including questions about your home, your finances, and your future — is handled with empathy, professionalism, and genuine care. Our team is here to walk alongside you at every step, help you understand your options, and connect you with the right professionals so that what happens to your home when you go into aged care reflects your values and protects your future.
If you would like to speak with our team about aged care options, family home planning, or the support we offer to residents and their loved ones, we invite you to visit the Superior Care Group website or reach out to us directly. We are here to help — and we believe that with the right support, this transition can be not just manageable, but genuinely positive.
