Your home and residential age care

You own your own home, but you need to go into residential age care. Can you keep your home or is it counted in the means test?

A couple of weeks ago we ran a story about the treatment of the family home in rural areas with regards to the pension means test. Not surprisingly, it was one of the most popular articles, garnering several comments from readers online.

"It is absolutely ridiculous. I have vacant land surrounding my home, which the experts (at Centrelink), deem to be of a certain value, and I will have my pension reduced, because of this because it is means tested. I wonder why the politicians who make these decisions can have several houses (all under negative gearing), and still get a very large pension, and gain lucrative employment, for the rest of their lives, when they have (so called) retired?? Any explanation would be greatly appreciated."

- Col

"We are in the same boat. Have two very small places due to family. Both are less together than a house in the city. We lose pension because of one which is an asset although not rented. In the USA you can have two houses up to a certain value."

- Dawn

"We couldn’t afford to retire and live in our home in the city so we moved out west and bought land off the grid with no services at all. We can afford to live on one pension. These rules are just not fair."

- Melani

This week, as promised, we look at the other instance where the family home is counted as an asset – if you or a loved one enters residential aged care.

How your assets and income affect residential care costs

The first thing you need to understand is there are two instances where your assets and income impact on residential aged care costs.

The first is the impact on the cost of care.

In aged care, everyone pays a basic daily fee which is taken out of your pension if you receive one. On top of this, you might have to pay a means tested care fee if your assets and/or income are assessed above a certain threshold. Your assets and income are used to determine the means tested fee.

The second is the impact on the cost of accommodation.

You may also have to contribute to the cost of your accommodation when in care, but only if your assets and/or income are above a certain threshold. As a general guide:

  • if you have income below $27,460 and assets below $49,500, the Australian Government will pay your accommodation costs
  • if you have income above $69,430 or assets above $169,079.20, you will need to pay for the full cost of your accommodation, negotiated and agreed to with the aged care home
  • if you need to pay for part of your accommodation, the Australian Government will pay the rest.

That includes the value of the family home.

However, the full value of the family home will not be included in the assets test if you don’t sell it. Instead a capped amount of $169,079.20 (as at 20 September 2019) is included or the net market value of your house, if lower.

Are there their other exceptions?

As always, it’s not as simple as that. And for good reason.

Firstly, your family home is not counted as an asset if either:

  • your partner or dependent children are still living there, or
  • a carer eligible for an Australian Government income support payment has been living there for at least two years, or
  • a close relative who is eligible for an Australian Government income support payment has been living there for at least five years.

Secondly, the value of your family home is not counted for two years for the assets test from the date you move into care.

So, if you move into residential care without selling your home (to pay for the lump sum required for accommodation), it will be exempt from the Age Pension assets test for two years from the date you move into care. The start date will vary if you are, or were, a member of a couple.

Other things to know

Where the family home is included as an asset, and the aged care home resident is part of a couple, each member of the couple is seen as equally owning half of the net market value of the home. The cap is applied to each half. Either the cap or the net value of each member’s part of the home will be included as an asset – whichever is lower.

If you are part of a couple, half the combined income and assets of both members of the couple are included in the assessment. For aged care purposes, you are considered to be a member of a couple if you are permanently living apart for health-related reasons.