Selling the Family Home to Pay for Aged Care (Australia 2026)

This is the single biggest fear families have, and the good news is that selling the family home is rarely compulsory. There is no rule that says the home must be sold to enter residential aged care. What matters is how the home is treated in two separate tests: the aged-care means assessment (which sets the fees a resident pays) and the Age Pension income and assets test (run by Services Australia).

Whether keeping, renting or selling the home is the right call depends entirely on the family's circumstances: whether a spouse still lives there, the resident's other assets, their pension, and how they choose to pay for accommodation. There is no single right answer, and the wrong choice can cost tens of thousands of dollars in extra fees or lost pension over a few years.

This guide is general information only. It is not personal financial or legal advice. Every figure below is drawn from official Australian Government sources and is current for 2026, but rules indexed twice a year change, and your situation is unique. Before signing an accommodation agreement or selling a home, speak to Services Australia's free Financial Information Service or an aged-care specialist financial adviser.

If you keep the family home and enter residential aged care, only a capped amount of its value counts in your means assessment, not the full market price. As at 20 March 2026 that cap is $214,884, or the net market value of the home if that is lower. The cap is indexed every March and September, so it rises slightly over time.

This is a crucial point that surprises many families: a home worth $900,000 is not assessed at $900,000 for aged-care fees. It is assessed at the capped $214,884. The rest of the home's value is simply not counted in the aged-care means test.

For couples, each partner is treated as owning half the home. The cap is applied to each half, so half of the net market value or the capped value, whichever is lower, is included for each person.

The means assessment combines a resident's assessable income and assets to work out two things: how much they contribute toward their care, and how much they pay toward their accommodation. The capped home value feeds into that calculation alongside other assets like savings, shares and any Refundable Accommodation Deposit paid.

Your home is not counted as an asset at all, not even the capped value, if a 'protected person' is living in it when you move into care. This single rule protects the most vulnerable families, and it is worth checking carefully before assuming the home must be touched.

A protected person is any of the following: your spouse or partner; a dependent child; a carer who is eligible for an Australian Government income-support payment and who has lived in the home with you for at least the past 2 years; or a close relative (a parent, child, grandchild, brother or sister) who is eligible for an income-support payment and has lived in the home with you for at least the past 5 years.

An important nuance: the carer or close relative only needs to be eligible for an income-support payment (notionally entitled), not actually receiving one. They do not have to have claimed Carer Payment or Carer Allowance.

The exemption can be lost. If the protected person later moves out of the home or loses their eligibility for an income-support payment, the home stops being exempt and the capped value can then be counted. This is why the situation should be reviewed if circumstances change. Services Australia's SA483 form is used to claim a carer or close-relative assessment.

If no protected person lives in the home, the family faces a genuine choice: keep and rent it, or sell it. Each path changes both aged-care fees and the Age Pension, and the two interact in ways that are easy to get wrong.

Renting the home out: The rent you receive is counted as income in the aged-care means assessment and in the Age Pension income test. The old concession that exempted rental income from aged-care fees was removed for people entering care from 1 January 2016, so for anyone entering care now the rent is assessable. Renting can help fund a Daily Accommodation Payment, but it raises assessable income and may reduce the pension.

Selling the home: Once sold, the capped home value comes out of the picture, but the sale proceeds become a fully assessable financial asset, deemed to earn income under the Age Pension deeming rules. A large cash sum in the bank can be assessed more harshly than the capped home was. Selling does, however, free up funds to pay a Refundable Accommodation Deposit, which is itself exempt from the Age Pension assets test.

There is no universally better option. The maths turns on the home's value, the rent achievable, the resident's other assets and pension, and how they pay for accommodation. This is exactly the kind of decision where a one-hour conversation with a Financial Information Service officer or specialist adviser can save thousands.

Accommodation in residential aged care is paid in one of three ways, and the choice often drives the decision about the home. You can pay a lump-sum Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or any combination of the two. You have 28 days from entering care to decide how to pay, and you can change your mind later.

A RAD is a refundable lump sum. The provider holds it and must refund the balance when you leave, within 14 days of you permanently leaving or, on death, after sighting probate or letters of administration. Crucially, the RAD is refundable and is exempt from the Age Pension assets test, though it does count as an assessable asset in the aged-care means assessment.

A DAP is a daily rental-style payment instead of the lump sum. It is worked out by applying the Maximum Permissible Interest Rate (MPIR), which is 7.65% as at 20 March 2026, to the agreed room price, divided by 365. The MPIR locked in on the day you agree the room price stays fixed while you remain in that room. Unlike a RAD, DAP payments are not refunded.

Two safeguards matter. First, RADs are protected by the Australian Government's Accommodation Payment Guarantee Scheme, so if a provider goes broke the government refunds your lump sum. Second, providers cannot charge a room price above the approval threshold (which rose to $750,000 from 1 January 2025 and is indexed to CPI each July) without approval from the Independent Health and Aged Care Pricing Authority.

For the Age Pension specifically, Services Australia exempts your former home from the assets test for 2 years from the date you enter care. Once that 2-year window closes, the home is counted at its full value and you are assessed as a non-homeowner. The non-homeowner threshold is higher, but a counted family home is usually far larger than that difference, so the pension can drop sharply at the 2-year mark. If the home is rented, the rent is counted as income throughout.

This 2-year pension rule is separate from the aged-care $214,884 cap, which has no time limit. People often confuse the two. The cap governs aged-care fees; the 2-year rule governs the Age Pension. Both can apply to the same person at the same time.

From 1 November 2025 the new Aged Care Act changed fees for people entering care on or after that date. New residents may pay a non-clinical care contribution capped at $107.32 per day, with a lifetime cap of $137,917.01 or 4 years (whichever comes first), plus a means-tested hotelling contribution of up to $22.15 per day. New residents who pay a RAD also have a 2% per year retention deducted from it for up to 5 years, which is not refunded.

If your parent was already in residential care before 1 November 2025, they keep their existing 1 July 2014 arrangements. The older means-tested care fee caps (annual $35,910.43 and lifetime $86,185.23 as at 20 March 2026) and no RAD retention continue to apply. The basic daily fee, set at 85% of the single basic Age Pension and currently $66.80 per day, applies to everyone.

The decisions here interact in ways that are genuinely hard to predict: how you pay for the room changes your means-tested fees, which changes your pension, and for couples one partner's choices affect the other's fees and pension. Selling, renting, paying a full RAD or a DAP can each leave a family materially better or worse off. This is why both Services Australia and My Aged Care explicitly recommend getting independent financial advice before deciding.

Start with the free official help. My Aged Care (1800 200 422) explains the system and arranges assessments. Services Australia's Financial Information Service (FIS) is free and helps you understand your options, though FIS officers do not sell or recommend products. Services Australia also has Aged Care Specialist Officers who can meet you in person.

For independent support, including if you feel pressured or unsure, the Older Persons Advocacy Network (OPAN) runs the free, confidential Aged Care Advocacy Line on 1800 700 600 (Monday to Friday 8am to 8pm, Saturday 10am to 4pm). For impartial money guidance, the government's Moneysmart website has a dedicated aged-care section.

For the lump-sum-versus-pension maths on a high-value home, consider a financial adviser who is accredited in aged care. A single piece of tailored advice can prevent a costly mistake on what is, for most families, the largest financial decision they will ever make. None of the figures or general guidance in this article is personal advice.