Moving into residential aged care is a major life change, but it can also be an opportunity to enjoy greater comfort, wellbeing, and peace of mind supported by clear and confident financial planning.
Beyond the personal adjustments, families often need to address important financial and practical matters quickly – such as funding the Refundable Accommodation Deposit (RAD), covering daily care fees and deciding what to do with the family home.
Selling your home can significantly increase cash flow, creating new financial flexibility. If you’re already receiving the Age Pension, it’s important to understand how this affects your eligibility, aged care means testing and ongoing fees.
With the right guidance, these rules can be managed to create a sustainable, well-planned aged care funding solution.
Making the move
Usually, a person’s home is exempt from the Age Pension assets test but once it’s sold, the cash is then assessed as an asset, which may reduce pension payments.
There are several exemptions to this rule. For example, if you move into aged care due to illness, your home may remain exempt from the assets test for up to two years and won’t be counted as an asset if your partner is still living there.
In addition to the Age Pension means test, the types of fees and how much you pay for an aged care home bed also depend on an assessment of your income and assets. The aged care means test considers both your income and assets to determine how much government subsidy you receive and what you will pay in care fees.
Options for managing the proceeds of a sale
Once your family home is sold, the sudden boost in cash may feel overwhelming. With good advice, the funds can be used to improve cash flow, reduce ongoing costs and preserve as much of the pension and aged care subsidy as possible.
Here are some of the options:
1. Paying the RAD
Paying the full RAD means you don’t have to pay the daily accommodation fees (DAP), which can total hundreds of dollars per day. However, the RAD is considered an asset in the aged care means assessment, even if it is paid by a family member, which may affect your fees. At the same time, a RAD may improve Age Pension eligibility for some people, making it a useful tool for managing both care costs and financial planning.
2. Paying a part RAD and part DAP
You can tailor your payment arrangement to suit your needs by paying part of the accommodation deposit and covering the balance with a reduced daily fee. This can provide you with greater flexibility and keep more cash available for living and medical expenses.
3. Making a downsizer super contribution
If you’re aged over 55, up to $300,000 can be contributed to super after selling the family home, which may be a more tax-effective environment. There is no maximum age for making a downsizer contribution, despite normal super rules preventing most voluntary contributions after age 75.
Your super balance is also assessed as part of the means test for both the Age Pension and aged care fees.
4. Renting the home instead of selling
This option might suit you if you want to keep the property in your family. While the rental income will be counted as part of the income test, depending on how you pay for your aged care accommodation, there may be some exemptions from means testing.
Next steps
In summary, selling your family home can affect both Age Pension entitlements and aged care means testing, potentially increasing costs and reducing your available benefits.
The key is ensuring the proceeds are used strategically. With careful planning, you’re able to navigate this transition in a way that protects income, manages aged care costs and ensures you’re entering care with the financial resources that you need.
During what is often an emotional and time‑sensitive period, the decisions involved can be complex. Seeking the right advice can help you make informed choices. If you would like guidance tailored to your circumstances, speak with your local Nexia Adviser today.
