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Helping a parent or loved one move into residential aged care is rarely straightforward. It’s often an emotional time for families, and on top of that, there are significant financial decisions that need to be made quickly and carefully.

Questions usually come thick and fast:
How will aged care accommodation be paid for? What happens to the Age Pension? And should the family home be sold, kept, or rented?

The good news is that with the right advice, these decisions can be managed in a way that supports care needs while protecting income and reducing unnecessary costs.

The Family Home and the Age Pension

For most people, their home is not counted under the Age Pension assets test. However, once the home is sold, the cash proceeds usually are - and this can reduce or even stop pension payments.

There are important exceptions that are often overlooked. If a person leaves their home to enter aged care due to illness, the home may continue to be exempt from the asset test for up to two years. In addition, if a spouse or partner continues to live in the home, it generally remains exempt for pension assessment purposes.

Separately, aged care fees are calculated using a different means test, which looks at both income and assets to determine the level of government subsidy and how much the individual must contribute toward their care.

Understanding how these rules interact is critical before making any major decisions.

What Happens When the Home Is Sold?

Selling the home can dramatically change someone’s financial position - often turning them from “asset rich but cash poor” into having surplus funds available.

Handled well, this can improve cash flow and give greater flexibility. Handled poorly, it can increase aged care fees, reduce pension entitlements and create unnecessary stress.

Here are some of the main options families commonly consider.

Using the Sale Proceeds Wisely

1. Paying the Refundable Accommodation Deposit (RAD)

Paying a RAD upfront can significantly reduce or eliminate daily accommodation payments, which can otherwise be hundreds of dollars per day.

However, the RAD amount is counted as an asset under the aged care means test - even if the money is provided by family - which can increase ongoing care fees. In some cases though, paying a RAD can actually improve Age Pension outcomes. This balance needs to be carefully assessed.

2. Combining a RAD and Daily Payments

It doesn’t have to be an all‑or‑nothing decision. Many people choose to pay part of the accommodation deposit and cover the rest through a reduced daily fee.

This approach preserves access to cash for medical costs, contingencies and personal spending, while still lowering daily accommodation charges.

3. Making a Downsizer Contribution to Super

If eligible, up to $300,000 can be contributed to superannuation from the sale of the family home under the downsizer rules (available from age 55). Importantly, there is no upper age limit, even where normal contribution rules no longer apply.

Super may provide a more tax‑effective environment for some people, however super balances are still included in both Age Pension and aged care means testing, so this option must be approached carefully.

4. Keeping the Home and Renting It

Some families prefer to retain the property for emotional or estate planning reasons. Renting the home generates income, which is assessable under the income test, but depending on how aged care accommodation is funded, some asset concessions may still apply.

This option can be complex and should be reviewed holistically.

Getting the Balance Right

Selling the family home can increase aged care costs and reduce government support if decisions are rushed or based on incomplete information.

With careful planning, however, the proceeds can be structured to:
✔ Improve cash flow
✔ Manage aged care fees
✔ Preserve pension entitlements where possible
✔ Provide peace of mind for the family

Given the emotional pressure and tight timeframes that often accompany a move into aged care, professional advice can make a significant difference.

If you or a family member are facing these decisions, we’re here to help guide you through the options and avoid costly mistakes. Please get in touch if you’d like to discuss your circumstances.

Book a chat with Sonia