Home Equity Access Scheme for Aged Care: Using HEAS to Fund Care Costs

What the Home Equity Access Scheme Is

The Home Equity Access Scheme (HEAS) — previously known as the Pension Loans Scheme — is a voluntary government loan that allows older Australians to supplement their income by borrowing against the equity in their home. Services Australia administers it, and eligibility depends on the applicant's age, pension circumstances, and the security property under the current rules.

For families navigating aged care costs, HEAS is sometimes floated as a way to generate extra income to cover daily fees without selling the family home. It can work in certain situations, but it comes with compound interest, means-testing implications, and risks that need careful evaluation before anyone signs up.

How HEAS Works

HEAS provides fortnightly payments and may allow a lump-sum advance, secured against Australian real estate owned by the applicant. The loan accumulates compound interest at the applicable government rate, which can change, so check the current rate before applying.

The amount a person can receive through HEAS depends on the maximum Age Pension rate, the applicant's existing pension income, and the HEAS rules in force when they apply. It is not a fixed aged-care allowance, so check the current Services Australia figures for the applicant's circumstances.

The loan balance (principal plus accrued interest) is secured against the property and must be repaid under the scheme's terms. Confirm the security and repayment arrangements with Services Australia before applying.

Why Families Consider HEAS for Aged Care

The appeal is straightforward: a parent entering residential aged care faces daily fees that can total $90 to $200+ per day (Basic Daily Fee plus means-tested contributions), and the family doesn't want to sell the home to fund those costs. HEAS can provide a supplementary income stream to cover some or all of these daily fees while the home is retained.

The most common scenario is a single homeowner entering care whose Age Pension alone doesn't cover the daily fees. HEAS payments can bridge the gap between pension income and the total fee burden, buying time before making irreversible decisions about the family home.

The Means-Testing Catch

Here's where HEAS gets complicated for aged care purposes. The aged care means assessment follows different rules from the Age Pension assessment, and the treatment of proposed HEAS payments should be confirmed with Services Australia before relying on them in a fee calculation.

Do not assume that HEAS payments will either be ignored or treated as ordinary income for the resident's aged care means assessment. Confirm the treatment of the payments and secured debt before modelling any effect on the Hotelling Contribution or Non-Clinical Care Contribution.

Families need to model both sides: how much usable cash flow the HEAS payments provide and how the scheme is treated in the aged care means assessment. An aged care financial adviser can help run these numbers after the treatment is confirmed.

HEAS vs Selling the Home

The decision isn't simply HEAS or sell — it's a spectrum of timing and strategy:

Keeping the home + HEAS works when the resident's stay is expected to be relatively short (one to three years), the home has a protected person living in it (making it an exempt asset anyway), or the family wants to delay the sale decision while stabilising the care situation.

Selling the home might be better when the accumulated HEAS interest would erode a significant portion of the home's equity, when the resident's likely stay is long, or when the sale proceeds can be used to pay a RAD (which is exempt from the Age Pension assets test, though still assessable for aged care means testing).

Neither — some families find that the Age Pension plus existing savings cover the daily fees without needing to tap home equity at all, particularly for full pensioners whose means-tested contributions are minimal.

The Compound Interest Problem

The HEAS debt grows through interest on the outstanding balance. Because the borrower may also draw new payments while interest accrues, the total debt can accelerate.

After several years of draws, the balance depends on the amount and timing of withdrawals, the applicable rate, and the borrowing limit. That debt reduces the eventual sale proceeds of the home and therefore the estate.

For families where preserving the estate is important, HEAS represents a trade-off: access to immediate cash flow at the cost of future inheritance. Compound interest over several years is still compound interest.

Eligibility Requirements

To qualify for HEAS, the applicant must:

• Be Age Pension age or older
• Own real property in Australia to use as security (the home being entered for care can qualify, but it must have equity)
• Not already have a debt exceeding the maximum loan amount

The property used as security doesn't have to be the home the person lives in. An investment property or a property connected with a partner may be relevant, but confirm ownership and consent requirements with Services Australia.

The application is submitted to Services Australia, and the property must be valued. Processing time varies, so allow for it when planning cash flow.

When HEAS Doesn't Make Sense for Aged Care

HEAS is unlikely to be the right tool when:

• The daily fees are high and the stay is expected to be long. The compound interest erodes the benefit over extended periods.
• The home will be sold anyway. If the family plans to sell within six to twelve months to fund a RAD, taking on HEAS debt in the interim adds unnecessary interest costs.
• The resident qualifies for financial hardship assistance. The Department of Health can reduce or waive means-tested fees for residents who genuinely cannot afford them — and that's free, unlike HEAS.
• The borrowing produces an aged-care assessment outcome the family has not confirmed, so the proposed treatment should be checked before relying on the income boost.

Getting the Numbers Right

HEAS sits at the intersection of pension rules, aged care means testing, and property equity — three systems that each have their own assessment logic. The wrong assumption about how HEAS income is treated can turn what looks like a good strategy into a costly one.

Our Paying for Residential Aged Care guide includes a Family Home Strategy Worksheet that maps out the financial implications of keeping, selling, or borrowing against the home — including the questions to take to Services Australia about how HEAS may affect the aged care means assessment. It's designed to help families compare scenarios with real numbers before committing.

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