Option A vs Option B Residential Care Subsidy NZ: Which Protects Your Home
The Choice That Decides Whether Your Home Is Safe
When one partner in a New Zealand couple enters rest home care while the other stays at home, Work and Income presents a choice that most families have never heard of: Option A or Option B. This single decision determines whether the family home is counted in the asset test, and getting it wrong can mean the difference between qualifying for the Residential Care Subsidy and paying full private fees.
How the Two Options Work
Option A excludes the principal family home and one personal vehicle from the asset assessment entirely. In exchange, the combined asset threshold is lower at $164,731 (effective 1 July 2026). Only non-home assets like savings, investments, and other property are counted.
Option B includes the family home and vehicle in the asset calculation, but applies the higher threshold of $300,811. Every asset the couple owns, including the home, is totalled against this figure.
| Option A | Option B | |
|---|---|---|
| Family home | Excluded | Included |
| Personal vehicle | Excluded | Included |
| Asset threshold | $164,731 | $300,811 |
| Gap | +$136,080 |
When Option A Wins (Almost Always)
The maths is straightforward. The difference between the two thresholds is approximately $136,000. If the family home is worth more than $136,000, excluding it under Option A saves more than the lower threshold costs.
Given that the median house price in New Zealand sits well above $500,000 in every region, Option A is the better choice for nearly all couples where a partner remains living in the home. A home worth $600,000 would add $600,000 to the Option B calculation, far exceeding the $136,080 gain from the higher threshold.
Option B only makes sense in unusual situations where the couple's home is worth very little (under roughly $136,000) or where the couple has minimal other assets and the home value would still keep them under the $300,811 combined ceiling.
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What Happens to the Partner at Home
When Option A is chosen, the partner remaining in the community is protected. The home is theirs to live in without any pressure from Work and Income to sell. Their personal vehicle is also excluded.
The at-home partner also receives a Special Disability Allowance of $51.67 per week (tax-free) to help with costs like travel to visit the partner in care. This is automatic and does not require a separate application.
If the at-home partner later needs to move into care themselves, the situation shifts to "both partners in care" and the family home becomes countable against the $300,811 combined threshold.
NZ Super and the Income Side
Once Option A qualifies the couple for the subsidy on the asset side, Work and Income assesses income to determine how much the resident contributes toward care costs. The resident's NZ Superannuation is redirected to the care facility, minus a personal allowance of $58.34 per week and an annual clothing allowance of $365.92.
The at-home partner can apply to shift from the married/couple rate of NZ Super to the single, living-alone rate, which provides a higher weekly payment.
Common Mistakes Couples Make
Rushing to sell the home. Some families assume they must sell the house to pay for care. Under Option A, the home is completely excluded. Selling it converts an exempt asset into cash, which then becomes countable.
Not realising the choice exists. Work and Income does not always clearly explain Option A vs Option B. Some families default into Option B without understanding that they had a choice that would have excluded their largest asset.
Ignoring gifting history. Even with Option A, Work and Income audits the past five years of asset transfers. Excess gifting above $8,500 per year is added back to the asset total, which can push a couple above the $164,731 threshold.
Not updating NZ Super rates. When one partner enters care, the at-home partner should promptly apply to switch to the single living-alone rate. The couple rate divided between two people in different living situations leaves the at-home partner worse off than the single rate they are entitled to.
What Happens When the At-Home Partner Also Needs Care
If the at-home partner eventually requires residential care, the couple's situation shifts to "both partners in care." The family home, which was exempt under Option A, now becomes a countable asset against the $300,811 combined threshold.
At this point, if the home value plus other assets exceeds $300,811, both partners may need to pay privately until the home is sold and assets deplete. Alternatively, if the couple's liquid assets (excluding the home) are under $30,000, the Residential Care Loan may apply.
This transition from Option A to both-in-care is a critical planning point. Families should understand that the home exemption only lasts as long as someone is living in it.
Making the Right Call
Before submitting the financial means assessment, list every asset outside the home. If that total is under $164,731, Option A qualifies you immediately and your home is safe. If it is above $164,731 but below $300,811 when the home is included, run the numbers both ways.
The NZ Residential Care Subsidy Guide includes an Option A vs Option B comparison worksheet that calculates both scenarios side by side, so you can see exactly which option protects more of your family's assets.
Get Your Free Residential Care Subsidy in New Zealand: Paying for Rest Home and Hospital Care — Quick-Start Checklist
Download the Residential Care Subsidy in New Zealand: Paying for Rest Home and Hospital Care — Quick-Start Checklist — a printable guide with checklists, scripts, and action plans you can start using today.