Selling Family Home for Aged Care Australia: What You Need to Know

The Decision That Changes Everything

When a parent enters residential aged care and no one is living in the family home, families face one of the most consequential financial decisions of the transition: sell the home, rent it out, keep it vacant, or have a family member move in.

Each option triggers different assessments under the Age Pension assets test and the aged care means test — and making the wrong choice can cost tens of thousands of dollars per year in higher fees or lost pension entitlements.

What Happens If You Keep the Home Vacant

If no "protected person" lives in the family home, the property is assessed as an asset — but not at its full market value.

For aged care means-testing: From Day 1 of entering permanent care, the home is assessed at the home exemption cap of $214,884 (as of March 2026). A $1.5 million home and a $300,000 home are both assessed at $214,884 for aged care fee purposes. Any value above the cap is excluded.

For Age Pension purposes: The home remains exempt from the pension assets test for exactly two years from the date of entry. During this period, the resident retains their homeowner status and pension entitlements remain unchanged. On the first day of year three, the full net market value of the property becomes assessable — which, for most Sydney or Melbourne homes, will reduce or eliminate the Age Pension entirely.

The two tests operate independently. There is no automatic increase in aged care fees after two years — the capped assessment of $214,884 stays in place indefinitely for aged care purposes. The two-year cliff applies only to the pension.

This means keeping the home vacant is often the cheapest option for aged care fees in the short to medium term, but the pension impact after two years can be severe.

What Happens If You Sell

Selling the family home converts a capped asset into fully assessable cash. The net sale proceeds enter the aged care means assessment; for the Age Pension assets test, any portion immediately used to pay a RAD is exempt, but the remaining cash is assessable.

The consequences cascade:

• Age Pension — surplus cash above the pension assets test threshold will likely reduce or cancel the pension, even within the first two years.
• Aged care means-tested fees — the increased assessable assets push up the Means-Tested Amount, which can trigger or maximise the Hotelling Contribution and the NCCC.
• The one exception: any portion of the sale proceeds used to pay a Refundable Accommodation Deposit (RAD) is exempt from the Age Pension assets test — but it remains assessable for aged care means-testing. So a RAD reduces the pension hit but does not reduce aged care fees.

A family that sells a home worth $1.2 million and pays a $500,000 RAD would have $700,000 in cash entering the pension assets test (plus the RAD exempt from pension) and $1.2 million entering the aged care means test ($500,000 RAD + $700,000 cash). Compare this to keeping the home, where aged care assesses only $214,884 and the pension exempts the home for two years.

What Happens If You Rent It Out

Renting the home creates a steady income stream but has immediate assessment consequences:

• Age Pension — the home is assessed as an investment asset immediately (the two-year exemption for vacant homes does not apply if the home is rented). Net rental income is also counted under the income test.
• Aged care means-testing — the home is assessed at the capped value of $214,884 (same as a vacant home). However, rental income is fully assessable under the income test, which can increase means-tested fees.
• Ongoing costs — property management fees (typically 8–10% of rent), maintenance, insurance, and council rates reduce the net yield.
• Capital Gains Tax — if the property has been rented for an extended period before eventual sale, CGT may apply on the capital gain from the date the home lost its main residence exemption.

Renting preserves the asset and the $214,884 cap but introduces assessable income that can increase daily fees and reduce pension entitlements.

What Happens If a Family Member Moves In

This is the most powerful protection — if the family member qualifies as a "protected person" under the legislation. If they do, the home is assessed at $0 for aged care means-testing purposes. The criteria are strict:

• Spouse or de facto partner — must continue living in the home. No time requirement. The home is fully exempt indefinitely for both pension and aged care tests.
• Eligible carer — must have lived in the home with the care recipient for at least two years before they entered care, and must be eligible for a Centrelink income support payment (Age Pension, Carer Payment, JobSeeker, etc.).
• Close relative (parent, sibling, child, or grandchild) — must have lived in the home for at least five years before the care recipient entered care, and must be eligible for income support.

The co-residence and income-support eligibility requirements are verified by Services Australia. If the protected person later vacates the home or passes away, the exemption ceases immediately, and the property must be declared within 14 days.

Which Option Is Right?

There is no universal answer — the right decision depends on the resident's asset profile, pension status, expected duration of care, and family circumstances. But the general principles are:

• Don't rush to sell. The home exemption cap ($214,884) is a significant protection that is permanently lost upon sale.
• Model the two-year pension cliff. If the resident is likely to stay in care beyond two years and the home is vacant, the pension loss at the two-year mark needs to be factored in.
• Consider the RAD offset. If sale proceeds will fund a RAD, the pension exemption on the RAD partially compensates for the loss of the home cap — but aged care means-tested fees will still increase.
• Get the timing right. If selling is the right decision, timing the sale to coincide with the accommodation payment deadline (within six months of entry) minimises the period of paying a DAP on the full room price.

The Paying for Residential Aged Care guide includes a structured decision framework for the family home, covering each scenario's impact on pension, fees, and long-term cost projections.

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