July 2020

Is the family home an assessable asset?

The treatment of the family home for asset testing affects aged care fees and any ongoing social security entitlements.  For this reason, it is important to be aware of the specific tests for asset test exemption that are applied to the family home for both aged care and social security.

An individual’s assets are assessed by Centrelink for aged care entry and ongoing fees as well as determining eligibility for social security entitlements.

Social security

The value of any right or interest an individual has in their principal home is not counted in the social security assets test.

Two year social security asset test exemption

If a person vacates their principal home to enter a care situation, the home generally continues to be an exempt asset under the assets test for two years from the time of entering care.  This provision applies irrespective of whether the person intends to return to their principal home.

A care situation includes:

  • community based care
  • long term hospital stay, or
  • residential care.

What happens after two years?

If, after two years, the person has not returned to their principal home, and does not qualify for the indefinite exemption:

  • the person is treated as a non-homeowner, and
  • the principal home is an assessable asset 

As a consequence:

  • Age Pension may be significantly reduced, and
  • eligibility for a Pensioner Concession Card or a Health Care Card may be impacted.

Indefinite social security asset test exemption

If an individual leaves their family home to enter a care situation, the home will continue to be recognised as their principal home (and continue to be excluded from asset assessment) for social security purposes for any period during which it is the principal home of the individual’s partner.

The home may also be exempt indefinitely for an individual who entered care prior to 1 January 2017, provided they pay all or part of their accommodation costs by daily accommodation contribution or daily accommodation payment and rent the residence to another person.

Is the rental income assessed in the above situations?

Rental income may be exempt under the income test for an individual who entered care prior to 1 January 2017 if they are  paying a daily accommodation contribution or daily accommodation payment.

Otherwise rental income is generally assessed. This includes a situation where an individual’s home is exempt from the assets test under the two year exemption but they do not qualify for the indefinite assets test exemption.

Aged care

Unlike social security, for aged care purposes, the family home is generally counted as an asset, unless specific criteria are met for exempting the home (these criteria are discussed below). 

Assessment of an individual’s assets determines the amount of accommodation contribution or payment and means tested care fee that applies to an individual upon entering an aged care facility. This means it may be beneficial for the individual to undergo means testing for aged care purposes, even if they are not social security recipients.

Aged care asset test exemption

The value of the family home may be exempt where, at the time of assessment, the home was occupied by:

  • the partner or a dependent child of the individual, or
  • a carer of the individual who had occupied the home for the past two years and was eligible to receive an income support payment at the time, or
  • a close relation of the individual who had occupied the home for the past five years and was eligible to receive an income support payment at the time.

A partner includes a person who is legally married to another person, a de-facto partner and a person in a registered relationship.  The partner must not be living separately and apart from the other person on a permanent basis.

A dependent child must be under 16 years of age or under 25 years of age and in full-time education at a school, college or university. Additional criteria apply.

A close relation includes a parent, sister, brother, child or grandchild of the person.

Income support payments include: age or service pension, carer payment (but not carer allowance), disability support pension, invalidity service pension, sickness allowance and Newstart Allowance (this list is not exhaustive).

What if the home is not exempt from the aged care assets test?

If a person’s home is assessed as an asset (ie no exemption applies), the value of the home that is counted as an asset will be capped at the ‘maximum home value’. The value of the home that exceeds the cap is disregarded.

The maximum home value is $171,535.20 (as at 20 March 2020). This cap applies separately to both members of a couple.

Is rental income assessed for aged care?

Where an individual entered aged care prior to 1 January 2016 and is paying a daily accommodation contribution or daily accommodation payment, any rent from the individual’s principal home is not counted as income for aged care means testing purposes.

Otherwise rental income from the former home is generally assessed.

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Macquarie Investment Management Limited (MIML) ABN 66 002 867 003 AFSL 237 492 is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959, and MIML’s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542.  Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIML.

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The information provided is not personal advice. It does not take into account the investment objectives, financial situation or needs of any particular investor and should not be relied upon as advice.  Any examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental. 

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