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Keeping the family home when moving into aged care: what it really means

Last updated: 12 February 2026. This article is general information only and doesn’t consider your personal circumstances. Rules and thresholds change. Confirm details with Services Australia, My Aged Care and (where relevant) the Department of Health, Disability and Ageing before acting.

Keeping the family home when moving into aged care can protect stability and buy time — but it can also quietly increase costs and complexity if you don’t plan for the pension rules, aged care means testing, and cashflow pressures. Many families are told “the home is exempt,” then later discover that outcomes depend on timeframes, whether a spouse remains living there, and whether the home is rented or eventually sold.

This pillar guide explains the key rules and trade-offs, plus a practical framework to decide whether to keep the home empty, rent it, or sell it — and how that decision links to RAD/DAP and aged care fees.

Key takeaways (save this)

There are three “keep the home” pathways: keep it empty, rent it out, or keep it because a spouse remains living there (each produces different outcomes).
Care situation rule: Services Australia says a former home may be exempt from the Age Pension assets test for 2 years in certain care situations; after that it may become assessable and you may be treated as a non-homeowner.
Partner-at-home exception: the DSS Social Security Guide explains the home can remain exempt while a partner continues to live in it.
Rent changes the pension and tax picture: Services Australia states rent counts in the income test, and the ATO requires rental income to be declared.
Aged care fees are a different system: aged care uses a separate means assessment (not identical to Centrelink rules).
The home decision and RAD/DAP are linked: keeping often means smaller RAD/more DAP; selling can fund a larger RAD but may reduce pension.
Be very cautious with transfers/gifting: deprivation rules and broader legal/tax risks often make outcomes worse.

If you want the detailed “home rules” hub (including protected person concepts and what changes when circumstances change), read:
The family home when moving into care.

What “keeping the family home” really means

In practice, keeping the family home when moving into aged care usually means one of three pathways:

Keep it empty (no rent, no sale yet)
Rent it out (generate income while retaining ownership)
Keep it because a spouse/partner remains living there (common in couples)

Each pathway affects cashflow and means testing differently — which is why “the home is exempt” is not a complete answer.

Keeping the family home when moving into aged care: Age Pension rules

The 2-year care situation exemption

Services Australia states that if you leave your principal home due to illness and enter a care situation, your home may be exempt from the Age Pension assets test for 2 years from the date you enter care. Once the 2-year period expires, the home may be assessed as an asset and you may be assessed as a non-homeowner. See:
Services Australia: real estate assets (care situation).

The DSS Social Security Guide confirms the policy position and explains the home can become assessable after the 2-year period if the person has not returned. See:
DSS Guide: exempting the principal home – care situations.

Why this matters (the “silent cliff”)

If no spouse remains in the home, families can unintentionally hit the end of the exemption period without a plan. A strong approach is to decide early whether keeping the home is a short-term holding strategy (to buy time) or a long-term strategy (and how it will be funded).

If a spouse remains at home (the biggest exception)

The DSS Social Security Guide explains that if a partner continues to live in the home, the home can remain exempt while the partner continues to live there. See:
DSS Guide: exempting the principal home – partner remains.

For couples, the home decision is usually less about “optimising fees” and more about protecting the at-home partner’s security and cashflow. Read this companion pillar:
Moving into aged care with a partner still at home.

Option 1: Keep the home empty (no rent)

Keeping the home empty can be a deliberate “buy time” strategy while you confirm care needs, the right facility, and the longer-term plan.

When it can suit

the care timeframe is uncertain (short stay vs long stay not yet clear)
the family is emotionally not ready to sell
selling now would likely be rushed or poorly timed

Trade-offs to plan for

Holding costs: rates, insurance and maintenance continue with no offsetting income.
Funding pressure: DAP and fees may need to come from savings, pension or investments.
Time risk: if the 2-year exemption applies, plan well before the “two-year point”.

Option 2: Rent the home (income + consequences)

Renting can improve cashflow, but it typically changes Age Pension and tax outcomes and adds landlord/admin load.

Rental income and the Age Pension income test

Services Australia states that lease or rent money you receive from a property you own counts in your income test. See:
Services Australia: real estate income.

Rental income is taxable

The ATO explains you must declare rental income you receive in your tax return (based on legal ownership). See:
ATO: rental income you must declare.

Admin burden and decision authority

Property decisions don’t pause just because someone enters care. If an attorney is signing leases, approving repairs, or managing a property manager, make sure authority is in place:
Power of attorney and aged care.

For a detailed comparison of renting vs selling (including pros/cons and typical scenarios), see:
Renting vs selling the family home.

Option 3: Sell later (what changes)

Keeping the home often delays the decision rather than removing it. When you eventually sell, proceeds usually become cash/investments, which are often assessable under the Age Pension means tests (assets test and deeming/income test). This is why selling can reduce or cancel Age Pension for some people when the home was previously exempt.

CGT considerations if you rent first

If you rent out a former home then sell later, CGT main residence rules may become relevant. The ATO explains treating a former home as the main residence (including the “6-year rule” concept where conditions are met). See:
ATO: treating former home as main residence.

Practical warning: tax outcomes depend on timing and personal circumstances. Consider tax advice before committing to a long rental pathway.

Aged care means assessment: why outcomes differ

A common mistake is assuming “Centrelink rules = aged care fee rules”. They are separate systems.

My Aged Care explains that a means assessment is used to determine what you may pay and what government support applies. See:
My Aged Care: means assessments for residential aged care.

The Department of Health explains the means assessment and that it determines eligibility for government support with means-tested fees and accommodation costs. See:
Department of Health: means assessment.

To understand the broader fee picture (in plain English), these support pages help:

How the home decision links to RAD vs DAP

For many families, the home decision is driven by accommodation funding:

Selling often enables a larger RAD, reducing DAP exposure.
Keeping often leads to a smaller RAD (or delay) and more reliance on DAP and ongoing income.
Renting can support DAP cashflow — but may reduce pension and has tax/admin implications.

Useful companions:

Worked example (simple numbers)

Example only: numbers are simplified to show decision flow and are not based on current thresholds. Confirm your own position before acting.

Scenario

Mum moves into permanent residential aged care.
No spouse remains living in the home (home is empty).
Family must fund accommodation costs (RAD/DAP) and ongoing fees.

Option A: Keep the home empty for 12 months

Pros: buys time; avoids rushed sale; keeps flexibility.
Cons: holding costs continue; DAP/fees funded from other assets; plan for the 2-year point if relevant.

Option B: Rent the home

Pros: rental income helps cashflow and DAP.
Cons: rent counts in income test; taxable income; landlord/admin burden.

Option C: Sell the home and pay more RAD

Pros: larger RAD can reduce DAP and stabilise cashflow; simpler admin.
Cons: sale proceeds become cash/investments and may reduce pension; less flexibility later.

Takeaway: the “best” choice is often the one that keeps cashflow stable, avoids forced decisions, and protects flexibility if circumstances change.

Decision framework (quick way to choose)

Is a spouse/protected person living in the home? If yes, prioritise security and cashflow.
Do you need capital now? RAD, debt clearance, or a buffer.
Can you tolerate landlord risk and admin? If not, renting may backfire.
What is your timeframe? short, long, or uncertain (and what happens at the 2-year point)?
How will this affect RAD/DAP? decide accommodation strategy alongside the home decision.

Common mistakes

Assuming the home is “exempt forever” regardless of circumstances.
Renting without modelling the pension income-test impact and tax obligations.
Paying a full RAD after selling the home and becoming cashflow tight later.
Transferring/gifting the home to children “to protect it” without understanding deprivation risks.
Not updating powers of attorney before urgent property and care decisions are required.

If gifting/transfers are being discussed, read this first:
Gifting & deprivation rules.

Step-by-step checklist

Confirm the care situation rule and timing:
Services Australia.
If a spouse remains at home, confirm the exemption position:
DSS Guide.
If renting, confirm income-test and tax impacts:
Services Australia /
ATO.
Start the aged care means assessment process:
My Aged Care.
Decide RAD/DAP with liquidity in mind:
RAD & DAP guide.
Update legal authority and documents:
Power of attorney guide.

FAQs

Is the family home exempt from the Age Pension assets test when I go into care?

Services Australia states the principal home may be exempt from the assets test for 2 years in certain care situations. After that, it may become assessable and the person may be treated as a non-homeowner. Always confirm the rule as it applies to your circumstances.

What if my spouse stays living at home?

The DSS Social Security Guide explains the home can remain exempt while a partner continues to live in it. Couples should prioritise the at-home partner’s security and cashflow.

If we rent the home, will that reduce the Age Pension?

It can. Services Australia states rent counts in the income test. The actual impact depends on your overall income and assets.

Does keeping the home affect aged care fees as well?

It can. Aged care fees are assessed under a separate means assessment system. Who remains living in the home and how it is used can change outcomes.

Should we transfer the home to children to protect it?

This can be high risk. Deprivation rules and broader legal/tax issues can create worse outcomes. If this is being considered, read:
Gifting & deprivation rules.

What to do next

Keeping the family home when moving into aged care is rarely about one rule. It’s about how the home decision interacts with pension means testing, aged care fees, accommodation strategy (RAD/DAP) and family cashflow over time.

General advice only: This information is general in nature and doesn’t consider your objectives, financial situation or needs. Aged care and Centrelink rules can change—confirm details with Services Australia/My Aged Care or seek personal advice.

If you want “keep vs rent vs sell” mapped to your numbers (pension, aged care fees, RAD/DAP and cashflow), we can do this entirely online and provide a clear, documented decision framework.