Key Points

  • The Australian Government cannot force you to sell your home to pay for aged care.
  • Your home is exempt from the means test if a spouse, partner, or protected person still lives there.
  • Choosing a Daily Accommodation Payment (DAP) instead of a lump sum lets you keep your home while paying for care from income.
  • Renting your home, family arrangements, and reverse mortgages are all legitimate alternatives to selling.
  • Gifting your home to family members does not work due to strict deprivation rules that count the asset for up to five years.
  • Getting independent financial advice before entering care is one of the best investments you can make.

Can They Really Make Me Sell My House for Aged Care?

The short answer is no. The government cannot force you to sell your home. However, whether your home is counted as an asset in the aged care means test can significantly affect the fees you pay. Understanding the rules is the key to keeping your home and still getting the care you need.

The means test looks at both your income and your assets to calculate how much you contribute toward your care. Your home is likely your largest asset, but it is not always counted. The rules change depending on who is living in the home and how you choose to pay for your accommodation.

How Your Home Is Assessed in the Means Test

The government uses a means test to determine your contribution to aged care costs. It assesses your income and assets. Your home is treated differently depending on your personal circumstances.

When Your Home Is Exempt

Your home is a fully exempt asset and not counted in the means test when:

  • Your spouse or partner remains living there. This is the most common exemption. The home is fully protected regardless of its value.
  • A protected person occupies the home. This includes a close relative who has lived in the home for at least five years and receives a government income support payment, or a carer who has lived there for at least two years and receives a carer payment.
  • You are within the two-year exemption period. If you are single and move into residential care, your home is exempt from the assets test for the first two years.

When Your Home Is Assessed

After the two-year exemption period expires for single homeowners, the home enters the assets test at a capped value. As of 2026, this cap is set well below the market value of most Australian homes. This means even when your home is assessed, only a portion of its value affects your fees.

Your SituationHow Your Home Is Assessed
Spouse or partner remains in the homeFully exempt, not counted
Protected person remains in the homeFully exempt, not counted
Single, first two years in careExempt from assets test
Single, after two years in careCapped value included in assets test
You rent out the home (paying DAP)Home may remain exempt; rental income counted in income test

Six Options to Avoid Selling Your Home

You have several legitimate strategies to keep your home while funding aged care. The right choice depends on your financial situation, family circumstances, and long-term goals.

Option 1: Choose a Daily Accommodation Payment (DAP)

The DAP is one of the most effective tools for keeping your home. Instead of paying a large lump sum upfront (the Refundable Accommodation Deposit or RAD), you pay a smaller daily fee calculated using the Maximum Permissible Interest Rate (MPIR).

As of March 2026, the MPIR is 8.36% per year. For a room with a RAD of $500,000, the equivalent DAP would be approximately $114.52 per day.

Why DAP works:

  • You avoid selling assets to fund a large lump sum.
  • You can fund the daily payment from pension, rental income, or savings.
  • Your home may remain an exempt asset.
  • You preserve the property for your family.
  • You avoid making rushed property sale decisions during a stressful time.

Option 2: Rent Out Your Home

Renting your home while you are in residential care generates income to cover your DAP and other costs. This is one of the most popular strategies for single homeowners entering care.

How renting affects your finances:

  • Rental income is counted in the income test, which may reduce your Age Pension.
  • Rental income can be used to pay your DAP directly.
  • The home itself may remain exempt from the assets test while you are paying via DAP.
  • You retain ownership and any future capital growth.

Before renting, consider the costs of property management (typically 7% to 10% of rental income), maintenance, insurance, and potential vacancy periods. Factor these into your calculations when comparing options.

Option 3: Combination Payment (Part RAD, Part DAP)

You do not have to choose between a full RAD or full DAP. A combination payment lets you pay part of your accommodation as a lump sum and the rest as a daily fee.

For example, on a $500,000 RAD room, you could pay $200,000 as a partial RAD and the remaining $300,000 equivalent as a DAP of approximately $68.71 per day. This reduces your daily costs without requiring a full property sale.

This approach works well if you have some savings or other liquid assets but do not want to sell your home.

Option 4: Family Arrangements

Families sometimes set up arrangements where adult children help fund care costs. Common approaches include:

  • Family members pay the DAP on behalf of the parent, either from their own income or by contributing to a shared family fund.
  • A family member moves into the home, which can make it an exempt asset if they qualify as a protected person.
  • Granny flat interest arrangements, where you pay to live in a family member’s home before entering care. This has specific rules under the Social Security Act and must be structured carefully with legal advice.

Important: Do not confuse family arrangements with gifting. If you transfer ownership of your home to a family member without receiving fair market value, Services Australia will treat it as a deprived asset. The value will remain in your means test for up to five years, and you will lose legal ownership of the property.

Option 5: Reverse Mortgage

A reverse mortgage allows you to borrow against the equity in your home without selling it. You receive funds (as a lump sum, regular payments, or line of credit) and the loan is repaid when the home is eventually sold, typically after your death or when you move permanently.

Key considerations:

  • Interest compounds over time, which reduces the remaining equity in your home.
  • The Australian Government’s Negative Equity Protection means you will never owe more than the home is worth.
  • Reverse mortgage funds could be used to pay a partial RAD, reducing your DAP.
  • The borrowed amount may be assessed in the means test, so get advice before proceeding.
  • The Australian Securities and Investments Commission (ASIC) requires lenders to provide projections showing how the loan will grow over time.

Reverse mortgages are regulated financial products. Only use lenders authorised by ASIC, and get independent legal and financial advice before signing.

Option 6: Home Equity Access Scheme (Government Option)

The Home Equity Access Scheme (formerly the Pension Loans Scheme) is a government-run alternative to commercial reverse mortgages. It allows older Australians to access a voluntary, non-taxable fortnightly loan using the equity in their home.

How it works:

  • Available to Age Pension recipients and self-funded retirees who own real estate.
  • The maximum combined payment (pension plus loan) cannot exceed 150% of the full Age Pension rate.
  • Interest rate is lower than most commercial reverse mortgages.
  • The loan is secured against your home and repaid when the property is sold.
  • A No Negative Equity Guarantee applies.

This scheme can supplement your income to help cover DAP costs while keeping your home.

Pension Implications: What You Need to Know

Your decision about how to handle your home directly affects your Age Pension. Here is how the main scenarios play out.

If You Keep Your Home and It Remains Exempt

Your home is not counted in the assets test, which means your pension is calculated based on your other assets only. This often results in a higher pension payment.

If You Rent Out Your Home

The rental income is assessed under both the income test and the aged care income test. This may reduce your Age Pension. However, you gain rental income that can offset your DAP and other living costs. The net effect depends on how much rent you receive and your other income.

If You Sell Your Home

The sale proceeds become a financial asset. They are assessed under both the assets test and the income test (via deeming). This can significantly reduce or eliminate your Age Pension and increase your aged care fees.

If You Use a Reverse Mortgage

The loan amount may be assessed differently depending on how you use it. If you use the funds to pay a RAD, the RAD itself is an exempt asset for means test purposes (but counts for the accommodation payment calculation). Get professional advice to understand how this applies to your situation.

Australian law provides several protections for aged care residents and their homes.

The Two-Year Exemption Rule

When a single homeowner enters residential aged care, their home is exempt from the assets test for two years from the date they enter care. This gives you time to decide what to do with the property without financial pressure.

The Assets Test Cap

After the two-year exemption ends, only a capped portion of your home’s value is included in the assets test. The cap is set at a level that is well below the market value of most Australian homes. This limits the impact on your fees even when the home is assessed.

Protected Person Rules

If a protected person lives in your home, it remains exempt from the assets test indefinitely. Protected persons include:

  • Your spouse or partner (including de facto and same-sex partners).
  • A close relative who has lived in the home continuously for at least five years and receives an income support payment.
  • A carer who has lived in the home continuously for at least two years and receives a carer payment or carer allowance.

Financial Hardship Assistance

If you are struggling to pay your aged care fees after exploring all options, you can apply for financial hardship assistance through My Aged Care. The Department of Health and Aged Care can reduce or waive certain fees if paying them would leave you in financial hardship. This is a safety net that ensures nobody is denied care because they cannot afford it.

Deprivation Rules (Why Gifting Does Not Work)

Services Australia has strict rules about disposing of assets below market value. If you give away your home or sell it for less than it is worth within five years of entering care:

  • The difference between market value and what you received is treated as a deprived asset.
  • The deprived amount is included in your means test for five years.
  • You may end up paying higher fees without the benefit of owning the asset.
  • There is a gifting free area of $10,000 per financial year (and $30,000 over five years), but this is far below any property value.

When Selling Might Be the Right Choice

While this guide focuses on keeping your home, selling is sometimes the best financial decision. Consider selling if:

  • The property requires significant maintenance or repairs you cannot manage from care.
  • The costs of holding the property (rates, insurance, maintenance) exceed the benefits.
  • You have no family members who want to live in or manage the property.
  • Selling would allow you to pay a full RAD, which avoids ongoing DAP costs and can result in lower total costs over time.
  • You want to simplify your financial affairs and reduce stress for your family.

If you do decide to sell, there is no rush. The two-year exemption gives you time to sell at a fair price rather than accepting a low offer under pressure.

Getting Professional Advice

The financial decisions around aged care and your home are some of the most consequential you will make. The rules are detailed and your situation is unique. Getting the right advice can save tens of thousands of dollars and protect your most valuable asset.

Consider consulting:

  • An aged care financial adviser accredited by the Aged Care Financial Advice Network.
  • A solicitor experienced in elder law for family arrangements and estate planning.
  • Services Australia for a means test assessment before you enter care.
  • A registered tax agent for the income and capital gains tax implications of renting or selling.

Frequently Asked Questions

Can the government force me to sell my home for aged care?

No. The Australian Government cannot force you to sell your home to pay for aged care. Your home may be exempt from the means test if a spouse, partner, or protected person lives there. Even if no one remains, the home is exempt for two years and then assessed at a capped value. You always have options such as DAP, renting, or combination payments that let you keep your home.

What is a Daily Accommodation Payment (DAP) and how does it protect my home?

A DAP is a daily fee you pay instead of a lump sum Refundable Accommodation Deposit (RAD). Choosing DAP means you do not need to sell assets to fund a large upfront payment. You can use rental income, pension, or other income to cover the daily cost while keeping your home.

What happens to my Age Pension if I rent out my house while in aged care?

Rental income is assessed under the Age Pension income test and may reduce your pension. However, the rental income can offset your Daily Accommodation Payment. You should use the aged care fees calculator or get financial advice to model the net effect on your total income before making a decision.

Can I gift my house to my children to avoid aged care fees?

This is not recommended. Services Australia applies gifting rules that treat assets given away within five years as deprived assets. The home value will still be counted in your means test, and you may face higher fees without the benefit of owning the property. You also lose legal ownership and any future control over the asset.

What is a protected person for the aged care means test?

A protected person is someone who lived in your home and receives an Australian Government income support payment such as the Age Pension or Carer Payment. This includes your spouse or partner, a close relative who lived there for five years, or a carer who lived there for two years. While a protected person occupies your home, it is fully exempt from the assets test.

Are reverse mortgages a good option to pay for aged care?

Reverse mortgages allow you to borrow against your home equity without selling. They can fund aged care costs, but interest compounds over time and reduces the estate value. The Australian Government provides a Negative Equity Protection guarantee so you will never owe more than the home is worth. Always compare the government’s Home Equity Access Scheme with commercial products before choosing.

How long do I have to decide what to do with my home after entering care?

You have at least two years. The two-year exemption rule means your home is not counted in the assets test for the first two years after you enter residential aged care. Use this time to explore renting, family arrangements, or other options without financial pressure.

What is a combination payment and who should consider it?

A combination payment splits your accommodation cost between a partial Refundable Accommodation Deposit (lump sum) and a Daily Accommodation Payment (daily fee). This suits people who have some savings or superannuation they can put toward a partial RAD but do not want to sell their home to fund the full amount. Paying a partial RAD reduces your daily cost while preserving home ownership.

Should I get financial advice before entering aged care?

Yes. The financial decisions around aged care are among the most consequential you will make. An accredited aged care financial adviser can model the impact of each option on your pension, fees, and estate. The cost of advice is typically far less than the savings it can generate. Services Australia also provides free means test estimates before you enter care.

MD Home Care is a connection platform that helps you find the right aged care providers and financial advisers. We do not charge families for our service. If you need help understanding your options for keeping your home while accessing quality care, call us on 1800 953 253 to speak with someone who can point you in the right direction.

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