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Moving into aged care, and the financial decisions you make at this time can both increase and decrease your age pension – so it’s important to know how this works.

The family home in most circumstances is exempt from any assets or income testing that apply to working out your age pension entitlement. What you decide to do with the home when you move into care can therefore have a big impact on your age pension.

If you move into care as a member of a couple, but your spouse remains in the home, it’s still an exempt asset. If somebody else lives in the house and it isn’t rented out, you may also be eligible to continue the exemption for a further two years.

If you are selling the home or renting it out, however, your home moves from being an exempt asset into becoming an assessable asset, with the value of the property counting towards the assets test, and any rental income counting towards the income test. If you’ve sold the property and put the proceeds into financial investments such as a bank account or investments, these count towards the asset test and deemed income will be counted towards the income test.

You should know that there were further exemptions that applied to people who entered care before 1 January 2017 and had rented out the family home – you should seek further advice if this applies to you.

Some of the payments that you make when entering into aged care offer exemptions from the assets and income tests that apply to your age pension.

Related content: How does aged care income and asset testing work?

For example, when you move into care you’ll need to make an accommodation payment either in a lump sum or as a regular payment. If you choose the lump sum option this is known as either a Refundable Accommodation Deposit (RAD) or Refundable Accommodation Contribution (RAC). Both of these are exempt assets, so they don’t count towards the asset test and there is no income deemed applied.

All of these changes could even mean somebody who previously wasn’t eligible for any pension may become eligible for age pension once they’ve moved into care.

The other major change applies to couples when one member enters into residential care. In this case, you go from being assessed as a couple to an illness-separated couple. This means that you are entitled to a higher level of age pension (you both receive the single age pension each).

This can mean that for a couple that was previously receiving a part pension, they may receive higher payments, or a couple who was not quite eligible for any age pension payments in the past becomes eligible for a part-pension.

If you’re not sure about how this might apply to you, it’s a good idea to either book in a session with a Centrelink Financial Information Service Officer who can help you calculate what might happen to your age pension, or seek financial advice that takes into account your age pension entitlements along with your care fees and other financial matters.

General advice only

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Michael Miller is an Authorised Representative of GWM Adviser Services Limited ABN 96 002 071 749, trading as MLC Advice an Australian Financial Services Licensee, Registered office at 105 –153 Miller St North Sydney NSW 2060 and a member of the National Australia group of companies.

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Michael Miller
Michael Miller is a CERTIFIED FINANCIAL PLANNER™ and Principal of MLC Advice Canberra. He has authored financial planning texts for LexisNexis Australia and regularly provides advice to individuals and their families on how to fund and understand care fees when moving into residential aged care.