For many Australians, the family home is their most valuable asset. When a person moves into residential aged care, deciding whether to sell, rent out or retain the property can affect aged care costs, Age Pension entitlements and capital gains tax (CGT). Importantly, these three assessments operate under different rules: a home may be exempt under one system but assessable under another.
1. Residential aged care: how the home is assessed
For the residential aged care means assessment, a former home may be exempt if a qualifying protected person continues to live there. Protected persons can include a spouse or partner, a dependent child, or an eligible carer or close relative who meets the relevant residence and income-support conditions. For example, a carer generally needs to have lived in the home for at least two years, and a close relative for at least five years; residence alone does not necessarily establish eligibility.
Where the home is not exempt, its assessable value is generally limited to the lower of its net value and the home exemption cap. The Australian Government schedule effective 20 September 2026 confirms a cap of $219,858.40. The schedule states that the cap applies separately to both members of a couple. This is a cap on the amount counted for the relevant aged care assessment—not a limit on the market value of a home a person may own or retain.
A resident’s income, other assets and applicable fee arrangements also affect their contributions. Different fee and accommodation arrangements apply depending on the resident’s circumstances and the rules under which they entered care, including the arrangements introduced on 1 November 2025. Rental income from the former home may also be relevant to the income assessment.
2. Centrelink: a different assets test
The principal home is generally exempt from the Age Pension assets test while it remains the person’s principal residence. Where a person leaves home to enter an eligible care situation, a former-home exemption may continue for up to two years, subject to the applicable conditions. If a partner remains living in the home, different continuing exemption rules may apply.
After an applicable exemption ends, the property may be included at its assessable value and the person’s homeowner status may change. This matters because the Age Pension assets-test thresholds differ for homeowners and non-homeowners. Rental income can be assessable under the income test even during a period when the home remains exempt under the assets test.
3. Capital gains tax: the main residence rules
The Australian Taxation Office applies separate main residence exemption rules. If a former main residence is not used to produce income, an eligible owner may generally continue treating it as their main residence for CGT purposes indefinitely under the absence rule. If the home is rented or otherwise used to produce assessable income, the owner may generally choose to continue treating it as their main residence for up to six years for that period of absence.
These outcomes are not automatic. Eligibility, prior use of the property, other properties treated as a main residence, and any periods beyond the permitted absence can affect the result. Where a home is first used to produce income, special market-value cost-base rules may also be relevant. Tax advice should be obtained before renting or selling.
4. Comparing the options
| Situation | Aged care assessment | Centrelink Age Pension | Potential CGT outcome |
| Protected person remains | Home may be exempt | Home may remain exempt | Main residence exemption may apply |
| Home retained vacant | Home may count, subject to cap | Possible care-related exemption; later assessable | Absence rule may allow continued exemption |
| Home rented out | Capped home value may count; rental income relevant | Property and rental income assessed under separate tests | Six-year absence rule may apply |
| Home sold | Proceeds may affect means assessment | Proceeds generally assessable unless an exemption applies | Main residence exemption may apply |
This table is a general guide only. The applicable assessment depends on the person’s circumstances, the date and nature of entry to care, and relevant eligibility requirements.
5. What should families consider before deciding?
Selling the home may release funds to pay a refundable accommodation deposit or meet other care costs. Renting it out may provide income while retaining the property, but can affect means assessments and tax. Leaving it vacant may preserve flexibility, while still involving rates, insurance and maintenance costs. There is no single strategy that suits every family.
A useful comparison should model the resident’s accommodation payment options, ongoing aged care contributions, Age Pension position, cash flow, potential CGT and estate planning objectives before a decision is made.
How Paris Financial Services can help
At Paris Financial Services, we help individuals and families understand the financial implications of entering residential aged care. Specialist aged care financial advice can compare the consequences of retaining, renting or selling the family home and help develop a strategy aligned with care needs, financial resources and family priorities.
Before making a decision about the family home, seek advice tailored to your circumstances.
Government reference
My Aged Care — Means assessments for residential aged care: https://www.myagedcare.gov.au/means-assessments-residential-aged-care
Services Australia — Real estate assets: https://www.servicesaustralia.gov.au/real-estate-assets
Australian Taxation Office — Treating former home as main residence: https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/treating-former-home-as-main-residence
Department of Health, Disability and Ageing — Schedule of fees and charges for residential care from 20 September 2026 (supplied schedule), pp. 2 and 4.
Paris Financial Services Pty Ltd is a Corporate Authorised Representative (No. 357928) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL No. 223135
General Advice Disclaimer:
The information in this article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives. Whilst every care has been taken in the preparation of this article, Paris Financial Services Pty Ltd, its directors, authors, consultants, editors and any persons involved in the construction of this article, expressly disclaim all and any form of liability to any person in respect of this article and any consequences arising from its use by any person in reliance upon the whole or any part of this article.
