1. The Short Answer: Why You Never Have to Sell

When an elderly parent transitions into residential aged care, adult children are often overwhelmed by the myth that they must immediately sell the family home to pay a massive lump-sum room deposit.

This is completely false. Under Commonwealth aged care legislation, families have total freedom to choose how they structure their accommodation payments:

  • You can choose to pay 100% Daily Accommodation Payments (DAP), which functions like a daily rental fee and requires zero upfront cash.
  • You can retain ownership of the property, rent it to tenants, and use the rental yield to fund the ongoing daily fees.
  • If family members continue to reside in the property, it may be completely excluded from government means testing.
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Legal Protection

No Australian aged care facility has the legal power to demand that you sell your home. You have the statutory right to pay via DAP on a monthly basis.

2. The Protected Person Rules (100% Exemption)

If a Protected Person resides in the family home on the date you enter residential aged care, the property is 100% exempt from the aged care Means Assessment. Its value is treated as $0.00:

Protected Person Category Eligibility Requirement Aged Care Asset Assessment
Spouse / De Facto Partner Must be living in the home at time of entry. 100% EXEMPT ($0.00 Value)
Dependent Child Under 16 years, or 16–24 in full-time study. 100% EXEMPT ($0.00 Value)
Eligible Carer Lived in home for 2+ continuous years and eligible for an Australian income support payment. 100% EXEMPT ($0.00 Value)
Close Relative (Parent, sibling, child). Lived in home for 5+ continuous years and eligible for income support. 100% EXEMPT ($0.00 Value)

3. The $206,039.20 Statutory Asset Cap

Even if no Protected Person lives in the home (for example, a single widowed parent entering care with an empty house), the government does not count the full market value of the property in the aged care asset test.

Under the Aged Care Act, the assessable value of the principal residence is legally capped at $206,039.20 (2026 indexed rate).

Example: Mum owns a family home in Sydney valued at $1,800,000. When Services Australia calculates her Means-Tested Care Fee, the home is entered into the formula at just $206,039.20, saving her thousands of dollars annually in means-tested contributions.

4. Renting Out the Home to Pay DAP Fees

Many Australian families choose to retain the family home and lease it out to reliable tenants. This strategy has distinct trade-offs:

  • Advantage: The rental income helps pay the daily DAP and Basic Daily Fee, while retaining capital growth in the property.
  • Consideration: Net rental income is assessable under Centrelink tests, which may increase the resident's Means-Tested Care Fee or reduce part of their Age Pension.

When a single person enters permanent residential aged care, Centrelink treats their former home as an exempt asset for Age Pension purposes for up to 2 continuous years from the date of departure.

During these 24 months, the resident continues to be assessed under the more generous 'homeowner' asset test thresholds, preserving their pension payments while the family decides whether to sell, rent, or renovate.

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