This can benefit people who have:
- sufficient funds to pay lump sum accommodation payment without selling former home
- a former home that has a high market value
- a former home that will generate sufficient rental income to assist with aged care expenses
- qualify for the exemptions as they entered aged care pre 1 January 2017 (or 1 January 2016) and paid DAP/DAC
- moved into aged care within previous two years (asset value of home exempt for social security purposes)
- Retaining former home may assist with maintaining social security/DVA entitlements as asset value exempt for two years after permanently entering aged care (assessed as homeowner)
- Retaining former home may assist in reducing aged care fees as capped value of former home1 is assessable (unless exempt as occupied by protected person or qualified for exemption)
- Rental income exempt for social security purposes if permanently entered aged care before 1 January 2017 and paid a portion of accommodation payment as DAP/DAC
- Rental income exempt for aged care purposes if permanently entered aged care before 1 January 2016 and paid a portion of accommodation payment as DAP/DAC
Things to be aware of:
- Person may not be able to afford to pay lump sum accommodation payments
- if they retain their former home. I.e. DAP payable
- Two years after permanently entering aged care, market value of former home assessable for social security (assessed as a non-homeowner) unless occupied by spouse. This may reduce or cancel age pension
- Rental income assessable for social security and aged care fee purposes unless eligible for exemptions5
- Former home may need repairs/renovation before can be rented
- Ongoing costs e.g. real estate agency fees, accounting costs, building and landlord insurance, council rates, water rates, repair costs, land tax etc.
- Rental income may fluctuate i.e. periods where its vacant
- Capital gains tax may apply if former home rented out for over six years
- Rental income assessable for tax purposes. Persons may have to lodge tax return.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.