"Mum's going into care, so we'll have to sell the house." It is one of the most common things families tell us, often before anyone has looked at the numbers.
The truth sits between two facts that are both correct. A home can be protected when the right person still lives in it. And the person entering care can still be asked to pay the full price of their room. Families who hear only one of those facts tend to make decisions in a hurry. This post sets them side by side, quoting the rules as they are written. And it starts with the fact most families are never told: you do not have to sell the house to pay for the room.
Truth one: the home can be protected
Services Australia's notes to the aged care means assessment form say:
"If your home is occupied by a protected person, it may not be counted as an asset for aged care purposes."
The same notes set out who a protected person is:
"your partner or dependent child"
"your carer who is eligible to receive an Australian Government income support payment and who has lived in your home with you for the past 2 years"
"your close relative who is eligible to receive an Australian Government income support payment and who has lived in your home with you for the past 5 years."
They also note: "This exemption may be lost if the protected person who has been living in the home, moves out of the home or loses their eligibility for their income support payment."
The law says the same. Section 330(6) of the Aged Care Act 2024 begins: "In working out the value at a particular time of the assets of an individual who is or was a homeowner, disregard the value of a home that, at the time, was occupied by: (a) the partner or dependent child of the individual". It goes on to cover a qualifying carer or close relation.
In both sources, a partner or dependent child carries no residency period and no income support test. A carer or close relative must meet both conditions.
Truth two: depending on other assets you could still be asked to pay the full price of a room
A protected home is left out of the means assessment. The person entering care is still assessed on everything else: their share of savings, investments, super and other assets, and their income. For a couple, assets are split 50/50 and each person is assessed on their half.
Depending on that result, a person may be asked to pay the full agreed price of their room, as well as a hotelling contribution and a non-clinical care contribution. A person who chooses not to provide their financial details to Services Australia is charged the full cost.
Room prices commonly run into the hundreds of thousands of dollars. Homes can set prices up to $789,686 without special approval (fee schedule from 20 September 2026). So a family can be told, correctly, that the house is protected, and also, correctly, that Mum's room costs $750,000. That is where the pressure to sell starts.
The balancing point
The pressure is greatest for people who land only just over the line. Once a person's assessable assets pass the first asset threshold, currently $219,858.40, they are asked to pay the full agreed room price rather than a means-tested contribution. Income above a set level has the same effect. For a couple, each person is assessed on their half of the combined assets.
On the room price, that puts someone with $300,000 in assessable assets in the same position as someone with $3 million: both are asked for the full agreed price. Here is what a $750,000 room looks like for a person with $300,000 and a protected home:
Daily payment only: no lump sum, and the $300,000 stays available. About $174.86 a day, or about $63,825 a year.
Combination: a lump sum of $233,500, keeping the required $66,500, with a daily payment on the remaining $516,500. About $120.42 a day, or about $43,954 a year.
Full lump sum: not possible, because anyone paying a lump sum must be left with at least $66,500.
Neither way requires the home to be sold. But at around $44,000 to $64,000 a year for the room alone, before the other fees and before indexation, the savings do run down, and that is exactly where families start hearing "sell the house". It is the point where the scenarios matter most: how long each way of paying lasts, what it does to the pension, and what the home itself could contribute while it is kept.
Illustration only, our calculations: daily payment = room price x 8.51% (MPIR from 1 October 2026) / 365. The first asset threshold and minimum assets are from the fee schedule from 20 September 2026. Real room prices, means and fees vary.
You do not have to sell the house to pay for the room
A full room price is not the same as a lump sum, and no rule requires the family home to be sold to pay it. The Department of Health puts it plainly:
"All residents have the right to choose a payment method that suits their circumstances."
Its fact sheet for people entering from 1 November 2025 says: "You can choose to pay your accommodation costs as: a lump sum refundable deposit that is refunded when you leave care; a daily payment that is not refunded when you leave care; any combination of lump sum and daily payment."
Here is how the three ways compare, using a $750,000 room:
Lump sum (RAD): paid up front and refundable, less a retention of 2% a year for up to 5 years. Up to $75,000 is retained over five years.
Daily payment (DAP): the room price x the MPIR / 365, paid daily. For people entering from 1 November 2025, it is indexed twice a year. About $174.86 a day at the current MPIR of 8.51%.
A combination: part lump sum, with the rest as a daily payment, in any split.
If any part is paid as a lump sum, the person must be left with at least $66,500 in assets.
Timing has changed too. For people entering care from 1 November 2025, the Department of Health says residents "are not required to choose how they want to pay for their accommodation within 28 days." A lump sum can be paid "at any time after their means assessment is finalised", with daily payments made until then.
So a full room price can be met without a lump sum, and there is no 28-day deadline to decide. A daily payment still has to be funded, from income, other assets, or in some families by renting out the home, so keeping or selling the home is a family decision with real trade-offs, not a requirement. Each way of paying has different effects on cash flow, the pension and what is left for the estate, which is why the numbers matter.
When no protected person lives there
Even then, the home is not counted in full.
Aged care means test. The home is counted only up to a cap, currently $219,858.40. In the words of the fee schedule: "The net value of the home above this amount is excluded from the value of the resident's assets."
Age Pension. After moving into care, the former home "continues to be an EXEMPT asset under the assets test for a 2-year period" (Social Security Guide 4.6.3.70). It stays exempt while a partner still lives there.
Selling changes both. Once the home is sold, the money from the sale is no longer a home: it joins the person's assessable assets, which can change both the aged care fees and the pension. How it is then used, for example as a lump sum on the room, changes the picture again, because a lump sum is treated differently by the pension test and the aged care test.
None of this means a home should or should not be sold. It means the decision has consequences on both sides, and they can be modelled before anything is signed.
Striking the balance
"The house is protected" and "you'll need to pay $750,000" can both be said in the same week, and both can be true. Neither, on its own, tells a family what to do. What helps is seeing the scenarios side by side: keeping the home, selling it, paying a lump sum, paying daily, or a mix, and what each one means for the home, the pension and cash flow.
We set out the facts and the scenarios. The decision stays with your family.
This is Episode 6 of FACTS with FACES, our new short-video series: Two things can both be true. Season 1 has 10 episodes, each about a minute, every figure sourced.
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Factual information only, not financial advice. FACES provides factual financial information and modelling on aged care funding and does not recommend any course of action. Figures are current at the date of publication and change with indexation.
Sources
- Services Australia / Department of Veterans' Affairs, "Residential aged care calculation of your cost of care", notes to Form SA457 (SA457.2511, November 2025), page 4.
- Aged Care Act 2024 (Cth), section 330(6)-(7), compilation registered 1 November 2025.
- Department of Health, Schedule of fees and charges for residential care from 20 September 2026: home value cap and first asset threshold $219,858.40; minimum assets of $66,500 after a lump sum; maximum room price without approval $789,686; MPIR 8.51% from 1 October 2026.
- [Department of Health, Managing accommodation costs for residential aged care](https://www.health.gov.au/our-work/residential-aged-care/managing/managing-accommodation-costs)
- [Department of Health, Understanding fees for aged care homes: 1 November 2025 fee arrangements](https://www.health.gov.au/sites/default/files/2026-04/understanding-fees-for-aged-care-homes-1-november-2025-fee-arrangements.pdf)
- Department of Social Services, Social Security Guide 4.6.3.70, Exempting the principal home - care situations.
- Daily payment and retention examples are our calculations: room price x 8.51% / 365; retention of 2% a year for up to 5 years.