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Frequently Asked Questions: Change to Assessment of Rental Income from the Former Home from 1 January 2016

Frequently Asked Questions

Does this affect me as I am part of the Veteran Community?

If you earn rental income from your former principal home, then yes.  Everyone moving into permanent residential aged care for the first time on or after 1 January 2016 will have net rental income from their former principal home assessed under the aged care means test.

What is the change?

From 1 January 2016 there will be a change to how rental income from the former home is assessed for means testing of aged care fees.

Aged care residents who:

  • entered care on or after 1 January 2016, and 
  • rent out their former home, 

will always have their rental income assessed for means testing of aged care fees, even if it is exempt for income support pension assessment purposes.

How do I know if the new rules will apply to me?

The new rules will apply if you entered residential aged care for the first time on or after 1 January 2016.

If you entered care for the first time prior to 1 January 2016, the new rules will only apply to you if you were discharged from care for more than 28 days and re-entered care on or after 1 January 2016.  Periods of hospital leave or social leave do not count as being discharged from care.

What are the current rules?

An aged care resident who entered care before 1 January 2016 who is: 

  • renting the former home, and

is paying or is liable to pay:

  • an accommodation charge, 
  • an accommodation bond by periodic payments,
  • a daily accommodation payment, or
  • a daily accommodation contribution.

will have:

  • the rental income exempted from the pension income test,
  • the value of the home exempted from the pension assets test, and
  • the rental income exempted from means testing of aged care fees.

What are the new rules?

The current rules will remain in place for aged care residents who entered care before 1 January 2016.

An aged care resident who enter care on or after 1 January 2016 who is:

  • renting the former home, and

is paying or is liable to pay:

  • a daily accommodation payment, or
  • a daily accommodation contribution.

will have:

  • the rental income exempted from the pension income test,
  • the value of the home exempted from the pension assets test, and
  • the rental income assessed for means testing of aged care fees.

What about the two-year former home exemption?

All income support pensioners who enter aged care will continue to have their former home exempted from the pension assets test for a period of two years.  The two-year exemption period commences when the person enters care if a partner does not remain in the home, or when a partner who remains in the home dies or leaves the home to enter care.

The two-year exemption will end after two years or when the home is sold, whichever happens earlier.

What is an accommodation payment?

When entering an aged care facility a person may be required to pay an accommodation payment.  The amount of the accommodation payment is assessed at entry to care and can be paid in a lump sum, by periodic (or daily) payments, or as a combination of lump sum and periodic payments.

The accommodation payment may be referred to as an:

  • accommodation charge or accommodation bond, for pre-1 July 2014 residents, or
  • accommodation payment or accommodation contribution, for post-1 July 2014 residents.

What are not accommodation payments?

The following are additional ongoing fees paid by aged care residents that are NOT accommodation payments:

  • basic daily fee,
  • means-tested or income tested care fee, and
  • fees for extra or additional optional services.

These payments are not relevant to deciding whether an aged care resident who rents their former home has an exemption under the pension income and assets test or an exemption for means testing of aged care fees.

What if I paid my accommodation payment by a lump sum?

If you paid your accommodation payment solely by a lump sum (or you didn’t have to make any accommodation payment) and you rent out your former home, the rental income will be assessable income for both pension assessment and means testing of aged care fees.  

The value of your home will be exempted under the pension assets test until the two-year exemption expires.

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