Will you need to sell your home to fund aged care?

As you or your parents grow older and the realisation that some form of aged care may be needed starts to set in, it’s easy to find yourself worrying about the cost. After all, such a service — accommodation, nurses and support staff, and regular meals and activities — can’t come cheap.

But is it so expensive that you’ll be forced to sell your home? Fortunately, this won’t be the reality for many people. In fact, the government has several provisions in place to make sure that elderly Australians aren’t denied the care they need. Below, we explore some of the ways you might be able to cover the cost of aged care.

How is the cost of accommodation determined?

Depending on your financial situation and the quality of the facility you’re looking at, you’ll be quoted a room price as a lump sum (known as a Refundable Accommodation Deposit). This is paid upfront and returned to you or your estate once you leave or pass away, minus any amount you’ve drawn down on to cover any additional costs.

The RAD can be quite expensive, but those who are unable or unwilling to part with such a large amount of money — even temporarily — can take heart knowing they have the option of making Daily Accommodation Payments instead. This is similar to making rental payments when the alternative of buying a home is out of reach. 

The daily amount payable is calculated by multiplying the RAD amount for your room by a government legislated interest rate, then dividing that number by 365 days. Payments are usually made fortnightly, in line with the Age Pension cycle. Unlike the RAD, however, payments are not refundable.

You’ll have 28 days after moving into an aged care facility to decide which of the two payment types you’d prefer. You’ll also have the option of selecting both and splitting them in any configuration you like. For example, if your room costs $400,000, you might choose to pay $200,000 upfront and the rest over time as daily payments.

Are there any other aged care fees?

Besides the accommodation costs, there are a few more fees you might encounter when considering aged care. These include:

• A basic daily fee: This is a fee that everyone pays to cover the cost of the day-to-day services like food and laundry. The maximum fee is currently set at 85% of the single basic age pension.
  
• A means-tested care fee: This applies to those with financial means. It takes into account assets and income, with interest from bank accounts and financial investments factored in using current deeming rates. From July 2025, it will be renamed the non-clinical care fee to differentiate it from the clinical costs that the government covers.
  
• Additional service fees: These are fees for services that go beyond what’s typically expected. Aged care providers are required to give residents an itemised account of these services and how much they cost.
  
• Extra service fee: For an extra fee, some aged care facilities will allow you to upgrade to a hotel-grade room or access higher quality meals and services.

So how does my home factor in?

When you enter an aged care facility, your home will be included in the means assessment that helps determine how much you’ll have to pay in accommodation costs. That said, it’s generally assessed at a lower rate, and if your home is still occupied by a ‘protected person’ (e.g. a spouse or dependent child) it will be exempt from assessment altogether.

This is often overlooked by many people entering aged care, who might rush to sell their home because they believe it’s preferable to pay the RAD rather than the DAP.

But there’s a lot more you’ll need to factor into your decision. For example, the money you receive from selling your home might go on to be counted as an asset, meaning you could wind up paying more in accommodation costs and means-tested care fees. You’ll also have to consider how it might affect any social security you receive.

Ultimately, whether or not you decide to sell your home will depend on your unique circumstances. To make sure you’re clear on what your options are and how they might affect you, be sure to speak to a financial adviser.