Removal of the rental income exemption

Page last updated: 17 November 2017

In the 2015-16 Budget, the Australian Government announced it would make aged care means testing arrangements more consistent by removing an exemption that relates to rental income from a resident’s former principal home. The change is consistent with changes that took effect on 1 July 2014 to make aged care means testing arrangements fairer and more comprehensive, and ensure that all rental income is included in the aged care means test. It affects residents who enter care from 1 January 2016, or move to a new service from 1 January 2016.

The change is about ensuring consistent treatment of rental income in the aged care means test, so that all income is treated the same regardless of its source and residents with the capacity to pay for their care make an appropriate contribution.

Treatment of rental income prior to 1 January 2016

Rental income from the former principal home was not included in the aged care means test if a resident is paying for at least some of their accommodation costs through periodic accommodation payments. This includes the daily accommodation payment (DAP), daily accommodation contribution (DAC), or a periodic payment of a bond for residents who entered care before 1 July 2014.

Changes from 1 January 2016

For residents who enter care on or after 1 January 2016, this exemption will no longer apply (including if a resident moves to a new service). This means that for residents who enter care on or after 1 January 2016, rental income will be treated in the same way as any other income stream in the aged care means test. New entrants into residential aged care after this date will have the net income from their former principal home assessed under the aged care means test.

As residents who pay for their accommodation entirely through a lump sum payment (refundable accommodation deposit, or refundable accommodation contribution) already have this income included in their means test, the change brought residents who pay through periodic payments into alignment with these residents.

Annual and lifetime caps on means-tested care fees remain in place to prevent any individual paying excessive aged care fees.

Value of former principal home

This measure did not change how the value of the former principal home is treated or included for  aged care means-testing purposes. The value continues to be capped at an amount set by the Minister.

Changes to age pension means testing arrangements from 1 January 2017

On 1 January 2017, changes were also made to the rental income from the former principal home for age pension means testing arrangements. This change has resulted in the treatment of rental income for aged care means testing and age pension means testing being aligned from 1 January 2017. For more information, please see the Department of Human Services (DHS) website. 

Who will be affected by the measure?

The removal of the rental income exemption affects residents who enter care or moved to a new home, on or after 1 January 2016. It is the date of entry into the service that determines whether the change applies, not the day that a resident chooses how they wish to pay their accommodation. Residents who entered care before 1 January 2016 were not affected by the change, and continue to have rental income from the former home exempt from the means test if they are making periodic payments. However, if a resident leaves care for more than 28 days, and re-entered care they are affected by the removal of the rental income exemption.

Re-entering care after hospital or social leave

If an aged care resident entered care before 1 January 2016 and starts hospital or social leave, and re-enters care, they are not affected and the exemption continues to apply.

Contacts

If you have questions about the removal of the rental income exemption, contact My Aged Care on 1800 200 422.

More information