Money
Pension, assets, the family home, what funding looks like. The financial mechanics of aged care without the jargon.
Pension, assets, the family home, what funding looks like. The financial mechanics of aged care without the jargon.
Six months in, my brother and I sat down at a kitchen table with a spreadsheet and a calculator and worked out for the first time what Mum actually had, what it cost to keep her where she was, and what it would cost to move her. The number that came out of the bottom of the spreadsheet was both bigger and smaller than I'd expected. Bigger, because aged care is expensive. Smaller, because the system carries more of it than I'd realised.
Most men come into the money side of caring for a parent with a vague dread and no numbers. The dread shrinks the moment you have the numbers. This module is the numbers.
The federal government pension is means-tested on two parameters: assets and income. The lower of the two tests applies. Both have a sliding scale rather than a hard cliff.
As of 2026 (figures index twice a year, March and September; check current rates):
The full pension cuts down as assets or income rise. It cuts to zero at the upper threshold. Where those thresholds sit:
The family home is exempt from the assets test for as long as a parent (or spouse) lives there. The car, contents, jewellery are assessed at second-hand value, not insured value, which most families overstate. Superannuation in pension phase is assessed.
Two reasons.
First, the pension is more generous than most middle-class men assume. A widow with a paid-off home and $200,000 in super might be on close to a full pension and not realise it. If she's not claiming, that's $30,000 a year on the table. Check, even if you assume not.
Second, structural decisions you make to "help" can cost the pension. The classic mistake: kids putting their money into Mum's house "to help with renovations", or Mum giving an early inheritance to one of you. Centrelink has a five-year look-back on gifts ($10,000 per year, $30,000 over five years, beyond that the gift is still assessed as if Mum still has it). Your generosity, badly timed, costs her pension.
If you're going to do anything financially clever, do it with a Centrelink Financial Information Service (FIS) appointment first. Free. Government-run. Independent. Book at servicesaustralia.gov.au.
For most Australian parents, the family home is two-thirds of their net worth. The decisions you make about it matter more than anything else in this module.
Three frames:
1. While they live in it: exempt from the assets test. Pension calculation ignores it. They keep the pension, they keep the house. This is why "downsizing for the pension" rarely improves the financial picture.
2. If they go into residential care: the home is exempt for the first two years if a "protected person" (spouse, dependent, certain carers) still lives there. After two years, it counts toward the means-tested care fee, partially. The rules on this changed in 2024 and again in 2025; a current adviser is worth the fee.
3. If they sell it while alive: the proceeds are assessable. The pension can drop or disappear overnight unless the money goes into another exempt vehicle (granny flat agreement, certain annuities, certain RAD payments). Selling the family home before you've understood the asset implications is the most expensive own-goal in this whole area.
Three structures families use to keep parents close while managing money. Each has tax and pension implications.
Sale-and-loan-back. Mum sells the family home to one of the kids at fair market value. The kid pays partly in cash, partly with a private loan back to Mum. Mum stays living there. Sounds simple. Reality:
Sale-and-loan-back can work. Don't do it without a solicitor and an accountant.
Granny flat agreement. A formal arrangement where a parent gifts money or property to a family member in exchange for the right to live in a granny flat (or self-contained part of the family home) for life. The ATO has a specific regime for this. If structured properly:
Improperly structured, it's a gift, plain. Family relationships and pensions destroyed by handshake granny flat deals are common. Do this on paper, with proper advice. Around $1,500-$3,000 in legal fees, well spent.
The reverse mortgage / equity release. Mum borrows against the home, takes income, the loan accumulates, the house is sold to repay it on death. Government's Home Equity Access Scheme is the cheapest version (currently 3.95% interest) and works for many parents. Private reverse mortgages from banks run 7-9% and compound. The maths gets brutal at the second rate. Use the government scheme if it covers the need.
The big number in residential care.
A RAD is a lump sum (typically $300,000 to $700,000, sometimes more, occasionally less) that secures a place at a residential aged care facility. It is fully refundable when the resident leaves or dies. The facility uses it for capital expenditure during the stay.
Three ways to pay:
Which is right depends on:
This is where the Centrelink Financial Information Service appointment matters most. Free, government-run, independent. They will model both scenarios for you. Book it before you sign anything.
In residential care, four fees stack:
Total daily cost: $150-$350 a day for a typical resident, plus the RAD if applicable. $55,000-$130,000 a year. Most of which is covered by some combination of the pension, means-tested government subsidy, and the resident's own money.
This is the conversation most families avoid until it's painful. Have it early.
Three principles that work for most families:
Write the agreement, even informally. A two-page document signed by all siblings, kept by Mum's solicitor. Saves two thousand legal arguments later.
The money side of caring for a parent has more government in it than most men expect. The mistake is not asking. The free Centrelink FIS, the My Aged Care assessment, the pension entitlement: all carry more weight than the family imagines on day one.
Get the numbers. Get the advice. Spread the load honestly.
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