Aged Care and the Family Home: Which Valuation Actually Matters

A parent moves into residential aged care, and within a fortnight somebody asks what the house is worth. Reasonable instinct, wrong first move: the number that decides the aged care fees is capped so low that the precise value is irrelevant to it, and Services Australia works that value out itself, at no cost.

The valuations that do matter come later, under different rules. And one common decision — renting the house out to help pay for care — quietly closes off two of them.

Quick reference — one house, three sets of rules

The valuation you do not need to pay for

For the residential aged care means assessment, a home that is counted as an asset is included at the net market value of the house or a capped amount, whichever is lower. That cap was $214,884 as at 20 March 2026. It is indexed twice a year, on 20 March and 20 September, so a figure quoted without its date is close to useless.

Because the cap sits at roughly $215,000 and the median dwelling in every Australian capital is a multiple of that, the effect is blunt: for almost every family the home enters the means assessment at the cap, and it makes no difference whether the house is worth $700,000 or $2.4 million.

For a couple, each partner is treated as owning half the home, and each is assessed on the lower of half the net market value or the capped amount. The cap is applied to each half — it is not halved. Getting this backwards understates the assessed asset by up to the full cap amount per partner, which feeds directly into the hotelling contribution, the non-clinical care contribution and the accommodation contribution.

Services Australia works the value out itself, and may arrange a professional onsite valuation at no cost — the valuer contacts the owner for access, and the result can move the figure up, down or not at all. For clients receiving a means-tested payment from the Department of Veterans’ Affairs, DVA administers the assessment instead. If you disagree with the outcome, there is a review pathway — ask Services Australia or DVA to reconsider rather than commissioning a report first.

When the home may be exempt entirely

The home may not be counted as an asset at all while a protected person lives in it. Under section 330(6) of the Aged Care Act 2024, that covers:

• the resident’s partner or a dependent child;
• a carer who provides daily care, has lived in the home for the past 2 years, and is eligible for an Australian Government income support payment — they need to be eligible, not necessarily receiving it; or
• a close relative — parent, sister, brother, child or grandchild — who has lived in the home for the past 5 years and is eligible for an income support payment.

Two details trip families up. The qualifying periods are the years immediately preceding, not any two or five years at some point; and the carer test requires daily care, so an adult child who has merely lived in the house for two years does not qualify. The exemption is tied to occupation — once the protected person moves out, the home starts to count.

The two-year clock, and when it does not start

The aged care means assessment and the Age Pension assets test are different tests applying different rules to the same house.

Start with the case that gets missed. If the person’s partner is still living in the home, it is not counted at all — it remains the partner’s principal home and stays exempt from the assets test for as long as that is true (Social Security Act 1991 s 11A(9)(c)). No clock is running. Where both partners later move into care, the two-year period runs from the later of the two entries.

Where nobody is left in the home, the exemption applies for two years from the date of entering care. Once it expires, the home is assessed as an asset at its current market value — no cap — and the person is assessed as a non-homeowner.

Those two changes pull in opposite directions: the full uncapped value entering the assets test can reduce or extinguish a part pension, while non-homeowner status raises the assets-test threshold and partly offsets it. This is the point at which the value of the house stops being irrelevant. It is not, however, the point at which you need to buy a valuation. Services Australia revalues assessable residential real estate itself each year, at no cost, and will send a valuer onsite if needed. An independent valuation earns its fee where you intend to contest that figure on review — typically property that indexed data handles badly: rural holdings, unusual improvements, restricted title, or a house in poor condition.

Renting the home out

Many families rent the former home to help fund the accommodation payment. The tax consequences are easy to trigger without noticing.

On means testing, rental income from the former home is assessable income. Services Australia is explicit that if you rent out your former principal home, it counts the rent you receive as income. Older exemptions have been progressively closed; anyone entering care now should assume the rent counts and confirm their own position with Services Australia.

On tax, letting the house starts a clock under the absence rule in section 118-145 of the Income Tax Assessment Act 1997. This is a choice, not an automatic treatment: you may choose to keep treating the dwelling as your main residence after moving out — for up to six years while it produces income, and indefinitely while it does not. A fresh six-year period becomes available each time the dwelling again becomes, and stops being, your main residence.

The choice has a price. Under s 118-145(4), while you apply the absence rule you cannot treat any other dwelling as your main residence. In an aged care context that bites when the remaining partner buys somewhere smaller, or when the resident acquires an independent living unit under strata title.

Section 118-192, and the date the tenants moved in

Where a main residence is first used to produce income, section 118-192 resets the cost base to market value at that moment. It is not elective — the section applies whenever its conditions are met. Those conditions, in the section itself, are three:

1. you would get only a partial exemption for a CGT event happening in relation to the dwelling, because it was used to produce assessable income during your ownership period;
2. that use occurred for the first time after 7.30 pm ACT time on 20 August 1996; and
3. you would have got a full exemption if the CGT event had happened just before that first use — the income time.

Where they are met, you are taken to have acquired the dwelling at its market value at the income time, and growth before the tenants moved in falls out of the calculation. (A separate requirement that the dwelling was acquired on or after 20 September 1985 appears in ATO guidance on this rule; it reflects the pre-CGT regime rather than a condition written into s 118-192 itself.)

For an aged care family the income time is usually the day the house was first let — a date chosen for cash-flow reasons and not thought about again until the property is sold years later. Where no valuation was taken at the time, the market value at that date still has to be established, and that is a retrospective valuation: the value reconstructed from the evidence that existed on the date. It is the same exercise described in our CGT cost base guide and in renting out a former home.

If the house is sold after death instead

This is where the decision to rent comes back, and it is the part most likely to cost a family money.

Where a dwelling passes from a deceased estate, the beneficiary’s cost base depends on how the property was being used at the date of death. Under the table in s 128-15(4), the first element is the market value at the date of death only where the dwelling was the deceased’s main residence just before death and was not then being used to produce assessable income. Where it was being rented, the beneficiary instead inherits the deceased’s own cost base.

The same condition governs the two-year concession. Under s 118-195, a dwelling the deceased acquired on or after 20 September 1985 can pass free of CGT where it was the deceased’s main residence just before death and was not then being used to produce assessable income — and then either the ownership interest ends within two years of death (or a longer period allowed by the Commissioner of Taxation), or the dwelling was, from death until disposal, the main residence of the deceased’s spouse, of someone with a right to occupy under the will, or of the beneficiary.

Read those together and the trap is plain: a house still tenanted on the date of death closes both doors at once. The executor loses the market-value cost base and loses the two-year window, no matter how quickly the estate sells. The relevant retrospective valuation then reverts to the date the property was first rented, under s 118-192 — not the date of death.

None of that is an argument against renting — only for knowing which date the valuation will hang on, and taking advice before the tenancy rather than after the funeral. Executors already in this position should read our executor’s guide and the estate valuation service page.

What changed on 1 November 2025

The Aged Care Act 2024 (Act No. 104 of 2024) commenced on 1 November 2025, introducing two means-tested contributions for residential aged care residents: a hotelling contribution and a non-clinical care contribution. The non-clinical care contribution is subject to daily and lifetime caps.

The treatment of the family home did not change. The Department of Health, Disability and Ageing states plainly that “the types of income and assets that count, and the treatment of the family home, did not change when the new Act started on 1 November 2025”.

A “no worse off” principle applies to people who were already in a permanent residential aged care home before 1 November 2025. It is narrower than it is often described: being approved for residential care before that date, but entering afterwards, does not attract it. (A separate arrangement covers people who had a Home Care Package, or were approved and on the National Priority System, as at 12 September 2024.)

Methodology

The capped home value is stated with its effective date because it is indexed on 20 March and 20 September each year. The $214,884.00 figure is set by section 330-5 of the Aged Care Rules 2025 and was substituted, from 20 March 2026, by the Aged Care Legislation Amendment (March Indexation and Other Measures) Rules 2026. The next indexation falls on 20 September 2026, shortly after publication; no September 2026 instrument was registered at the time of writing, and readers should check the current amount.

Statutory propositions were checked against the compilations on the Federal Register of Legislation and, for the social security rules, the DSS Social Security Guide: Aged Care Act 2024 s 330 and ss 278-279, Social Security Act 1991 s 11A(9), and Income Tax Assessment Act 1997 ss 118-145, 118-192, 118-195 and 128-15(4). Where this article states the conditions of a section, they are the conditions in that section; where a proposition comes from departmental guidance instead, it is attributed to the department. Fee administration — who values the property, who pays, how a review is requested — sits in Services Australia, My Aged Care and Department of Health guidance rather than the Act, and that is what we relied on for those points.

Frequently asked questions

Do I need a property valuation for an aged care means assessment?

No. The home is counted at the lower of its net market value or a capped amount — $214,884 as at 20 March 2026 — and almost every Australian home exceeds that cap, so the cap is what applies. Services Australia works out the value itself, and may arrange a free onsite valuation. For DVA clients, DVA administers the assessment.

How much of the family home counts for aged care fees?

A capped amount, or the net market value of the home if that is lower. The cap was $214,884 as at 20 March 2026 and is indexed on 20 March and 20 September each year. For a couple, each partner is assessed on half the home, and the cap applies to each half rather than being halved.

When is the family home exempt from the aged care assets test?

While a protected person lives in it: the resident’s partner or dependent child; a carer providing daily care who has lived there for the past 2 years and is eligible for an income support payment; or a close relative — parent, sister, brother, child or grandchild — who has lived there for the past 5 years and is eligible for an income support payment.

Does the Age Pension two-year clock start as soon as a parent enters care?

Not if their partner is still living in the home — it stays exempt from the assets test for as long as it remains the partner’s principal home. The two-year period applies where nobody remains, and where both partners enter care it runs from the later entry. After it expires the home is assessed at full market value with no cap, and the person is assessed as a non-homeowner.

Does renting out the former home affect capital gains tax after death?

Yes, and significantly. Both the market-value cost base at death (s 128-15(4)) and the two-year concession (s 118-195) require that the dwelling was not being used to produce assessable income just before death. A property still tenanted at that date fails both, and the relevant valuation date reverts to the day it was first rented under s 118-192.

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Sources:

• Means assessments for residential aged care — My Aged Care
• Means assessment for residential aged care — Department of Health, Disability and Ageing
• You own your own home — aged care calculation of your cost of care, Services Australia
• Aged care carer or close relative assessment — Services Australia
• Real estate assets, Age Pension — Services Australia
• Aged Care Act 2024 (Cth), Act No. 104 of 2024 — Federal Register of Legislation
• Aged Care Legislation Amendment (March Indexation and Other Measures) Rules 2026, which set the current capped home value — Federal Register of Legislation
• Social Security Act 1991 s 11A — Federal Register of Legislation
• Social Security Guide 4.6.3.70, exempting the principal home — DSS
• ITAA 1997 s 118-145, absence rule — AustLII
• ITAA 1997 s 118-192, special rule for first use to produce income — AustLII
• ITAA 1997 s 118-195, dwelling acquired from a deceased estate — AustLII
• ITAA 1997 s 128-15, effect on the legal personal representative or beneficiary — AustLII

This article is general information about how the family home is treated for aged care means testing, the Age Pension assets test and capital gains tax. It is not legal, financial or tax advice, and it does not summarise any Act in full. Aged care fees, pension entitlements and CGT outcomes all turn on individual circumstances, and the capped home value and pension thresholds are indexed regularly. Confirm your position with Services Australia or DVA, your financial adviser and your accountant before acting. Last verified 9 September 2026. We update this article when the figures are reindexed or the rules change.

See also: Retrospective Valuations · Estate Valuations · Capital Gains Tax Valuations · Property Valuation for a Deceased Estate: An Executor’s Guide · Who Decides What a Retirement Village Unit Is Worth? · Renting Out a Former Home: the CGT Valuation · Retrospective Valuation for CGT Cost Base