Can you rent out the family home?

The Short Answer

Yes, you can rent out the family home while your parent is in residential aged care. But it will almost certainly increase their aged care fees — and possibly by more than the rental income itself.

When the home is rented out, two things happen simultaneously:

1. The home value is included in the asset test (capped at $198,550.80)
2. The rental income is included in the income test

Both feed into the means-tested care fee (MTCF) calculation. In some cases, the additional fees exceed the rental income — meaning you’re financially worse off than leaving the house empty.

How Renting Affects the Asset Test

The family home has a special status in the aged care means test. When it is occupied by a “protected person” (spouse, dependent child, or long-term carer), or when it is vacant and unrented, it is either fully exempt or partially exempt from the asset test.

The moment the home is rented to a tenant, this exemption ends. The property value is immediately included in the asset test, subject to the capped home value of $198,550.80 (2025–26 rate). Even if the home is worth $800,000, only $198,550.80 is counted.

The asset test contribution to the MTCF is calculated at 17.5% per year of assets above the threshold ($55,000 for a single person). This means the home being assessed could add up to:

In practice, the actual increase depends on total assessable assets and whether the annual or lifetime cap is reached.

How Renting Affects the Income Test

Rental income is assessable income for the aged care means test. Services Australia counts the net rental income — gross rent minus allowable deductions:

• Property management fees
• Council rates and water rates
• Insurance premiums
• Maintenance and repair costs
• Interest on any outstanding mortgage (but not the loan principal)

The income test contribution to the MTCF is 50% of income above the threshold ($32,249.60/year for a single person in 2025–26).

For example, if the home is rented for $500/week ($26,000/year) with $6,000 in expenses, the net rental income is $20,000/year. If your parent is already above the income threshold, the additional MTCF from rental income alone would be:

Worked Example: Renting vs Keeping Vacant

The situation

Margaret enters residential aged care. She is single, receives the Age Pension ($28,514/year), and has $120,000 in other assets (bank + super). Her home is valued at $650,000 with no mortgage. She could rent it for $450/week ($23,400/year gross, ~$18,000/year net after expenses).

Scenario A: Home left vacant (year 1–2)

The home is exempt from the asset test for up to 2 years. Margaret’s assessable assets are $120,000. Her assessable income is $28,514 (pension only).

• Asset excess: $120,000 − $55,000 = $65,000 × 17.5% = $11,375
• Income excess: $28,514 − $32,249.60 = below threshold = $0
• Total MTCF: $11,375/year

Scenario B: Home rented out immediately

The home value ($198,550.80 capped) is added to the asset test. Net rental income ($18,000) is added to the income test.

• Assets: $120,000 + $198,550.80 = $318,550.80
• Asset excess: $318,550.80 − $55,000 = $263,550.80 × 17.5% = $46,121
• Income: $28,514 + $18,000 = $46,514
• Income excess: $46,514 − $32,249.60 = $14,264.40 × 50% = $7,132
• Total MTCF (uncapped): $46,121 + $7,132 = $53,253/year
• But the annual cap applies: MTCF is capped at $33,309.23/year

The comparison

Every situation is different. If your parent has very few other assets, renting may still be worthwhile. The key variables are total assessable assets, income from other sources, and the net rental yield.

The 2-Year Exemption Rule

When a person enters residential aged care and their home is vacated and not rented, the home remains exempt from the asset test for up to 2 years. This is designed to give families time to make a considered decision about the property.

Key points about the 2-year rule:

• The 2-year clock starts from the date the person enters permanent residential care (not respite).
• If the home is rented at any point during the 2 years, the exemption ends immediately and the home enters the asset test.
• After 2 years, even if the home remains vacant, Services Australia will include the capped value ($198,550.80) in the asset test.
• If the home is sold during the 2-year period, the sale proceeds become assessable assets immediately.

When a Partner Still Lives There

If the person entering care has a partner who continues to live in the home, the home is fully exempt from the asset test indefinitely — regardless of whether it is rented, sold, or anything else. The partner’s presence as a “protected person” provides a permanent exemption.

This means the renting question is largely irrelevant for couples where one partner stays at home — the home is already exempt.

However, if the partner also enters care later, the home is then assessed under the standard rules. At that point, the renting vs selling vs keeping vacant analysis applies.

Capital Gains Tax Considerations

While the family home is generally CGT-free as a main residence, this exemption has limits when the owner is in aged care:

• If not rented and sold within 6 years: The full CGT main residence exemption applies. No CGT is payable.
• If rented: The property may still qualify for the CGT main residence exemption under the “6-year absence rule” — but only if no other property is nominated as the main residence during that period.
• If sold after 6 years of being rented: CGT may apply on a proportional basis for the period beyond 6 years. This can be significant for high-value properties.

Practical Tips

• Get a professional valuation before renting or selling. The property value used in the asset test is based on current market value as assessed by Services Australia, not the council rates valuation.
• Use an aged care financial adviser to model the renting scenario against your parent’s specific income, assets, and care costs. The interaction between asset test, income test, and fee caps means the outcome varies enormously.
• Track all rental expenses carefully. Only net rental income is assessable — maximising legitimate deductions reduces the income test impact.
• Notify Services Australia if you start (or stop) renting the home. Failure to report a change in circumstances can result in backdated fee adjustments.
• Consider the maintenance burden. An empty house still needs maintenance, insurance, rates, and security. Factor these costs into the “keep vacant” scenario.

When Renting the Home Does Make Sense

Despite the fee impact, renting can be the right choice when:

• Your parent has low other assets: If total assessable assets are below or near the threshold ($55,000 for singles), the asset test impact of including the home is smaller.
• The MTCF is already at the annual or lifetime cap: If fees are already capped, additional assets and income from renting won’t increase fees further.
• The rental yield is high relative to the property value: A high-yield property (5%+ net) is more likely to generate income that exceeds the fee increase.
• You need income to pay the DAP: If your parent is paying the Daily Accommodation Payment (DAP) rather than a lump-sum RAD, rental income can help cover this ongoing cost.
• Long-term care is expected: If your parent is likely to be in care for many years, the lifetime cap ($78,526 under pre-November 2025 rules) will eventually be reached regardless. After that, rental income is pure benefit.

The decision is rarely straightforward. Model it with real numbers — our cost calculator can give you a starting estimate, and an aged care financial adviser can do a detailed scenario analysis.