Forman Financial Services

Aged Care Strategy – Former Home – Retain and rent former home

This can benefit people who have:

  • sufficient funds to pay lump sum accommodation payment without selling former home
  • a former home that has a high market value
  • a former home that will generate sufficient rental income to assist with aged care expenses
  • qualify for the exemptions as they entered aged care pre 1 January 2017 (or 1 January 2016) and paid DAP/DAC
  • moved into aged care within previous two years (asset value of home exempt for social security purposes)

Potential Benefits:

  • Retaining former home may assist with maintaining social security/DVA entitlements as asset value exempt for two years after permanently entering aged care (assessed as homeowner)
  • Retaining former home may assist in reducing aged care fees as capped value of former home1  is assessable (unless exempt as occupied by protected person or qualified for exemption)
  • Rental income exempt for social security purposes if permanently entered aged care before 1 January 2017 and paid a portion of accommodation payment as DAP/DAC
  • Rental income exempt for aged care purposes if permanently entered aged care before 1 January 2016 and paid a portion of accommodation payment as DAP/DAC

Things to be aware of:

  • Person may not be able to afford to pay lump sum accommodation payments
  • if they retain their former home. I.e. DAP payable
  • Two years after permanently entering aged care, market value of former home assessable for social security (assessed as a non-homeowner) unless occupied by spouse. This may reduce or cancel age pension
  • Rental income assessable for social security and aged care fee purposes unless eligible for exemptions5
  • Former home may need repairs/renovation before can be rented
  • Ongoing costs e.g. real estate agency fees, accounting costs, building and landlord insurance, council rates, water rates, repair costs, land tax etc.
  • Rental income may fluctuate i.e. periods where its vacant
  • Capital gains tax may apply if former home rented out for over six years
  • Rental income assessable for tax purposes. Persons may have to lodge tax return.

Aged Care & Home Care can seem complex.  We have a special offer for general advice for $225.00.
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