The TWO YEAR Rule

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The TWO YEAR Rule

<p>Hi everyone..My widowed father will have been in residential aged care for two years on Oct 21, 2018. So he entered aged care on 21/10/2016. He has paid a partial RAD of $350K of a $530K room.. His former residence is valued at $500K and he as $30K in assets. He is currently not renting out his home. I was hoping that you can confirm the below for me or advise otherwise .. As I understand it, after 21/10/2018, his full value of his former home will be means tested in the aged care calculation (currently capped at $165K). If we choose to rent it out after 21/10/18, any rent received will also be means tested. However, for aged pension purposes, if we choose to rent his home after 21/10/18, his home AND the rent received are exempt as he entered aged care prior to Jan 2017 (when the rules may have changed). If we don’t rent his home out, the two year rule kicks in and his house becomes an assessable asset for aged pension purposes and he will probably end up with a significantly reduced pension. Thanks in advance.. Ian</p>

agedcare101

Hi Ian,

Thanks for your question.  Sorry with the slight delay to respond.  We had to ask advice from the wonderful Robert Craven from Affinity Aged Care Financial Services.

How will the home be assessed after my father has been in permanent residential care for 2 years?

He entered care after 01 January 2016 but prior to 01 January 2017 with no protected person living in the former home.

For Aged Care Means Test:

• Under the assets test:    The home will continue to be assessed at the capped value – currently $165,271.20.

• Under the income test:  The net rental income will be assessable.

For the Centrelink Pension Test:

• Under the assets test:    As he is paying part of his accommodation costs by way of a DAC, if it is rented & remains so, the home will be exempt indefinitely.

• If it is not rented, it will be assessed at it market value.  However, your father will then be classified as a non-home owner, so the higher threshold will apply.

• Under the income test:  The rental income will be exempt.

We hope this helps,
The agedcare101 team

iandmello

Cheers- thanks for the response Robert and agedcare101...

I can now do some modelling to ensure he maximises pension and minimises means test payments !

It's the old  giveth with one and and take with the other!!

Ian

ngocnguyen

Hi team, 

Would the same rule as said in your post applied to resident who entered into aged care after July 2014 ?

ngocnguyen

and after July 2017 ?

 

Jill_Donaldson

Hi ngocnguyen

According to the government website (see link below) all rental income is included in the aged care means test for residents who entered care from 1 January 2016 or moved to a new service from 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 rental income assessed.

Residents who entered aged care prior to 1 January 2016 will continue to have rental income from the former home exempt from aged care means test if they are making periodic payments. However if a resident leaves the aged care home for more than 28 days and re enters home they are affected by the removal of the rental income exemption.

From 1 January 2017 the rental income exemption ceases to apply to the age pension.

https://agedcare.health.gov.au/programs-services/residential-care/remova...

Hope that helps

the agedcare101 team

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