The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

4.6.3.70 Exempting the principal home - care situations

Summary

An income support recipient's principal home MAY continue to be an exempt asset (1.1.E.170) when they are in a care situation (1.1.C.25).

This topic discusses:

  • to which income support recipient's care situation provisions apply
  • the exemption period for care situation
  • the effect of a temporary absence from the care situation (1.1.T.45)
  • the effect of an income support recipient selling the principal home during an exemption period, and
  • the treatment of illness separated members of a couple.

Act reference: SSAct section 11A(1) Principal home, section 4(7) Illness separated couple

Definition of a care situation

The care situation provisions apply to income support recipients in:

  • community based care, OR
  • long term hospital stay, OR
  • residential care (1.1.R.220) (prior to 1 July 2014 this included high level residential care (nursing homes) (1.1.N.140) and low level residential care (hostels) (1.1.H.90)).

An income support recipient MAY be in a care situation even when they are a carer (1.1.C.15).

Exception 1: The continued exemption of the former principal home under the care provisions does not apply when an income support recipient creates a granny flat interest that includes the provision of care and support.

Explanation 1: The act of creating a granny flat interest is effectively purchasing a new principal home. The granny flat interest becomes the person's new principal home. The value of any interest in the former principal home becomes an assessable asset under the assets test. The value of the granny flat interest MAY be exempt from the assets test depending on the amount paid.

Act reference: SSAct section 11A(9) A residence of a person …, section 23(4CA) For the purposes of this Act, a person is in residential care …

Policy reference: SS Guide 4.6.3.20 Determining Homeowners & Non-homeowners, 4.6.4.10 General provisions for special residences (see 'Exemption status of former principal home')

Exemption periods for care situations

If an income support recipient vacates their principal home to enter a care situation, the home continues to be an EXEMPT asset under the assets test for a 2-year period. This provision applies irrespective of whether an income support recipient intends to return their principal home.

If, after 2 years, an income support recipient has not returned to their principal home the:

  • income support recipient is treated as a non-homeowner, AND
  • principal home is an assessable asset (1.1.A.290).

Exception 2: An income support recipient's principal home can also be exempted for:

  • either up to 5 years IF
    • the income support recipient entered a care situation between 5 November 1997 and 30 June 2004, AND
    • the resident is accruing a liability to pay an accommodation charge (1.1.A.18) (see explanation 2 and example), AND
    • their principal home is rented. The rent received by the income support recipient, or their partner, is exempt from the income test for the period that the principal home is exempt (see explanation 3), OR
  • indefinitely IF
    • the income support recipient entered a care situation between 1 July 2004 and 31 December 2016, AND
    • after 1 January 2017, they have not re-entered aged care after having been absent for more than 28 days (other than being on leave), AND
    • the resident is accruing a liability to pay either an accommodation charge, a daily accommodation payment or daily accommodation contribution (1.1.D.05) (see explanation 1 and example), AND
    • their principal home is rented. The rent received by the income support recipient, or their partner, is exempt from the income test for the period that the principal home is exempt (see explanation 2).

Explanation 2: The resident does not have to be actually paying the accommodation charge, daily accommodation payment or daily accommodation contribution.

Example: The resident may have chosen to defer payment and have it recovered from their estate.

Exception 3: From 1 July 2005, an income support recipient's principal home can also be exempted IF:

  • the income support recipient entered a care situation before 1 January 2017, AND
  • after 1 January 2017, they have not re-entered aged care after having been absent for more than 28 days (other than being on leave), AND
  • they are paying some or all of their accommodation bond (1.1.A.15) by periodic instalments, AND
  • their principal home is rented. The rent received by the income support recipient, or their partner, is exempt from the income test for the period that the principal home is exempt (see explanation 2).

Explanation 3: There is no purpose test to this rental exemption. This means that:

  • it is not necessary for an income support recipient to establish that the rent of the former home is used to pay the accommodation charge, daily accommodation payment, daily accommodation contribution or accommodation bond, and
  • the amount of rent that is exempt may be greater than the accommodation charge, daily accommodation payment, daily accommodation contribution or accommodation bond.

An income support recipient CAN live in multiple care situations during the 2-year exemption.

Explanation: A new 2-year exemption period does NOT begin if an income support recipient moves from one care situation residence to another.

When an income support recipient moves from a care situation where an accommodation charge, daily accommodation payment, daily accommodation contribution, or accommodation bond is not payable (such as community based care) into residential care where an accommodation charge, daily accommodation payment, daily accommodation contribution or accommodation bond is payable, a new exemption period for the principal home may apply.

Explanation: If the income support recipient is liable for either an accommodation charge, daily accommodation payment, daily accommodation contribution or is paying some or all of their accommodation bond by periodic instalments and rents the former home, a new exemption period starts.

Temporary absence from a care situation

The 2-year principal home exemption is NOT interrupted IF an income support recipient is temporarily absent from the care situation. This provision applies even if an income support recipient resumes living in their principal home.

Explanation: A new 2-year exemption does NOT start when the income support recipient re-enters the care situation.

Principal home sold during exemption period

For a single pensioner in a care situation, if the principal home is sold during the exemption period, the proceeds are immediately assessable under the assets and income tests. See the table below for the treatment of couples.

Explanation: The exemption is a continuation of the exemption from the assets test of the income support recipient's former home. Even when there is an intention to occupy a property to be purchased with the proceeds of sale, the new property CANNOT satisfy the exemption provision of being the income support recipient's former home.

Policy reference: SS Guide 4.6.2.10 General provisions for exempt assets, 4.6.3.10 General provisions for assessing the principal home

Assessment of illness separated members of a couple

A couple is considered to be an illness separated couple where they are unable to live together in their home, and their inability to live together is due to illness or infirmity of either or both of them, which results in their living expenses being greater or are likely to be greater than otherwise, and the situation is likely to continue indefinitely. Home ownership status for both partners is derived from the partner residing in the home property. The following table explains how to assess the principal home for illness separated couples.

If the partner living in the principal home … then the …
remains in the home principal home is an exempt asset under the assets test.
vacates the home to enter a care situation 2-year exemption applies to both partners from the date of the later entry to a care situation.

Note: Exemption period may be extended under exceptions 2 & 3.
vacates the home temporarily for a reason that is not care or illness related 2-year exemption applies from the date of the first partner's entry to the care situation. The remaining partner's 12-month home exemption for the temporary vacation applies concurrently. The date from which the exemption ceases to apply is generally the later of:
  • the 2 years from the first partner's date of entry to the care situation, OR
  • 12 months from the remaining partner's date of temporary vacation.

Note: Exemption period may be extended under exceptions 2 & 3.
sells the home with the intention of purchasing, rebuilding, repairing or renovating a new home within 24 months, or up to 36 months if certain criteria are met homeowner status continues.

Proceeds of sale are exempt from the assets test but subject to deeming for up to 24 months, or up to 36 months if certain criteria are met.

Sale proceeds are deemed at the lower deeming rate (4.4.1.10) for the purposes of the income test during the period they are exempt from the assets test.

4.6.3.80 Exempting the principal home - sale proceeds (for homes sold between 01/07/2007 & 31/12/2022)
sells the home and does not intend to purchase another couple is treated as non-homeowners. Proceeds of sale are immediately assessable under the assets and the income tests, and the increased non-homeowner assets threshold will apply.
dies 2-year exemption applies to the person in the care situation from the date of the partner's death.

Note: Exemption period may be extended under exceptions 2 & 3.

Act reference: SSAct section 11A(9) A residence of a person …

Policy reference: SS Guide 2.2.5.60 Determining an illness separated couple, 4.6.4 Assessing special residences & aged accommodation, 4.6.2.10 General provisions for exempt assets, 4.6.3.10 General provisions for assessing the principal home, 4.6.3.20 Determining Homeowners & Non-homeowners, 4.6.3.60 Exempting the principal home - temporary vacation of property

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