What Assets Are Exempt from Care Home Fees?

How Are Care Home Fees Assessed?

how much you can keep when entering aged care. The nuance is that some items are excluded entirely, and others are only partially assessed, which is where exemptions become strategically important.

According to the Australian Government’s My Aged Care service, the means test does not consider every asset, which allows for strategic financial planning to minimise care fees where possible.

Read More: Means-Tested Care Fee Explained

1. Primary Residence

The family home is one of the most significant assets, and in many cases, it’s exempt from means testing, but there are conditions:

• If a spouse, partner, or dependent relative resides in the home, it will likely remain exempt. This exemption can also apply if a carer who has been living there for at least two years continues to reside on the property.
• The exemption status changes if the property is vacant or sold, so careful planning is crucial. Temporary stays in a care facility also generally do not impact the exemption status of your home.

In practice, “is the home assessable?” is rarely a theoretical question. It becomes a sequence of decisions about occupancy, timing, and funding, especially when you are weighing whether you can keep the home without creating cash-flow stress. If the home is central to your plan, it is worth reading what happens to the house when someone moves into residential care and, where relevant, strategies to avoid selling the family home to fund care.

2. Exempt Savings and Investments

While the means test considers most savings and investments, there are specific cases where exemptions apply:

• Tax-advantaged accounts like certain superannuation accounts may receive favourable treatment, especially if held by a spouse.
• Jointly held accounts might also be subject to partial exemptions. The treatment of these accounts can vary depending on individual circumstances, so consulting a financial expert is advisable.

Retirees are often unaware of exemptions within superannuation that could impact their care fees, underscoring the importance of understanding asset classifications.

3. Pensions and Annuities

Income from pensions and annuities plays a role in the means test, but some pensions come with exemptions or are only partially assessed:

• Veterans’ pensions, for example, often receive favourable treatment, with certain payments exempt from means testing.
• Additionally, annuities that are structured with specific estate-planning considerations can help limit assessable income.

These nuances matter because the aged care assessment and your broader retirement income position can collide in ways people do not anticipate. If your concern includes government payments, it is worth reviewing how entering a nursing home can affect the Age Pension, then returning here to see which income streams are assessed and which are treated more favourably.

4. Personal Possessions

Personal items, such as jewellery, vehicles, and family heirlooms, are generally exempt from care home (Aged Care) assessments unless they hold substantial investment value:

• Most belongings will not be part of the means test unless they’re seen as assets for potential sale or investment.
• However, collectors’ items (like art or rare antiques) may be evaluated individually if their resale value is significant.

From a planning perspective, personal possessions are usually not where fee outcomes are won or lost. The decisive levers are typically the home, assessable investments, and accommodation funding strategy. If you are trying to prioritise effort, start with the family home rules and the broader context of aged care fees, then return to possessions only if you have high-value collectables.

5. Trusts and Gifts

Setting up trusts can be a viable strategy for protecting assets from care home (Aged Care) costs. However, not all trusts qualify for exemptions:

• Irrevocable trusts, where assets are transferred permanently, are often structured to avoid inclusion in means testing. These require careful planning, especially regarding “look-back” periods that might impact exemption status.
• Gifting assets also comes with limitations. Gifts made within a certain timeframe before entering care can be scrutinised and possibly included in means testing.

Creating trusts and gifting requires foresight and legal advice, as incorrectly structured plans can lead to unexpected care costs.

6. Insurance Policies and Funeral Plans

Certain types of insurance and pre-paid funeral plans can also serve as exemptions:

• Life insurance is usually exempt, particularly if policies are payable to beneficiaries rather than the estate.
• Funeral plans that are pre-paid are also typically excluded from the means test, allowing families to plan in advance while reducing future care liabilities.

Planning with these policies offers a way to keep funds aside for specific needs without impacting financial assessments.

7. Business Assets

For those who own businesses, certain business assets may be exempt from means testing if they meet specific criteria:

• Family-run businesses can often retain exempt status if they’re actively operated by a spouse or family member.
• Farm and rural properties, especially those in active use, are sometimes exempt to allow families to continue their livelihood.

Careful structuring of business assets can provide stability and asset protection, which is essential for families that rely on these assets for income.

Common Pitfalls to Avoid

While planning for aged care costs, some common mistakes can lead to unintended consequences, including:

• Last-minute transfers: Moving assets right before care assessment can often be challenged, leading to penalties or assessments.
• Improper trust structures: Trusts that aren’t set up correctly may not be exempt, leaving families with higher care costs.
• Inadequate legal advice: Relying solely on informal advice can be costly; professional financial planning is essential for maximising exemptions.

Avoiding these pitfalls ensures that your assets are well protected and your financial plan remains intact.

Steps for Financial Planning and Protection

Navigating asset exemptions requires careful financial planning. Steps you can take include:

• Consulting with a financial planner or estate lawyer to evaluate which assets are best protected.
• Structuring trusts, insurance, and estate plans with care to avoid unexpected fees.
• Reviewing superannuation and pension assets to maximise their potential exemptions.

Starting early and consulting professionals can provide peace of mind while securing a greater share of your wealth.

If your situation is not yet residential care, or you are trying to delay entry while support increases at home, it can help to understand how home care packages work, because the pathway you take can change timing, assessments, and the decisions you need to make first.

Conclusion

Knowing which assets are exempt from the means test is not just about “saving money on fees.” It is about making the right sequence of decisions under pressure, especially around the family home and accommodation funding. If you want the cleanest path through the system, anchor your plan in the core framework of aged care fees, then use the means-tested care fee and the exemptions in this article to model what you can preserve and what you should protect early.

If you’d like to discuss your specific situation, reach out for tailored guidance. In most cases, a useful first step is clarifying your likely assessment outcome, then mapping the next decision points: the treatment of the family home, whether you can avoid a sale, and whether RAD or DAP best fits your cash flow and objectives. Contact us to book a consultation.