Aged Care Costs for Couples: When One Partner Enters Care

When one partner enters aged care and the other stays at home, the financial situation gets a lot more complex. The good news: the rules are actually more favourable for couples than for singles, as long as you understand them.

The big advantage: home exemption

This is the most important thing to understand about couples and aged care: if your partner continues living in the family home, the home is fully exempt from the aged care means test.

No cap, no partial exemption, no "home equity release" workaround needed. The entire value of the home is ignored for assets test purposes.

Example: David and Jean own a $950,000 home. David enters residential care. Jean continues living in the home.

• Home value counted in means test: $0
• Compared to a single person in the same situation: $210,555 (the home exemption cap)

This alone can save thousands of dollars per year in aged care fees, and often makes the difference between being a part pensioner and a full pensioner.

How the means test works for couples

For couples, the means test looks at combined income and assets, not just the partner entering care.

Income test (combined)

• Income-free area: ≈$360/fortnight combined ($9,360/year)
• Above the free area: pension reduces by 50c per dollar (split between both partners)
• Both partners' income counts, including super, investments, rental income

Assets test (combined)

Notice these thresholds are much higher than single thresholds. Couples get about 50% more room before losing the pension.

Two people, one pension: how it's paid

Once the means test runs, both partners get a share of the pension. But here's where it gets interesting:

When one partner enters care, they may be reclassified as a "single for Centrelink purposes" after a certain period, even though they're still legally married. This means:

• The home-staying partner may qualify for the higher single Age Pension rate
• The aged care partner's income is assessed separately
• Total pension income for the household can actually go UP

Services Australia has specific rules on when this reclassification happens, and it typically requires genuine separation (e.g., your partner permanently moves into residential care). Ask them directly, as the answer depends on your specific situation.

What about the home-staying partner's finances?

The partner who stays at home needs to be looked after too. Key considerations:

• They keep receiving the Age Pension (possibly at a higher rate after reclassification)
• They can still use the house. It's their home, not just an asset.
• Their income and assets continue to be assessed for their own pension
• If they own other investments or property, those still count toward both partners

Can the home-staying partner use savings for the aged care partner's RAD?

Yes, and this is often the optimal strategy. Using joint savings (or the other partner's super) to pay a RAD has multiple benefits:

1. RAD is not assessable, reducing combined assets and possibly increasing pension
2. Eliminates the daily accommodation payment, saving $40,000+/year
3. RAD is refundable. When the care partner leaves or passes away, the money comes back (minus 2% retention per year, capped at 5 years)

Worked example

Alan (79) and Beth (76): couple, homeowners, moderate means

• Home value: $750,000
• Combined super: $380,000
• Combined bank: $60,000
• Alan's income: $8,000/year super drawdown
• Beth's income: $6,000/year super drawdown
• Alan needs residential care; Beth will stay in the home
• Facility RAD: $500,000

Option A: Beth stays, no RAD paid

• Home: exempt ($0 assessable)
• Assessable assets: $380k + $60k = $440,000
• Below couple homeowner threshold ($473,750)
• Full pension
• Alan pays: BDF + accommodation as DAP ($114/day)
• Total annual aged care cost: ≈$66,000
• Pension received: ≈$45,000/year combined

Option B: Beth stays, pay RAD from super

• Home: exempt ($0)
• Withdraw $380k from super + $120k from bank to pay $500k RAD
• RAD: not assessable ($0)
• Remaining liquid: not quite enough for full RAD
• Could do a partial RAD ($440k) plus a smaller DAP on the remainder ($14/day)
• Assessable assets: $0 (all liquid assets used)
• Full pension, higher rate possibly
• Total annual aged care cost: ≈$30,000 (no accommodation, means-tested fees minimised)
• RAD of $440,000 still refundable

Option B saves ≈$36,000/year AND most of the money is refundable when Alan leaves care or passes away.

What happens if the home-staying partner also needs care later?

Sadly, this happens. If Beth also eventually needs residential care:

1. She's assessed individually at that point
2. The home is no longer occupied by a protected person, so it becomes assessable (up to the $210,555 cap)
3. At this stage, selling the home often makes sense (neither partner is living there)
4. The sale proceeds can fund both partners' accommodation

This is why couples should plan for the "what if we both need care eventually" scenario, not just the immediate one.

Common mistakes couples make

• Selling the home when a partner is staying. This eliminates the biggest financial benefit couples get.
• Forgetting the partner can use joint funds for the RAD. It's one of the best tax-free moves available.
• Not updating Services Australia when one partner enters care. Reclassification can increase the home-staying partner's pension.
• Making decisions based only on the care partner's finances. It's a combined assessment.

Frequently asked questions

Can my partner gift me money to reduce their assessable assets?

Gifts over $10,000/year (or $30,000 in 5 years) are treated as "deprivation" and still assessed as if they still owned them. The 5-year look-back means you can't game this.

What if we're not legally married but in a de facto relationship?

Centrelink treats de facto relationships the same as marriage for assets and income tests.

What happens to the home if we're separated but not divorced?

If you're genuinely separated, you may each be assessed as singles. But the rules are strict and the onus is on you to demonstrate genuine separation.

Can my partner refuse to pay for my care?

Legally no. Combined assets are assessed regardless. Practically, this is a conversation about priorities and fairness, not something the law decides.

The bottom line

Couples have significant advantages in the aged care system, but only if you understand how to use them:

1. Keep the home. The exemption is your biggest financial protection.
2. Pay the RAD from combined assets. This removes it from the means test.
3. Plan for both partners' futures. Don't just optimise for the immediate crisis.
4. Update Services Australia. Reclassification can increase the home-staying partner's pension.

Every couple's situation is different, so the best approach is to model your specific numbers. Our calculator handles the couple case explicitly and shows you how the home exemption flows through to your actual costs.