The aged care means test is the single most important thing affecting what you'll pay. It decides whether you're a full pensioner, a part pensioner, or a self-funded retiree, and that classification drives almost every fee. Here's how it actually works.
Key Takeaways
- Two separate tests run: an income test and an assets test
- You get whichever test produces the LOWER pension (that's the one that applies)
- Your home can be fully exempt from the assets test if a protected person lives there
- Your category (full / part / self-funded) determines your aged care fees
Two tests, not one
The means test is actually two separate calculations running in parallel:
- Income test: how much money you earn per year
- Assets test: how much you own in total
Both tests produce a potential Age Pension amount. The lower of the two is what you actually get. This is important: even if you have modest income, high assets can wipe out your pension (and vice versa).
The income test
This looks at your annual income, excluding the Age Pension itself (since we're calculating how much you should get).
What counts:
- Superannuation drawdowns
- Investment income (dividends, interest)
- Rental income from investment properties
- Deemed income from financial assets
- Any other regular earnings
What doesn't count:
- Your Age Pension
- Your home's imputed value
- Lump sums that aren't income (like a RAD refund)
How the test works:
- Singles get an income-free area of about $204 per fortnight ($5,304/year)
- Couples get about $360 per fortnight combined
- Above the free area, your pension reduces by 50 cents for every dollar of income
So if you're single and earning $15,000/year over the free area, your pension drops by $7,500/year.
The assets test
This looks at the total value of everything you own, minus debts.
What counts:
- Super balance
- Bank accounts, term deposits
- Shares, managed funds
- Investment properties
- Personal effects (car, furniture, jewellery)
- Your home, but only in certain cases (more on this below)
What doesn't count:
- Your home when a "protected person" lives there
- Debts (these are subtracted)
Homeowner vs non-homeowner thresholds:
| Status | Homeowner (single) | Non-homeowner (single) |
|---|---|---|
| Full pension | Up to $314,750 | Up to $566,500 |
| Taper zone | $314,750 to $695,500 | $566,500 to $947,250 |
| No pension | Over $695,500 | Over $947,250 |
Taper rate: For every $1,000 above the lower threshold, your pension reduces by $3 per fortnight ($78/year).
The home exemption rule
Your home is one of the biggest assets most people have. Whether it counts depends on who's living there after you move into care.
Your home is fully exempt if any of these apply:
- Your partner continues living there
- A dependent child lives there
- A qualifying carer has lived there for 2+ years and was providing your care
- A close relative has lived there for 5+ years and receives income support
If none of these apply, your home becomes assessable, but only up to a cap (currently $210,555). Anything above the cap is ignored.
This is why "what happens to the family home" is such a critical question in aged care planning. If your partner stays, you keep your pension. If the home is vacant and you can't rent it out, only part of it counts anyway.
See how the means test affects your fees
Enter your actual income, assets, and home situation to see exactly what you'd pay.
Try the CalculatorHow the means test drives your fees
Once the tests classify you as full pensioner, part pensioner, or self-funded retiree, that category determines your aged care fees:
| Category | Hotelling | Non-clinical care | Accommodation |
|---|---|---|---|
| Full pensioner | $0 | $0 | Often covered by govt supplement |
| Part pensioner | Partial (scaled) | Partial (scaled) | Full cost |
| Self-funded retiree | Max ($22.15/day) | Max ($105.30/day) | Full cost |
The basic daily fee ($66.80/day) applies to everyone regardless of category.
Real examples
Example 1: Part pensioner
Margaret, 78, single, lives in her own home ($550k), $200k super, $50k bank
- Home is assessable (no protected person), counted at the $210,555 cap
- Total assessable assets: $210,555 + $200,000 + $50,000 = $460,555
- This is above the single homeowner threshold of $314,750
- Her pension reduces by ≈$440/fortnight, leaving about $704/fortnight
- Result: Part pensioner
Example 2: Full pensioner (home exempt)
John, 80, partnered. His wife will stay in their $800k home. $150k super, $30k bank
- Home is EXEMPT (partner is a protected person)
- Assessable assets: $150,000 + $30,000 = $180,000
- Below the couple homeowner threshold
- Result: Full pensioner, pays minimum aged care fees
Just by having his wife stay in the home, John's aged care costs are thousands of dollars per year lower than Margaret's.
Example 3: Self-funded retiree
Patricia, 75, single. Rents, has $1.2M in investments, $80k income from super
- Non-homeowner, so higher asset threshold ($566,500)
- But $1.2M is way above the upper threshold ($947,250)
- Assets test result: $0 pension
- Result: Self-funded retiree, pays maximum aged care fees
Frequently asked questions
Does the means test look at my partner's assets too?
If you're a couple, combined assets are assessed. This is important: even if only one of you enters care, both of your financial situations count.
Does gifting money help?
Services Australia applies a 5-year look-back. Any gifts over $10,000/year (or $30,000 over 5 years) are still counted as if you still owned them. It's called "deprivation."
Can I reduce my assessable assets legally?
Yes. Paying a RAD lump sum is the most common strategy, because the RAD amount doesn't count as an assessable asset. Speak to a specialist aged care financial advisor about your specific situation.
What if my situation changes?
The means test is reassessed regularly (every 6 months by default, or when you report a change in circumstances).
The bottom line
The means test is the biggest lever affecting your aged care costs. Understanding it, especially the home exemption rule, can save you tens of thousands of dollars over the years you're in care.
The easiest way to see how it applies to you is to run your actual situation through a calculator. Ours walks you through every input and shows you exactly which test drove your result.