Paying a RAD for aged care: sell, rent or borrow against the family home?
You can pay a RAD by selling the home, renting it out and paying a daily payment instead, or borrowing against it, or a mix. Each changes your tax, capital gains and Centrelink position differently. Compare them in writing, and get aged-care fee and Centrelink advice from a licensed financial adviser.
Written by James Chee CPA, Credit Representative 517980 of Global Mutual Funds Pty Ltd (ACL 222640), FBAA member·Reviewed by Graham Chee FCPA·Last reviewed
Key facts for funding a RAD from the family home
| Fact | What it means | Source |
|---|---|---|
| RAD or daily payment | You can pay the room price as a refundable lump sum (RAD), a daily accommodation payment (DAP), or a combination. Rules changed from 1 November 2025, so check current rules. | health.gov.au: accommodation payments and contributions |
| Time to decide | The aged care home must tell you how long you have to choose your payment method. My Aged Care explains the current timeframes. | My Aged Care: understanding aged care home accommodation costs |
| Former home and the pension assets test | The former home can be exempt for up to 2 years after entering permanent care in some cases. Rental income is assessed. Get advice before acting. | Social Security Guide 1.1.R.113: real estate and the former principal home |
| Main residence CGT | You can generally keep treating your former home as your main residence after you move out: up to 6 years if it earns rent, or indefinitely if it doesn’t, provided you don’t treat another property as your main residence. | ATO: your main residence (home) and capital gains tax |
| Deceased estates | Beneficiaries or the executor may be exempt from CGT on a former main residence if it is sold within 2 years of death, if the conditions are met. | ATO: your main residence (home) and capital gains tax |
Tax points reviewed by Graham Chee FCPA. Aged care fee and Centrelink strategy is referred to a licensed financial adviser.
Option 1: sell the home
Selling can pay the RAD in full and remove ongoing property costs. If the home has been your main residence, the sale is generally exempt from capital gains tax, including when it is sold after you move into care and the absence rule applies.
Sale proceeds held as cash or investments can change your pension and aged care means assessments. Timing matters, so speak with a licensed financial adviser before you list the property.
Option 2: rent the home and pay a daily payment
Renting keeps the home in the family and can help cover a daily accommodation payment. Rent is taxable income, and you can claim deductions for allowable expenses while it is rented.
Under the absence rule, you can generally keep the main residence exemption for up to 6 years while the home earns rent, as long as no other property is treated as your main residence. Past that period, part of any later gain can become taxable. Keep records of the date you moved out and the property’s market value.
Option 3: borrow against the home
Borrowing can pay the RAD while you decide what to do with the home. Options include a bridging loan if a sale is planned, a reverse mortgage, or a Home Equity Access Scheme loan (within its limits, applied for through Services Australia).
Lenders assess whether the loan suits your circumstances and how it will be repaid. A reverse mortgage requires Moneysmart projections before suitability is assessed, and interest compounds until the loan is repaid when you sell, move into care or pass away. With a loan secured over a home you no longer live in, check the lender’s conditions about occupancy.
What we refer to a licensed adviser
How a RAD, daily payment, rent or sale proceeds affect your aged care fees and your Age Pension depends on your full circumstances and on rules that changed under the new aged care arrangements. We refer that strategy to a licensed financial adviser and focus on the lending and tax side.
Sources
- health.gov.au: accommodation payments and contributions
- My Aged Care: understanding aged care home accommodation costs
- Social Security Guide 1.1.R.113: real estate and the former principal home
- ATO: your main residence (home) and capital gains tax
- Services Australia: Home Equity Access Scheme
- ASIC Moneysmart reverse mortgage calculator
Frequently asked questions
- Home Equity Access Scheme vs reverse mortgage: which suits you?
- Can I lose my home or owe more than it’s worth with a reverse mortgage?
General information only. It does not take your objectives, financial situation or needs into account and is not financial product, tax or legal advice. Lending criteria, fees and charges apply. Super, Centrelink and aged-care fee advice is referred to a licensed financial adviser.
Compare your options in writing
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