Moving a loved one into aged care is a big step. It can bring uncertainty, pressure and many financial questions.
For most families, the home carries deep meaning. It may hold memories, cultural traditions or a sense of safety. It may also be the main asset the family owns. Because of this, one of the biggest worries is how the home will be treated when aged care fees and pensions are assessed.
To support older Australians and their families, the government has a safeguard known as the 2 year home asset exemption. This exemption can protect the value of the home during the early years of aged care. It can also help older people keep their pension for longer. Most importantly, it gives families time to make decisions without pressure.
This guide explains the 2 year exemption. It also explains how the rule affects your pension, how it affects aged care fees and what happens after the two years end.
What Is the 2 Year Home Asset Exemption?
When a person moves into permanent residential aged care, the Australian Government looks at their income and assets. This helps decide how much they need to pay for aged care. The family home is often the biggest asset, which is why families worry.
Under the 2 year home asset exemption, the home is not counted in the Centrelink assets test for up to two years after the person leaves it to enter care.
This exemption protects the Age Pension. If the home were counted as an asset straight away, many older people would lose part of their pension or all of it. The rule gives older Australians some financial stability in the first years of aged care.
It is important to understand that this exemption applies to the Centrelink pension assets test. It is not the same as the aged care fee assessment. These two systems interact, but they follow different rules.
Why the 2 Year Exemption Exists
The transition into aged care can be emotional and stressful. Families often feel rushed to decide what to do with the home. Selling the home quickly can lead to low prices or decisions that do not feel right. For many CALD (culturally and linguistically diverse) families, the home carries cultural value, family history or community ties. It may also be important for religious reasons.
The 2 year exemption exists to:
- reduce financial pressure
- protect the pension during the early years
- allow families to take time to decide about the home
- prevent rushed sales
- honour family and cultural needs
- support older people with a smoother transition
The most important benefit is time. Families have room to breathe and plan.
Who Is Eligible?
A person may receive the 2 year exemption if:
- they move into permanent residential aged care
- the home was their main residence
- the home becomes vacant or is not occupied by a protected person
- they continue to own the home or a share of it
- they receive or apply for a pension or payment assessed under the assets test
Eligibility rules appear in the Social Security Guide. The exemption applies across all states, including Victoria.
How the 2 Year Exemption Affects Your Pension
The Age Pension is assessed under both an income test and an assets test. Normally, your home is exempt while you live in it. When you leave it, the government needs to know how to treat it.
Because of the exemption:
- your home is not counted as an asset for two years
- your pension may stay the same during this time
- you may avoid losing your pension too early
- you have time to decide what to do with the home
How the Home Is Treated in Aged Care Fee Assessments
Aged care fees use a separate test. This test helps calculate:
- the basic daily fee
- the means tested care fee
- the accommodation contribution or payment
Under aged care fee rules:
- if a protected person lives in the home, the home is fully exempt
- if no protected person lives in the home, a capped value is counted instead of the full value
A protected person can be:
- a partner
- a dependent child
- a carer or close relative who meets government conditions
- someone who lived in the home for at least two years and receives income support
If there is no protected person, the home is counted up to a government cap. This means the home is treated differently under the aged care fee system than in the Centrelink pension system.
How the Pension Rules and Aged Care Rules Interact
This is the area where families become confused.
To keep it simple:
- The two year exemption is a Centrelink rule.
- The protected person and capped value rules are aged care fee rules.
This confusion is common. Families often believe the home is exempt from aged care fees for two years. In reality, that is not how the aged care system works. The exemption applies to the pension, not the full aged care means test.
What Happens After 2 Years
After two years, if no protected person lives in the home:
- the home becomes part of your Centrelink assets test
- your pension may decrease
- your pension may stop if your assets exceed the limits
This change can impact your income. Families should plan for this before the two year mark.
For aged care fees:
- the home stays exempt if a protected person lives there
- if not, it continues to be counted at the capped value
- there is no automatic increase in fees after two years
The fee rules do not follow the pension rules. They are separate.
Can the Exemption Be Extended
Extensions do exist, but they are rare. The government allows extra time only in limited cases. Examples include:
- delays due to legal processes
- settlement issues
- extreme hardship
Families should not expect an extension. It is better to prepare for the exemption to end.
Why the Rule Matters for CALD Families
Many CALD families have strong emotional ties to the home. The home may reflect cultural traditions, religious practices, food preparation customs or family gatherings. Some families want to pass the home to the next generation. Others want time to discuss plans with relatives overseas.
The exemption offers:
- space to make decisions
- time to organise family discussions
- protection from rushed financial decisions
- stability during a difficult time
- respect for cultural and family needs
This rule is particularly valuable for families who need time to understand aged care policies in their preferred language.
Examples to Help You Understand the Rule
Example 1: Home becomes vacant
A woman enters aged care. Her home becomes empty. For two years the home is not counted in her pension assets. After two years it becomes assessable and her pension reduces.
Example 2: Protected person lives in the home
A man enters aged care. His son receives a government income support payment and lives in the home. The home stays exempt under aged care fee rules. His pension exemption lasts two years.
Example 3: Couple living apart due to care needs
A wife enters aged care. Her partner remains living in the home. The home stays exempt for aged care fee purposes because the partner is a protected person. The pension exemption still lasts two years.
FAQs
1. Do I have to sell my home within two years?
No. The government never requires you to sell your home.
2. Does renting the home change the rule?
The home can remain exempt for two years, but rental income may affect your pension.
3. What happens after two years?
The home becomes countable under the pension asset test unless a protected person is living in it.
4. Can the home be exempt longer if a protected person lives there?
Yes. For aged care fees, the home remains exempt as long as the protected person continues to live there.
Need Support Understanding Aged Care or NDIS Pathways?
Understanding aged care fees and government rules can feel overwhelming, especially when you are caring for someone you love. You don’t need to work through these decisions alone.
If you’re exploring aged care, NDIS options or a transition between services, our team can guide you with clear information and culturally respectful support.
QP Care offers:
- Free initial consultation
- Multilingual guidance for CALD families
- Support Coordination
- Help understanding aged care and disability pathways
- Personalised planning based on your family’s needs
If you would like support or have questions about the 2 year home exemption, speak with our team today.
