CAN YOU RENT OUT YOUR HOME TO PAY FOR AGED CARE?

Yes, you can rent out your family home to help pay for aged care. Many Perth families choose this strategy. Rental income funds ongoing daily costs like DAP (accommodation charges). It preserves the home for eventual sale or inheritance. But renting has financial implications that need careful consideration.

Your home is likely your largest asset. Deciding whether to sell, rent, or keep it affects aged care affordability significantly. Each choice creates different financial outcomes, Centrelink impacts, and tax situations. Understanding these helps you make the right decision.

This guide explains how renting your home to pay for aged care works in practice. You'll learn about rental income realities, Centrelink effects, tax considerations, and when renting makes sense versus selling. Let's start with your three main options.

YOUR THREE FAMILY HOME OPTIONS

Option 1: Sell the Home

Selling provides a lump sum immediately. You can pay your RAD (accommodation deposit). The facility holds this money. You pay zero ongoing accommodation charges. When you leave care, they return most of it (minus 2% annual retention from 2025).

Selling is clean and simple. No property management hassles. No maintenance worries. No tenant problems. You convert an illiquid asset into immediate aged care funding. Many Perth families choose this path.

Downside? The home is gone. You can't return to it. The emotional attachment ends. Your children don't inherit the property. The finality troubles some families despite the financial logic.

Option 2: Rent the Home

Renting preserves the home while generating income. You receive monthly rent that helps cover aged care DAP payments and other ongoing fees. The home remains an asset for eventual sale or inheritance.

Perth rental yields vary widely. Inner suburbs might rent for $500-800 weekly. Outer suburbs $350-550 weekly. Condition, location, and market timing affect actual returns. Property managers typically charge 8-10% of rent plus letting fees.

You pay insurance, council rates, water charges, and maintenance from rental income. After these costs, net rental income might be 60-70% of gross rent. A $600 weekly gross rent becomes $360-420 net after expenses. That's $18,720-21,840 annually available for aged care costs.

Option 3: Keep It Empty

Some families keep the home empty, hoping to return. This rarely works out. Most people entering residential aged care stay permanently. The empty home costs money (rates, insurance, maintenance) without generating income.

Keeping it empty makes sense only if your spouse or protected person lives there. Otherwise, it's usually poor financial strategy. You're paying holding costs while also paying aged care fees. This depletes other savings quickly.

HOW RENTING ACTUALLY WORKS

Gross Rent Versus Net Income

Your gross rent is what tenants pay. Net rent is what you actually receive after all costs. The difference can be substantial. Let's look at a realistic Perth example:

Gross weekly rent: $600

• Property management: -$54 (9% of rent)
• Insurance: -$30 weekly average (-$1,560 yearly)
• Council rates: -$40 weekly average (-$2,080 yearly)
• Water charges: -$15 weekly average (-$780 yearly)
• Maintenance: -$40 weekly average (-$2,080 yearly)
• Net weekly income: $421
• Net annual income: $21,892

So $600 weekly gross rent delivers about $420 weekly net. That's 70% of gross. This nets you roughly $21,900 annually to help fund aged care costs.

Property Management Realities

You'll need a property manager. Managing rentals while in aged care isn't practical. Property managers handle tenant finding, rent collection, maintenance coordination, and compliance reporting.

Standard fees: 8-10% of gross rent plus letting fees (typically one week's rent when finding new tenants). Annual statements for tax reporting. Extra charges for special services like attending tribunal hearings or coordinating major repairs.

Choose reputable Perth property managers. Check reviews. Ask about their vacancy rates. Understand their fee structure completely. Poor management costs you far more than the fee savings from cheap managers.

Maintenance and Repair Costs

Budget at least $2,000-3,000 yearly for maintenance and repairs. Older Perth homes might need more. Things break. Tenants report issues. Hot water systems fail. Air conditioners need servicing. Gardens require maintenance.

Major repairs hit harder. Roof repairs, plumbing emergencies, electrical faults. A $5,000 unbudgeted repair wipes out several months of net rental income. Set aside reserves or accept that some years rental income will be negligible after big repairs.

CENTRELINK PENSION IMPACTS

How Rental Income Affects Your Pension

Rental income counts toward the Age Pension income test. Centrelink deems part of it as income. This might reduce your pension. The reduction depends on total income from all sources.

The income test applies a taper rate. You don't lose $1 of pension for every $1 of rental income. Currently, you lose 50 cents of pension for each dollar of income above the free threshold. This makes rental income viable even for pensioners.

Example: You earn $20,000 net rental income annually. Your Age Pension reduces by about $10,000 yearly (50% taper). So net benefit is roughly $10,000 after pension reduction. Still worthwhile but less than the gross rental income suggests.

The Assets Test Complication

Your home value also counts toward pension assets test once you're in aged care permanently. Centrelink deems the home generates investment income even if it's empty. Renting it doesn't change the deemed income calculation on the home value itself.

So you face both actual rental income (affecting income test) and deemed income on home value (affecting both tests). The interaction is complex. Professional Centrelink specialists can model how rental income affects your specific pension entitlements.

The Two-Year Grace Period

Good news: Your family home is exempt from aged care means testing for accommodation purposes for two years (if your spouse doesn't live there). This grace period lets you keep the home while deciding whether to sell or rent.

During these two years, the home doesn't count toward your accommodation means testing. But it might affect NCCC and HSC calculations after this period. Use the time wisely to make informed decisions about the property's future.

TAX IMPLICATIONS OF RENTING

Rental Income Is Taxable

You must declare rental income to the Australian Taxation Office. It's assessable income. You'll pay tax on net rental income (gross rent minus deductible expenses) at your marginal tax rate.

If you're on Age Pension with limited other income, your tax rate might be low. You might pay little or no tax. But rental income combined with superannuation pension and other income can push you into higher tax brackets.

Deductible expenses reduce taxable rental income:

• Property management fees
• Insurance premiums
• Council rates and water charges
• Repairs and maintenance
• Interest on any property loans
• Depreciation on fixtures and fittings

Keep detailed records. Claim every legitimate deduction. This minimises tax payable on rental income.

Capital Gains Tax Considerations

Your family home normally enjoys a full Capital Gains Tax (CGT) exemption when sold. But if you rent it out, this exemption might be affected. The six-year rule provides protection.

You can rent your former home for up to six years and still claim the full CGT exemption when you sell. This applies if the home was your main residence before you moved to aged care. After six years of renting, CGT might apply to any capital gain.

Most people in aged care for six+ years aren't planning to return home anyway. But if you enter care at 75 and live until 90, you might exceed the six-year rule. Professional tax advice helps navigate this.

WHEN RENTING MAKES SENSE

Strong Rental Yields Available

Perth rental markets vary by suburb and property type. Well-located properties can achieve 4-6% gross yields. On a $600,000 home, that's $24,000-36,000 annually gross rent. After costs, you might net $16,000-25,000.

This income can substantially fund aged care DAP payments. At current MPIR (7.65%), a $500,000 accommodation costs $104.79 daily DAP or $38,248 yearly. Rental income of $20,000+ covers significant portion of this cost.

Renting makes financial sense when rental yields are strong relative to aged care costs you're funding. Run the numbers for your specific property and situation.

Emotional Attachment Factors

Your family home holds memories. Decades of life happened there. Children grew up there. Selling feels like cutting ties with your past. Renting preserves that connection.

Some families hope to return home eventually. Statistically unlikely once in residential care, but the hope provides comfort. Renting keeps the door open (emotionally if not practically).

These emotional factors are valid considerations. Financial optimisation isn't everything. Your peace of mind and sense of continuity matter too.

Preserving Inheritance

Renting rather than selling preserves the home for your children's inheritance. The property continues appreciating (hopefully). Perth real estate has shown strong long-term growth despite short-term fluctuations.

When you pass away, the RAD refund plus the home value both go to your estate. Your beneficiaries receive both. Compare this to selling the home to fund RAD - only the RAD refund (minus retention) flows to your estate.

If preserving maximum inheritance value matters to you and your family, renting might align better with this goal than selling.

WHEN SELLING MAKES SENSE

Need Lump Sum for RAD Immediately

If you want to pay RAD to eliminate daily accommodation charges, you need a lump sum. Rental income is ongoing. It can't fund a $500,000 RAD payment. Selling provides immediate capital.

Paying RAD eliminates $38,000+ in yearly DAP charges. For stays longer than five years, this typically costs less total than paying ongoing DAP. The 2% annual retention (maximum 10%) is less than cumulative DAP payments over long stays.

If financial modelling shows RAD is optimal for your situation, selling the home to fund it makes clear logical sense.

Rental Income Won't Cover All Costs

Even strong rental income rarely covers complete aged care costs. You'll still need other income for Basic Daily Fee, NCCC, HSC, and probably some accommodation costs too.

If rental income is $20,000 yearly but your total aged care costs are $80,000 yearly, you're still drawing down other assets by $60,000 annually. After a few years, you've depleted those assets. You might then need to sell the home anyway.

Selling upfront might provide better overall financial outcomes than renting for a few years then selling from necessity. Run long-term projections to see which path leaves you better positioned financially.

Property Needs Major Work

Older Perth homes might need significant repairs before renting. Rewiring, replumbing, roof replacement, structural work. If your home requires $50,000+ in repairs to be rentable, this upfront cost needs consideration.

You could sell it "as is" and let the buyer handle repairs. Or spend $50,000 fixing it up, rent for years recovering that cost slowly. Sometimes the math favours selling as-is despite lower sale price.

Family Conflicts About the Future

Sometimes family members disagree about the home's future. One child wants to rent it. Another wants to sell. Someone suggests moving in temporarily. These conflicts create stress and delay decisions.

Selling resolves the conflict cleanly. Proceeds fund aged care. Everyone knows where they stand. The ongoing management burden and family disagreements end. Sometimes this clarity is worth more than marginal financial benefits of renting.

GETTING THE RIGHT ADVICE

Who Can Help You Decide

This decision benefits from professional input. Aged care financial specialists model both scenarios:

• Sell home → Pay RAD → Zero DAP
• Rent home → Use income for DAP → Keep property

They show total aged care costs, Centrelink pension outcomes, tax implications, and estate values under each approach. This quantifies the financial differences objectively.

Tax accountants help with CGT implications and rental tax planning. Real estate agents provide accurate rental yield estimates for your specific property. Quality aged care facilities like Regents Garden connect families with specialists who model these scenarios comprehensively.

Questions to Ask Yourself

Before deciding, honestly answer:

• Do I realistically expect to return home? (Most don't)
• Can rental income actually fund my aged care costs?
• Am I comfortable managing a rental property remotely?
• What do my children want regarding inheritance?
• Would paying RAD reduce my total long-term costs?
• Is emotional attachment to the home worth the financial trade-offs?

Honest answers guide you toward the right decision for your circumstances. There's no universal "correct" answer. What works for one family might not suit another.

CONCLUSION

Yes, you can rent out your home to help pay for aged care in Perth. Rental income funds ongoing costs like DAP, Basic Daily Fee, NCCC, and HSC. It preserves the home for eventual sale or inheritance. Many families successfully use this strategy.

But renting creates complexities. Net rental income is typically 60-70% of gross rent after expenses. Your Age Pension reduces as rental income increases. Tax obligations apply. Property management requires ongoing attention. Maintenance costs vary unpredictably.

Selling provides lump sum capital for RAD payments, eliminating daily accommodation charges. It's clean, simple, and final. No property management. No tenant issues. No maintenance surprises. But it ends your connection to the family home permanently.

The right choice depends on your financial situation, care cost projections, rental yield potential, family priorities, and emotional attachment. Professional advice helps quantify these factors objectively so you can make informed decisions.

Quality Perth facilities provide transparent information about all aged care costs and accommodation options to help families evaluate whether rental income realistically funds their care needs. Facilities offering restaurant-quality meals and comprehensive wellness programs demonstrate commitment to supporting families through these complex financial decisions.

For families needing guidance about using their home to fund aged care, contact the care team at (08) 6117 8178 for personalised consultations. Regents Garden operates aged care residences across five Perth locations: Bateman, Lake Joondalup, Booragoon, Aubin Grove, and Scarborough, with retirement villages at Lake Joondalup and Aubin Grove.