The Australian government’s recent aged care reforms are prompting a profound cultural shift in how the family home is perceived. Traditionally, the family home has been seen as a legacy, passed down to children as a form of intergenerational wealth.
However, these reforms aim to reposition the home as a financial asset to be utilised, challenging long-standing traditions and creating ripple effects across families and society.
“A lot of this stems from a deliberate effort by the government to change the mindset that the family home is an inheritance gift,” says aged care financial expert Rachel Lane. “They want people to see their home as a source of wealth that can be tapped into and spent.”
This shift has been building over time. Lane points to the expansion of the Home Equity Access Scheme (previously known as the Pension Loan Scheme) as a key example.
“The scheme now allows more Australians, including non-pensioners, to access up to 150% of the full pension by borrowing against their home. This change was the starting point for no longer viewing the family home as a ‘sacred cow’ that must be kept out of funding someone’s retirement or aged care.”
The Pressure to Sell
One major consequence of the reforms is the increased likelihood of families needing to sell the family home to cover aged care costs, particularly Refundable Accommodation Deposits (RADs).
These deposits, which can reach $750,000 without regulatory approval from January 2025, are driving many families to re-evaluate how they utilise their assets.
“If the Maximum Permissible Interest Rate (MPIR) stays at around 8%, it creates additional pressure to sell,” Lane explains. “People with homes worth far more than the RAD might opt to keep their homes to reduce means testing, but those with lower-value properties could find they need to sell to afford aged care.”
This impacts families differently depending on the value of the home. Lane elaborates, “For people in homes worth substantially more than the RAD, there can be both emotional and financial motivations to keep it because only $206,000 of the home’s value is assessed for aged care and if they get a pension the value of the home is exempt for 2 years from the date they leave. But, for those with homes closer in value to the RAD price, the pressure to sell can feel insurmountable particularly if the assets outside the home are modest”
Generational Wealth Under Threat
The reforms also complicate attempts to preserve generational wealth. Some families are turning to strategies such as pre-emptive gifting or transferring property to children’s names to shield assets from aged care costs. However, Lane warns that these strategies come with significant risks.
“Gifting a house triggers stamp duty and could be classified as a ‘deprived asset.’ This means the value of the gift can still be counted against the older person’s pension eligibility and aged care costs for up to five years. It’s not a strategy for the faint-hearted, especially for those who might need aged care imminently,” she cautions.
Lane also highlights the potential for elder abuse in these scenarios, with families exerting undue pressure on seniors to act against their best interests. “Powers of attorney must act in the older person’s best interests and will often have a clause that says the attorney cannot benefit themselves. Large asset transfers, such as homes, rarely align with that responsibility.”
Changing Perspectives on Inheritance
Beyond the immediate financial impacts, these reforms challenge societal attitudes towards inheritance. Lane observes a growing entitlement among younger generations regarding their parents’ assets.
“In the last five years, inheritance has increasingly been viewed as a right rather than a gift,” she says. “This mindset can reduce industriousness among younger people, as they anticipate a windfall rather than working hard to build their own wealth.”
However, Lane acknowledges that many parents still view passing on their wealth as an integral part of supporting their children.
“Parents often want to improve their children’s lives, even if it’s to their own detriment. The challenge is finding a balance so seniors receive the care they need without compromising their financial security.”
The Broader Housing Crisis
The reforms are unfolding against the backdrop of Australia’s housing crisis, further complicating the issue. Rising property prices make home ownership increasingly unattainable for younger Australians, heightening the significance of intergenerational transfers.
“Many parents and grandparents feel compelled to help their children buy homes because they don’t believe they’ll be able to do so otherwise,” Lane explains. However, she cautions that this generosity can backfire if it jeopardises the older person’s financial stability.
At the same time, quicker turnover of family homes—sold to fund aged care or other expenses—could exacerbate housing market volatility. This turnover risks undermining the stability and security that home ownership has traditionally provided Australian families.
A Shift, Not a Revolution
Despite these challenges, Lane does not foresee a fundamental change in Australians’ attachment to home ownership.
“People buy homes for security. Very few Australians rent on the basis that it’s cheaper or more flexible—they rent because they have to. Those who can afford to buy, do so for the certainty that comes with it “ she asserts.
However, she believes that open conversations about money and inheritance are crucial to navigating this new landscape.
“In the past, families didn’t talk about things like wills or estate planning. These reforms are encouraging those discussions, which can ultimately lead to better outcomes for everyone involved.”
As families grapple with the implications of the reforms, Lane offers a sobering reminder: “You shouldn’t wait to walk in a dead man’s shoes. Inheritance is a gift, not an entitlement. Families must prioritise their loved ones’ wellbeing and not sit there waiting for a house to drop into your lap.”
Very disappointing to see a headline like this run in your publication. You could have framed it positively.
Aged care needs more funding and that cannot come solely from the increasingly poor younger generations who don’t even own homes at the same rate; who are paying increasingly more for things like energy and who will face the brunt of the costs and suffering resulting from climate change.
I agree. The heading is depressing. Even so, at the end of the day, if aged care is propped up with family homes being sold, nothing is going to change in aged care. It’s the nature of the beast. You cannot make people love working in aged care. It’s a hard, thankless job and must be incredibly difficult for the majority of aged care workers whose first language is not English and their culture is so vastly different compared to ours. It can’t be fixed. It’s too broke. End of story.
Absolutely disgusting. why work and save . the government needs to pull its head in and give back to the people it professes to serve.
As someone who has worked in the aged care industry for over 20 years, I and several of my peers, have observed the increase in the phenomenon that children will do whtever they can to preserve their “inheritance.” And in doing will disregard the fact that their parents made sacrifices to acquire their assets which should be used to support their older age. No parent is averse to the idea of doing what they can to make their childrens life better than their own, but it should not be assumed by their offspring that they have an inalienable right to everything their parents have.
I agree. The heading is depressing. Even so, at the end of the day, if aged care is propped up with family homes being sold, nothing is going to change in aged care. It’s the nature of the beast. You cannot make people love working in aged care. It’s a hard, thankless job and must be incredibly difficult for the majority of aged care workers whose first language is not English and their culture is so vastly different compared to ours. It can’t be fixed. It’s too broke. End of story.