The Residential Care Subsidy, the asset test and gifting to family
Most families start asking about the Residential Care Subsidy in a hurry, when a parent or partner suddenly needs a rest home. It pays to understand it earlier, because gifts made years before can change the answer.
The subsidy is run by Work and Income and paid by Health NZ straight to the rest home. It covers the gap between the cost of care and what you’re assessed as able to pay.
Who qualifies
You need to be 65 or older, or aged 50 to 64 and single with no dependent children. A NASC (Needs Assessment and Service Coordination) agency must assess you as needing long-term residential care for an indefinite length of time. That assessment comes first.
If you’re 65 or over, Work and Income then runs a means assessment. Return the form within 90 days of the date you want the subsidy to start, because it can only be backdated up to 90 days. People aged 50 to 64 who qualify automatically meet the asset test.
From 1 July 2026, the asset threshold is $300,811 for a single person and for a couple where both are in care. Where one partner goes into care and the other stays home, the partner at home chooses between two options. You can count the house and car, with a $300,811 threshold, or leave them out, with a $164,731 threshold.
The thresholds rise every 1 July in line with inflation, and the 2026 rise was 3.08%. Prepaid funerals of up to $10,000 each, furniture and personal belongings don’t count as assets.
If your assets are over the threshold, you don’t get the subsidy and pay the maximum contribution instead. That’s a weekly cap set by area. From 1 July 2026, it’s $1,634.43 a week in Auckland City, $1,597.05 in Wellington City and $1,556.80 in Christchurch City.
Even with the subsidy, your income goes towards your care, including NZ Super and half of any private super. You keep a personal allowance of $58.34 a week.
How gifting is counted
In the five years before you apply, Work and Income will let gifts of up to $8,500 a year pass without counting them, from 1 July 2026. That’s up to $42,500 over the five years.
The limit is a total for the couple, not $8,500 for each partner. Gifts made by a partner who has died still count. Any gifting over the limit in those five years is added back to your assets, and MSD’s own manual says there’s no discretion on that.
Further back, more than five years before you apply, a couple can gift up to $27,000 a year in total. Anything over that may be counted, and MSD has to consider the effect on you and whether you have other ways to pay.
A gift to a family member to thank them for caring for you sits inside the $42,500, not on top of it.
If you’ve sold something to family for less than it’s worth, or lent money, Work and Income looks at that too. A debt still owed to you counts as an asset.
If most of your wealth is your house, the Residential Care Loan can help. It’s for people who own their home where the house takes them over the threshold, but who have less than $15,000 in other assets ($30,000 for a couple).
The loan is interest-free and secured by a caveat on the home. It’s repaid when the home sells, or within 12 months of death. Approval isn’t guaranteed.
The subsidy covers standard care only. It doesn’t pay for premium rooms or extras such as hairdressing, toiletries, glasses, hearing aids and dental care. Any extra charges must be written into the admission agreement, so read it before you sign.
The rules may change. In August 2026, a ministerial advisory group chaired by David Cunliffe recommended lowering the asset threshold to $100,000, with stepped bands up to $350,000, and a lifetime cap on what people pay. These are recommendations, and the Government says it will consider them carefully before making any decisions.
Associate Health Minister Casey Costello welcomed the report. “For too long, governments have kept kicking the aged care can down the road.”
If you’re thinking about gifting money, helping a child into a house or selling an asset to family, talk to a lawyer before you do it, not after.
