Residential Care Subsidy in NZ: Asset and Income Thresholds Explained

How the Residential Care Subsidy works in NZ: the 2025/26 asset thresholds, how your home, NZ Super and KiwiSaver are assessed, and the Residential Care Loan alternative.

Long-term residential care is expensive, and many New Zealanders will need some of it later in life. The Residential Care Subsidy is the main form of government help with the cost, but it is means-tested against both your assets and your income. This guide explains the 2025/26 thresholds, how your home, NZ Super and KiwiSaver are treated, and the Residential Care Loan as an alternative.

TL;DR: The Residential Care Subsidy is income- and asset-tested. For the 2025/26 year, a single person generally qualifies on the asset side with total assets of $291,825 or less, or $159,810 or less for a couple where one partner is in care and they exclude the family home and car. ¹² Thresholds rise with inflation each 1 July.

What is the Residential Care Subsidy, and who pays for aged care in NZ?

When someone can no longer be safely cared for at home and needs long-term residential care in a rest home or hospital, that care has to be paid for. The first step is a needs assessment that confirms the person genuinely requires that level of care. Cost is the next question.

The Residential Care Subsidy is a Work and Income (MSD) payment that helps cover the cost of contracted long-term residential care for people who meet the means test. If you qualify, the subsidy tops up what you can afford from your own income so that the approved cost of your care is met.

There is a cap on what a rest home or hospital can charge for contracted care, called the maximum contribution. It is set per region by Health New Zealand — Te Whatu Ora and adjusted each 1 July, and for 2025/26 it sits at roughly $1,460 to $1,572 a week depending on location. ⁸ That cap matters whether or not you get the subsidy, because it limits what you can be charged for standard contracted care.

What are the 2025/26 asset thresholds for a single person and a couple?

The asset test has two threshold options, and which one applies depends on your situation and a choice you make about whether to include the family home and car. The figures below are for the year from 1 July 2025.

Where one partner is in care and the other is still at home, the couple chooses between two options: the higher threshold that counts everything, or the lower threshold that sets the family home and one car aside. The right choice depends on the size and make-up of the couple's assets, which is exactly the kind of decision worth getting advice on before applying.

These thresholds are adjusted by the Consumers Price Index each 1 July. The 1 July 2025 increase reflected a 2.53% CPI rise for the year ending 31 March 2025, lifting the single-person threshold from $284,636 in 2024/25 to $291,825 in 2025/26. ³ If you are reading older guidance, check the date, because pre-July-2025 figures are now out of date.

How is the family home and a partner's situation treated?

The family home is the asset that causes the most confusion, and the treatment turns on whether a partner (or in some cases a dependent child) still lives there.

Where a couple have one partner needing care and the other still living in the family home, they can choose the lower threshold that excludes the value of the home and one car from the test. ² In that case the home is set aside while the at-home partner remains there. Where there is no partner or dependant living in the home, the home is generally counted as an asset, which is why the single-person and both-in-care thresholds count everything. ¹

This is general information, and the precise rules around homes, partners, relationship property and timing can get technical. Before assuming your home is protected or exposed, it is worth confirming your exact position with Work and Income or an adviser.

How is income (including NZ Super and KiwiSaver) assessed?

The subsidy is income-tested as well as asset-tested. Even if you pass the asset test, your own income is expected to go towards the cost of your care, and the subsidy covers the rest up to the approved cost.

Income that is counted includes NZ Superannuation, Veteran's Pension and other benefits, 50% of private superannuation payments, 50% of life-insurance annuity payments, overseas government pensions, contributions from relatives, and interest or bank earnings. ⁶ NZ Super is counted in full, so it forms the bulk of most residents' assessed income. For reference, the after-tax NZ Super rate for a single person living alone (M tax code) used in the assessment as at late 2025 is $1,076.84 a fortnight (the 1 April 2025 rate). ⁷

A small amount of income from your assets is exempt from the income test:

If you receive the subsidy, you keep a weekly personal allowance of $56.58 plus an annual clothing allowance of $354.89, and most of your remaining NZ Super and other income goes towards your care costs. ¹⁰

Does your KiwiSaver count as an asset for the test?

In short, yes. KiwiSaver is a financial asset, and the balance you can access counts towards the asset test in the same way as money in a bank account, term deposits or other investments. Once you are over 65 and able to withdraw your KiwiSaver, there is generally no special carve-out that shelters it from the means test.

This matters for planning, because people sometimes assume KiwiSaver is treated differently from ordinary savings. It is not. The same point applies on death: your KiwiSaver balance forms part of your estate, which our guide on what happens to KiwiSaver on death covers in more detail.

That is not a reason to avoid KiwiSaver. It remains one of the most effective ways for most people to build retirement savings, and the great majority of New Zealanders will fund retirement from it rather than ever apply for a care subsidy. It is simply a reason to understand how the asset test works, rather than to be surprised by it.

What's the difference between the subsidy and the Residential Care Loan?

If your assets are above the threshold, you will generally be expected to pay for your own care until your assets reduce to the threshold level. For many people the main asset above the threshold is the family home, and selling it is not always something they want to do.

The Residential Care Loan is the alternative. It lets people whose assets exceed the threshold borrow interest-free against the family home to pay for care, rather than selling it. ⁹ The loan is secured against the home and is repaid later, typically when the home is eventually sold. It can suit people who want to keep the home in the family for a time, or who expect their circumstances to change.

Both have detailed eligibility rules, and which is right depends on your full financial picture, your family's wishes for the home, and your wider estate plan. Neither is automatically better than the other.

Why gifting and trust strategies need real care here

A common idea is to give away assets, or move them into a family trust, so they fall below the threshold. The rules are stricter than many people expect, and getting this wrong can backfire.

Work and Income looks back at gifting when assessing the subsidy. Within five years of applying, gifts of up to $8,000 per person per year are generally allowed before they count against the asset test. For gifts made more than five years before applying, up to $27,000 a year (per couple) is generally allowed. ⁵ Gifts above these limits can be counted back into your assets, which can disqualify you when you most need help.

Trusts add further complexity. Setting up or restructuring a trust late in life, specifically to qualify for a subsidy, can be challenged and may not achieve what people hope. Trust and gifting decisions also have legal and tax dimensions.

Smiths Financial does not provide advice on trust structures, estate law or tax. This is general information only — please consult a lawyer or other appropriately authorised professional before making gifting or trust decisions for this purpose.

How should this shape your wider retirement plan?

For most people, aged-care costs are a tail risk rather than a certainty, but they are a large one, and they sit alongside the other big retirement questions. A few principles are worth holding onto.

Plan for the likely, not just the worst case. The majority of retirement spending is ordinary living cost, funded by NZ Super and your own savings. Knowing your NZ Super rates and eligibility and building a savings buffer on top covers the common path. Whether you reach retirement owning your home or renting also changes the picture, since the home is both where care begins and a key asset in the test.

Avoid late, reactive restructuring. The gifting and trust rules above reward planning done well ahead of time, not decisions made in a hurry once care is needed. If aged care, estate planning or asset structuring is on your mind, our guide on when to see a financial adviser covers the points at which advice tends to add the most.

The aim is a plan that holds up across the likely path and the harder ones, without assuming any single rule or threshold stays exactly where it is today.

Frequently asked questions

What is the asset threshold for the Residential Care Subsidy in NZ?

For the 2025/26 year (from 1 July 2025), a single person generally qualifies on the asset side with total assets of $291,825 or less. ¹ A couple where one partner is in care and the other stays in the family home can instead use a lower threshold of $159,810 or less if they exclude the value of the family home and car. ² Thresholds are adjusted for inflation each 1 July.

Is the family home counted as an asset?

It depends on your situation. Where a partner or dependant still lives in the home, a couple can choose the lower threshold that excludes the home and one car. ² Where there is no partner or dependant living there, the home is generally counted under the higher threshold that includes all assets. ¹

Does KiwiSaver count towards the asset test?

Generally yes. Once you are over 65 and able to access it, your KiwiSaver balance is treated as a financial asset like other savings and investments, and it counts towards the asset test.

How is NZ Super treated by the subsidy?

NZ Super is counted as income in full. ⁶ If you receive the subsidy, most of your NZ Super and other income goes towards your care costs, while you keep a weekly personal allowance of $56.58 and an annual clothing allowance of $354.89. ¹⁰

What is the Residential Care Loan, and how is it different?

The Residential Care Loan is for people whose assets are above the threshold. It lets you borrow interest-free against the family home to pay for care instead of selling it, and the loan is repaid later, usually when the home is sold. ⁹ The subsidy, by contrast, is a top-up payment for people at or below the asset threshold and is not repaid.

Can I give away assets to qualify?

There are limits. Within five years of applying, gifts of up to $8,000 per person per year are generally allowed before counting against the test; for gifts made more than five years before applying, up to $27,000 a year per couple. ⁵ Gifts above these limits can be counted back into your assets. Trust and gifting decisions also have legal and tax consequences, so seek advice from a lawyer before acting.

General information, not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Seek advice tailored to your situation before acting. Smiths Financial does not provide advice on trusts, estate law or tax — consult an appropriately authorised professional. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Figures are correct as at 27 December 2025 and care-subsidy thresholds are set by Government and change annually — check current figures at workandincome.govt.nz. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 27 December 2025.