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Feature article
Who pays for rest home care in NZ?
Understanding residential care funding
12 December 2025
Navigating the costs of aged residential care in New Zealand can be complex. When a loved one needs long-term care, the immediate question for most Kiwi families is, “Who pays for this?”
The answer depends entirely on the person's financial situation and health status. We’ll break down how it works, and what your options are.
What we’ll cover:
- The three ways rest home fees are paid
- Financial thresholds: The asset test
- Gifting and deprivation rules
The three ways rest home fees are paid
1. Full government funding (Residential Care Subsidy)
The Ministry of Social Development (MSD), through Work and Income may cover your fees if you meet two core criteria:
- Needs assessment: An initial assessment confirms you require long-term residential care.
- Financial assessment: Your assets and income must be below certain thresholds (more on this to come).
If you are approved, the government pays the bulk of the standard care fees directly to the rest home. The resident is still responsible for small personal expenses (i.e. toiletries, haircuts, and newspapers).
2. Full private payment
If you require care but your assets or income are over the government’s set thresholds, you are considered a “self-funder.” This means you must pay the full cost of your care, known as the Maximum Contribution, until your assets fall below the limits.
3. The Residential Care Loan
If you don’t qualify for the subsidy but own a home, you may be eligible for a Residential Care Loan from Work and Income. This is an interest-free loan that covers your fees. It’s often used to prevent the immediate sale of a family home and is typically repaid when the property is eventually sold or after the resident passes away.
Financial thresholds: The asset test
The most critical factor in determining who pays is the asset test. This is a measure of the total value of your financial resources.
Work and Income review all your countable assets, which generally include bank accounts, investments, shares, and non-exempt property.
Age 50-64
If you are aged 50-64 and single with no dependent children, you automatically pass the asset test.
Age 65+
If you are 65 or older, the main limit for your total assets is $291,825. This limit applies if:
- You are single
- You have a partner and your partner is also in long-term care. This limit covers your combined assets.
Age 65+ with partner staying at home
If you are 65 or older and your partner remains living in your family home, the government gives you a choice on how to count your assets
| What is counted in your assets? | The maximum limit you can have | ||||
|---|---|---|---|---|---|
| Option 1: Lower limit | Option 1: Lower limit | Everything but your family home and car. | Everything but your family home and car. | Your other assets must be $159,810 or less. | Your other assets must be $159,810 or less. |
| Option 2: Higher limit | Option 2: Higher limit | Everything, including the value of your family home and car. | Everything, including the value of your family home and car. | Your total assets must be $291,825 or less. | Your total assets must be $291,825 or less. |
The option where one partner remains in the family home is designed to help them maintain security. You should choose the option that best fits your financial circumstances to ensure you qualify.
The income test
In addition to the assets, Work and Income will also assess your annual income. Income includes things like superannuation, investments, rental income, and certain pensions.
There is a maximum allowable level of income you can receive and still qualify for the subsidy. Any income above the limit must be contributed towards the cost of your care.
Gifting and deprivation rules
It is common to want to protect the family’s assets, but New Zealand has very strict anti-deprivation rules to prevent people from giving away assets solely to qualify for the subsidy.
Any gifting that exceeds the government’s low, set limits can be ‘counted back’ by MSD as if you still owned the asset.
To fully understand the legal limits on gifting, the specific rules around trusts, and the legitimate ways to structure your finances, we recommend reading our dedicated guide: Avoiding rest home fees in New Zealand: What is and isn’t allowed under the current rules
Final word on fees
In New Zealand, the payment for rest home care ultimately falls to the individual and their family, with the government stepping in via the Residential Care Subsidy only after a financial assessment confirms you cannot afford it.
Due to the complexity of the asset and gifting rules and the severe financial consequences of getting it wrong, always seek independent legal or financial advice from an expert specialising in aged care funding before applying.
Disclaimer
This article provides general guidance only on who pays for rest home care in NZ and the Residential Care Subsidy. It does not constitute financial, legal, or professional advice.
Government rules, asset thresholds, and gifting limits are subject to change. Do not act on this information without first obtaining specific, qualified advice from a New Zealand solicitor, lawyer, or financial adviser specialising in aged care funding or estate planning. Neither the author nor the publisher accepts liability for any reliance on this general content.
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