How the Residential Care Subsidy Works in NZ
NOTE ON FIGURES The asset thresholds in this guide are current as at 1 July 2026 ($300,811 and $164,731). These figures are adjusted annually on 1 July in line with CPI. Always verify current figures with Work and Income (freephone 0800 999 727) before making any financial decisions.
What is the Residential Care Subsidy?
The Residential Care Subsidy (RCS) is a government payment that contributes to the cost of long-term residential care — rest home, hospital-level, or specialist dementia care — for people who meet the financial eligibility criteria.
It is not a grant. It is not automatic. It requires an application, a needs assessment, and a financial means assessment. The subsidy is paid directly to the care facility by Health New Zealand, covering the difference between the maximum resident contribution and the actual cost of care.
Step 1 — The needs assessment
Before any financial assessment happens, your parent must be assessed as requiring residential care through an interRAI needs assessment carried out by the local NASC (Needs Assessment and Service Coordination) service. Without a needs assessment outcome, the financial means assessment cannot proceed.
Step 2 — The financial means assessment
Once the needs assessment is complete, Work and Income carries out a financial means assessment to determine whether your parent is eligible for the subsidy. This looks at both assets and income.
The asset assessment
Asset thresholds as at 1 July 2026:
Situation - Asset threshold (current to 30 June 2026)
Single person - $300,811 or less
Couple — both in long-term residential care - $300,811 combined or less
Couple — one in care, partner at home (Option A — include home and car) - $300,811 combined or less
Couple — one in care, partner at home (Option B — exclude home and car) - $164,731 combined or less
The family home is not counted as an asset if a spouse or partner (or dependent child) is still living there as their main residence. The family home is counted as an asset for a single person in care.
What is counted as an asset
Cash and bank savings
Investments, shares, managed funds
Rental properties and other real estate
The family home (for single people, or where no partner/dependent child remains)
Loans made to others, including to family trusts
Assets transferred to trusts
What is not counted as an asset
Personal belongings — clothing, jewellery, household contents
One car (exempt from the asset assessment)
Pre-paid funeral expenses up to $10,000 per person in a recognised funeral plan
The family home when a partner or dependent child is still living there
The income assessment
If your parent passes the asset test, Work and Income assesses income. Most income — NZ Superannuation, overseas pensions, interest, investment income — is counted toward the resident’s contribution. NZ Super is typically paid almost entirely toward care costs once the subsidy is in place.
The gifting rules — this is where families often go wrong
Within 5 years of the application: gifts above $8,000 per year (total, not per recipient) are counted as deprivation of assets and treated as if still owned
More than 5 years before the application: gifts above $27,000 per year are counted as deprivation
CRITICAL POINT Gifting assets to children or transferring them to a family trust does not protect those assets from the means assessment if it exceeds these thresholds. Work and Income actively reviews gifting history going back five years and beyond. Decisions made without specialist advice can have significant and irreversible financial consequences.
Family trusts and the subsidy
Work and Income now actively scrutinises trust structures. If a trust holds assets that were transferred from the applicant, those assets may be counted. If your parent has assets in a trust, specialist legal and financial advice before the means assessment is not optional — it is essential.
The Residential Care Loan
For people aged 65 or over whose assets exceed the threshold primarily because they own a home, a Residential Care Loan from the government allows care costs to be funded against the value of that home. The loan accrues interest and is repaid when the home is sold. Administered by Work and Income — verify current terms before publishing.
What happens while waiting for the assessment
In the interim, your parent is considered a private payer and charged the full cost of care. If the subsidy is granted, it can be backdated to the date of application — so applying promptly is important. Apply as soon as the needs assessment indicates residential care.
Getting advice
Work and Income Residential Care Subsidy Unit — freephone 0800 999 727
A specialist financial advisor or elder law lawyer — particularly important if there is a family trust, significant gifting history, or complex asset structure
Frequently asked questions — Residential Care Subsidy New Zealand
What is the Residential Care Subsidy in New Zealand?
The Residential Care Subsidy is a government payment that contributes to the cost of long-term residential care — rest home, hospital-level, or specialist dementia care — for people who meet the financial eligibility criteria. It is assessed by Work and Income through a means assessment and paid directly to the care facility. It does not apply to retirement village living.
Who qualifies for the Residential Care Subsidy?
To qualify, your parent must first be assessed as needing residential care through a needs assessment (interRAI) carried out by the local NASC service. They must then pass a financial means assessment by Work and Income, which looks at their assets and income. As at 1 July 2025, the asset threshold for a single person is $291,825. This figure is adjusted annually on 1 July — always verify the current threshold with Work and Income (0800 559 009) before making financial decisions.
Does the family home count as an asset for the Residential Care Subsidy?
It depends on the circumstances. The family home is not counted as an asset if a spouse or partner (or dependent child) is still living there as their main residence. For a single person in care with no partner at home, the family home is counted as an asset. A Residential Care Loan is available for people whose only significant asset is the family home — this allows care costs to be funded against the home's value, repayable when the home is eventually sold.
What are the gifting rules for the Residential Care Subsidy?
Work and Income reviews the history of asset transfers when assessing eligibility. Assets transferred to family members or trusts within 5 years of an application are subject to deprivation rules — gifts above $8,000 per year total are counted as if still owned. Beyond 5 years, the threshold is $27,000 per year. Transferring assets to avoid the means assessment can backfire significantly. Specialist financial advice before making any asset decisions is strongly recommended.
How do I apply for the Residential Care Subsidy?
The needs assessment (interRAI) must be completed first through your local NASC service — your parent's GP can initiate this. Once the needs assessment indicates residential care is required, apply to Work and Income for the means assessment as soon as possible. The subsidy can be backdated to the date of application, so applying promptly is important. Work and Income's Residential Care Subsidy unit can be reached on 0800 559 009.
How do family trusts affect the Residential Care Subsidy?
Work and Income actively scrutinises trust structures as part of the means assessment. Assets transferred to a family trust may be counted as if still owned by the applicant, depending on the circumstances and timing of the transfer. The effectiveness of family trusts established to protect assets from the means assessment has reduced significantly in recent years. If your parent has assets in a trust, specialist legal and financial advice before the means assessment is essential.
How long does the Residential Care Subsidy assessment take?
The interRAI needs assessment typically takes one to two weeks to arrange and complete. The Work and Income means assessment can take several weeks. In the interim, your parent is treated as a private payer at the full care cost. Because the subsidy can be backdated to the date of application, it is important to apply to Work and Income as soon as the needs assessment is underway — do not wait for it to be completed first.