Some retirees who need aged care may prefer to stay at home, whilst others may need or prefer the assistance that a residential aged care facility can provide.
To access residential aged care, the person requiring care must be assessed and approved by the Government’s Aged Care Assessment Team (ACAT).
If you or a family member can no longer manage to live independently at home, you may need to consider moving into residential aged care. Before you do, there are many factors to consider, including your eligibility, the costs involved and the effect on your finances and lifestyle.
What care and services are provided?
All aged care homes must provide a specified range of care and services to residents, according to their individual needs. These services include:
- appropriate staffing to meet the nursing and personal needs of residents
- assistance with daily living activities such as bathing, showering and dressing
- assistance with medications
- meals and social activities
- basic furnishings
- laundry and cleaning services
- maintenance of buildings and grounds.
For residents with higher care needs, services will also include the provision of special medical equipment, such as wheelchairs, basic medical and pharmaceutical supplies, nursing and therapy services.
How much does aged care cost?
While the Australian Government provides the majority of funding to residential aged care homes to assist with the costs associated with providing care, most residents will have to pay fees and charges.
All aged care facilities are subject to the same fee structure, regardless of the level of care the resident requires.
There are two main types of fees payable for aged care:
- Accommodation payments
- Ongoing fees
An accommodation payment is an entry fee payable for residential aged care. It is like an interest free loan to the aged care facility. The amount you pay as an accommodation payment will depend on the facility you choose to enter and is determined by a number of factors including quality of the facility, location and demand.
Protections are in place for residents who are assessed to have ‘low means’ and cannot be asked to pay the advertised accommodation payment. At the time of entry to the aged care facility, the government measures your ‘means tested amount’ and if it is less than a specified threshold, you will not have to pay the advertised accommodation payment.
You may however be asked to make a contribution towards the accommodation cost of your care known as an accommodation contribution.
Your means tested amount is determined by the value of your income and assets – added together.
What is included in the means tested amount?
Means tested amount = income tested amount + asset tested amount
Income tested amount
The income tested amount uses total assessable income measures. Total assessable income includes ordinary income (as assessed by Centrelink / DVA) plus:
- age pension
- service pension
- income support supplements
- other income support payments
- any other assessable income, such as certain compensation payments, gifts and foreign pensions.
Asset tested amount
The asset tested amount includes assets as assessed by Centrelink and includes any property or item of value that you or your partner have an interest in within Australia and overseas. It can also include assets that you have gifted (above the allowable threshold) within the last five years.
Assessable assets also include:
- Former home: The assessable asset value of the former home is included and capped at $171,535.20. This applies separately to both members of a couple.
- Refundable Accommodation Deposit (RAD): the amount paid as a lump sum accommodation bond is included in the assessable asset calculation.
Basic daily care fees
All aged care residents pay a basic daily care fee. The basic daily care fee of $52.71 is equivalent to 85% of the maximum (basic rate) single age pension.
Means tested fees
The means tested fee is another ongoing daily fee, charged in addition to the basic daily care fee. The amount you will pay is calculated based on your means tested amount. The means tested fee is capped at $28,048.80 per annum or $68,012.98 over your lifetime.
Extra services mean that the facility will provide you with a higher standard of accommodation and services, which you will pay for in the form of a daily extra service fee. Extra services may include a choice of meals, wine or massages.
Daily Accommodation Payments
If a resident does not pay the accommodation payment in full, interest will be charged on the amount of the bond that is outstanding. These are referred to as Daily Accommodation Payments (DAP).
What effect will paying aged care fees have on my Age Pension?
Married pensioners may each receive a higher rate of pension, under the government’s ‘separated due to ill health’ provision, if one or both members of the couple are in aged care.
If you entered care prior to 1 January 2017, are renting your former home and paying a Daily Accommodation Payment or Daily Accommodation Contribution, the value of your former home is exempt from the Age Pension assets test and rental income is exempt from the income test.
If you enter care from 1 January 2017, however, your former home becomes an assessable asset after 2 years (unless occupied by your spouse) and rental income is assessable for Age Pension income test purposes.
Residential aged care is a complex area. Getting the right professional financial advice can make all the difference in ensuring your assets and income are structured effectively, managing any changes to your pension payments and ensuring you have sufficient income to support your lifestyle and care needs. Give us a call on 03 5434 7600.