For many Australians, moving into an aged care facility will become inevitable. As this time approaches, the ageing person and their family begin to investigate how the system works and how it will impact them. It will always be in your best interest to have some plans in place so you do not get caught up in the urgency of the transition, and can therefore ensure best outcomes.
The prices may be high
With recent changes to the aged care sector, more and more responsibilities are being transferred to the individual and their family.
For example:
- These changes now permit bonds to be levied on aged care residents at the market price
- Assets are now being means tested to pay fees. This is because the government’s position is that taxpayers shouldn’t be burdened with another person’s retirement
- You will have to contribute more to your own funds for your upkeep
Basic fees
There are three tiers of fees which are now applied to residential aged care which you will have to investigate:
- There’s a basic fee for daily care which is about $47.15; everyone pays this
- Next, if you have $155,000 in assets or more you may be required to pay an accommodation fee
- Finally, there is a means tested cost-of-care fee which is used for medical expenses. This fee is capped at $25,000 per year. However, when you have paid $60,000 total then this fee discontinues.
Another important point is that once your assets have reached $155,000, then you become responsible for 100% of the accommodation fee. This will be at a flat market rate that the nursing home sets. But there are two ways to pay the fee. It can be paid by an invested bond which yields interest for the nursing home. When you cease your residence at the facility, the original investment is then returned to you, or your estate for your inheritors.
A flat rent fee can be paid monthly to the aged care residential home. If you have a large sum of money, you may be better off keeping it and then paying a monthly fee to stay in the nursing home from the interest. Or you could pay half your rent from retirement income and then the balance through a bond. A good idea would be to talk to a financial investor and discuss which would be a better option for you.
Selling the family home
Whether or not you have to sell the family home actually depends upon your personal circumstances. It also depends on the negotiated agreement you have made with the aged care home you wish to move into. There are several reasons why your home may not be counted as an asset:
- One would be if your partner; or a child who is a dependent, is living there.
- Another reason would be if a caregiver who has been living there for at least 2 years is eligible for an Australian government income support payment.
- If a close relative who has been living with you for 5 years or more is eligible for an Australian government income support payment.
- If you really don’t want to sell your home, but the care provider is asking you for a refundable accommodation payment, you may be permitted to make a periodic payment instead.
- If you don’t sell your home before moving into a care facility, then for 2 years your residential home will be exempt from the age pension assets test. If you are renting out the home to pay for care, it would be exempt also.
- If you rent your home so as to pay periodic payments, the age pension asset test will exempt the value of your home. The rental income will be exempt from the age pension income tests as long as you are using the rent to make the periodic payments.
- From the date of January 1st 2016 under the aged care means test, this has changed. New residents entering into a care home will have their net rental income from the home they formally lived in assessed in their application for subsidies.
- This does not affect anyone who has already entered into a home before this date. However, this only applies if they have not left a home for 28 days beyond regular leave and then reentered one.
Remember, by planning ahead, you will be in a much better position in relation to your choices. Certainly a worthwhile investment of your time.