Your guide to Aged Care
It can be a confusing and emotional time considering placing yourself or a relative into residential aged care – but as with many of life’s big decisions the best approach is to arm yourself with the facts and seek guidance from specialists.
Naturally, your focus is to find the best aged care facility, but it is just as important to consider the financial options to, so you make the right financial decisions for you and your family.
We see hundred of families every year, and we’ve a pretty good idea of the important issues you’ll need to address over the coming weeks; so we’ve put together a guide designed to help you understand your options and the costs involved.
As fees change a couple of times a year this information should be used as a guide only, and you should check with a specialist adviser before making any long-lasting financial commitments.
What is residential aged care?
Residential aged care is specifically for elderly or frail people who can no longer manage at home on their own. Depending on the level of care required the facility entered will be a:
- low care facility (hostel) providing personal care services such as assistance with daily living, or
- Higher care facility (nursing home) providing nursing type services in addition to personal care services.
A single facility may provide both low and high-level care on the one site.
All facilities are obligated, by government legislation, to meet a standard level of accommodation and provide specific levels of care. Some facilities however, can also choose to offer extra services for which additional fees are charged.
The Government requires all low care and standard high care facilities to provide a set percentage of their accommodation for prospective residents who are considered as Supported or Fully Supported; this applies to individuals with assessed assets valued below a specific threshold. (See Industry Updates on our website for further details). An asset assessment is required by Centrelink or Department of Veteran’s Affairs in order for ‘Supported’ status to be granted.
Retirement Villages, Independent Living Units, Assisted Living facilities and Supported Residential Services are not classified as government-funded residential aged care facilities and, therefore, are not subject to government regulations.
Do you need an assessment before entering residential aged care?
Yes. To enter a government funded aged care facility you must first be assessed by an Aged Care Assessment Team (ACAT). These teams are often based in hospitals and are made up of health care professionals such as doctors, nurses and social workers.
This team conducts a thorough assessment to help older people work out what kind of service will be best for them when they can no longer manage at home.
To find the closest ACAT to you, call Commonwealth Carelink Centre on 1800 052 272 – there is no charge for this assessment.
Who regulates Aged Care?
The Federal Government is responsible for regulating the aged care sector and enforcing legislation contained in the Aged Care Act and Residential Care Manual.
Aged Care facilities can be owned and operated under a number of different structures, including local government, Churches and Charitable organisations, and can be privately owned.
How much does it cost?
The Government partly funds the cost of care, with the resident also paying fees depending on their assets and income, and the fees levied by the individual facility.
Aged Care facilities all charge a basic daily care fee which is regulated by the government and is based as a set percentage of the full age pension. This fee is reviewed when the age pension is adjusted. (See the latest Industry Update on our website for current fees)
Residents may also incur an income tested fee (depending on their level of deemed and actual income).
Residents may also be required to pay an accommodation bond in the case of a hostel or extra service nursing home, and an accommodation charge in the case of a nursing home.
Fees can vary dependent on the level of care provided and type of facility entered.
- Accommodation Charge – residents entering standard Nursing Homes (High Care) may be required to pay an accommodation charge in addition to the Daily Care Fee.
The charge is set at a maximum level by the federal government and can be indexed to inflation.
Fully supported residents do not pay an accommodation charge, and Supported residents will pay a reduced amount from the set maximum. (See our Industry Update for current details)
- Accommodation Bond – those residents who can afford it, will pay an Accommodation Bond in the case of a Hostel (Low Care) or an extra service Nursing Home (High Care with extra services).
Fully supported residents do not pay an Accommodation Bond.
An Accommodation Bond is basically an interest free loan to the facility for the residents’ right to live there. The amount paid can be negotiated with the individual facility, and there is no maximum limit set in legislation. However, the Accommodation Bond amount charged must leave the resident with a minimum level of assets, as determined by the government. (See our Industry Update for current details)
How can an Accommodation Bond be paid?
A bond can be paid as a lump sum, or periodic (interest) payments, or a combination of the two. Interest is charged if payment of the Bond is not made in full. This is known as the Maximum Permissible Interest Rate (MPIR).
Does the Accommodation Bond count for age pension purposes?
No. The bond is exempt from the Centrelink and Veteran’s Affairs tests for the pension.
Is any part of the Bond refundable?
Yes. The facility is entitled to deduct monthly amounts (retention amounts) from the Bond for up to a maximum of 60 months (a five-year period) whilst the resident remains there. When the resident leaves the home the balance is then returned to the resident, or paid to their estate. (See Industry Update for current retention amounts)
- Basic daily care fee are charged by both hostels and nursing homes. The maximum rate is set at 84% of the full age pension. This fee is reviewed six monthly and indexed to inflation. (See Industry Update current details)
- An additional daily fee is the Income Tested Fee that is based on the deemed and actual income of a resident, and includes any pension amount received.
- Additional services fees apply in some facilities and is charged as an extra services fee; this fee is more common in nursing homes, but can apply in some hostels. An extra services facility provides choices such as additional activities, choice of meals, use of a private dinning room and in some cases a larger private room. The extra services offered will vary between facilities.
Will you have to sell the family home?
Selling the family home to pay for fees is probably one of the biggest financial worries people have when it comes to aged care. However, entering aged care may not mean having to sell all your assets. The rules are fairly complicated but some main points to be aware of are:
- If sold, the proceeds of the home are immediately means tested.
- The family home is exempt for the purposes of bond calculations indefinitely if a spouse or dependant child remains in the home. These may also apply to a close relative or prime carer if they meet certain conditions.
- If the home is rented, and a portion of the bond remains unpaid, both the rental income and value of the house may remain exempt for Centrelink purposes indefinitely.
- If the home is rented, and the rental income is used to pay an accommodation charge or periodical payment on your accommodation bond, both the rental income and the value of the home remain exempt for Centrelink purposes indefinitely.
Your financial adviser can help work out the best option to suit your individual situation.
Can you reduce your income and assets by gifting?
There is a limit of $10,000 per financial year with a limit of $30,000 in a consecutive five-year period. Gifts over these amounts are treated as ‘deprived’ assets and are assessed as assets for a period of five years. Gifting within the limits may reduce your income tested fee, but only slightly.
Are overseas pensions counted as assessable income?
Yes. They are in most cases.
How can specialist financial advice help?
Your specialist adviser will work with you to explore all your financial options that will best suit your ongoing needs. Your adviser will:
- Provide advice on the affordability of care.
- Explain facility’s costs – initial and ongoing daily charges including income tested fees and extra services.
- Advise on the best way to pay the accommodation bond.
- Provide investment advice to make your money last.
- Develop cash-flow projections and a plan to manage your on-going finances.
- Work with you on asset preservation and any estate planning issues of concern.
- Ensure you understand the Government benefits available to you, and make sure you claim everything you’re entitled to.
Talk over your situation with one of our specialist Aged Care Advisers call our Toll Free number from anywhere in Australia – 1800 AGEDCARE (1800 243322).
Aged Care Financial Services Australia (ABN 68 142 582 367) Financial Advisers are licensed under Millennium3 Financial Services AFS Licence Number 244252.
This advice is of general nature only and is based on current laws and their interpretation. The application of the information in this document will depend on the individual’s circumstances. Before making any investment decisions, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual needs. Aged Care Financial Services advisers are authorised representatives of Millennium3 Financial Services.
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