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Melissa Grimshaw

Navigating Age Care:  Understanding Fees, Pensions and Making the Right Choices

Written by Melissa Grimshaw

Aging is an inevitable part of life.  As we or our loved ones grow older, there may come a time, families need to think about care for Mum or Dad or both.

But with these considerations come questions about fees, pensions and more.  Even where to start to understand the whole process.

We are going to delve into the realm of age care and explain how it works, what fees to expect and what needs to be considered before any action is taken.

Firstly, what do we mean when we say Age Care?  Aged care is the support provided example our aging parents who need assistance with everyday living.  This can range from in home care – assistance with tasks like cooking, cleaning, or personal care – to residential aged care in a facility, which can be permanent or respite care.

DID YOU KNOW? – As at 30 June 2022, approximately 407,000 people were using residential aged care, home care or transitional care according to Gen Aged Care data as at 23rd April 2023.

Age Care Fees – What to expect.

There are a different type of fees associated with aged care, and they are calculated differently across Home Care and Permanent residential care.

Though generally there four types of fees that you may come across in your research:

  1. Basic Daily Fee – This fee covers living costs such as meals, cleaning, laundry, and heating. Everyone pays this fee – Home Care or Residential.
  2. Means Tested Care Fee or Income means tested fee – These fees is in addition to the basic daily fee and is based on an assessment of both income and assets. This is treated as an additional contributions from one’s own resources for the cost of care.  Not everyone will pay this fee, it does depend on the financial situation of the person needing care.
  3. Accommodation Payments – this payment is for accommodation, it can be a lump sum, regular rent like payments or a combination of. Usually associated with residential care rather than Home Care.
  4. Fees for extra or additional services – These are not standard and are for additional comforts or services beyond the basics. These are paid by the person’s financial resources only.

How to pay for the above fees?

There are a myriad of rules and regulations that govern the fee structures for all fees and there are lifetime caps in place for the Means Tested or Income means tested fees.

Generally, however, if you are a supported person receiving the full age pension, the basic daily fee is funded at 85% of your age pension.

The means tested or income means tested fees are determined by the person current income and assets and are funded from financial resources for those that need to pay this fee.

Should you be a person that is required to pay for accommodation within a residential facility, you can elect to pay this as a Lump Sum or as an ongoing fee or combination of.  The bond is structured by the residential care facility within government guidelines.

For example, a facility charges an accommodation fee of $500,000 known as Refundable Accommodation Deposit (RAD).  This can be paid upfront upon entry and is held in trust until such time the person leaves care or passes away.  It is then returned to the estate.

If you elect to not pay the fee as a lump sum, you are able to pay as an ongoing rent like charge, known as the Daily Accommodation Payment (DAP).  This is calculated based on the Accommodation fee ($500,000) that is being charged and a government prescribed interest rate- (currently 7.90% as a 1 July 2023).  It is charged daily and forms part of the ongoing fees payable by the resident.  Money paid this way is not an asset and is not returned to the resident upon leaving or passing.

You can pay a combination of the two, part lump sum and part Payment.  You can also elect to pay the lump sum at any point of care rather than the payment to help reduce ongoing fees.

The important point to note, is that how you pay the accommodation payment affects your ongoing care fees, and your asset and income position for calculating age pension and the means tested care fee.

Therefore, seeking advice is invaluable before making any decisions on structuring your care costs.

Lastly, the fees for extra or additional services are negotiated with your Home Care Provider or the residential care provider and generally charged daily as well and funded from the resident’s own resources.

How does this all affect Centrelink Pensions and Age Care?

This can be another complex area and how Mum and Dad’s assets including the family home is treated can affect entitlements under Centrelink or DVA age/service pensions and fees payable through accessing age care support.

We cannot stress how important it is to seek advice before making any major changes to the structure of assets held.  The below quick case study only emphasis the need to seek expert advice around age care.  Thanks to a newsletter article released by Agedcare 101, 13th October 2023.

Case Study

Two siblings were taking care of the parents navigate age care.  Mum needed to go into residential care and Dad was going to continue to live in the family home.   One of the siblings, a successful businessman, sought advice from his account around asset protection and acting on the advice moved parents’ home into a family trust.  Innocently thinking securing the family’s future but inadvertently caused a financial disaster for parents.

The Mistake

Transferring the home ownership, triggered a reassessment of assets, leading to Mum and Dad losing their maximum age pension and increase to Means tested care fees for Mum.

The Costs

  • Loss of age pensions – $1,096 per person per fortnight or $56,992 in income between Mum and Dad in the first year.
  • Means tested Care Fee – depends on the overall income and assets value, though would have increased due to the value of the home now being counted as an asset.
  • Legal and stamp duty costs to transfer the home from personal names to family trust.

Mistakes can be costly.

The things you should consider.

Do your homework – There is a great website called My Age Care – www.myagedcare.gov.au which provides a lot of factual information and can help you get armed with some information before you go out talking to Home Care or Residential care providers.

Know the costs – before choosing aged care service, get a clear breakdown of all fees involved. and;

Seek Financial Advice – Consider consulting with a financial planner that has knowledge around age care.  Can provide you with insights on managing assets, maximizing your pension, and minimizing your care fees.

Fun Fact In the last 100 years, the life expectancy of Australians has increased by 20 years.  There are now 4,250 people aged 100 years or older living in Australia – National Seniors Australian –01 06 2023

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