When should the discussion about aged care commence? At what age should you start thinking about your aged care needs? The answer is simple, any age is the right time. Whether you find yourself in the early stages of retirement or well into this life phase, initiating conversations about aged care is important.

Starting the conversation while your loved ones are still in good health is a smart approach. Focus discussions on what support may prove beneficial or alleviate potential challenges in the future. While raising the subject may introduce a level of awkwardness, it provides your loved one with an opportunity to consider their priorities and provide you with instructions. These instructions provide guidance if you need to make choices on their behalf in the future.

Five things to consider

1. Addressing financial, family, and personal aspects early on can open up a range of options and help reduce stress when navigating aged care decisions.
2. Beyond residential aged care, consider alternatives like the Commonwealth Home Support Programme and Home Care Packages. These options offer varying support levels, allowing individuals to remain in their homes while maintaining independence.
3. Explore short-term respite options or alternatives to support family and friends in need of a break from the care and support they provide, allowing them focus on their personal wellbeing.
4. Review the enduring power of attorney, enduring guardianship, and Will to ensure they are appropriate and valid. This will minimise confusion and delays, along with any unexpected outcomes when they are required.
5. Alteris Financial Group’s Aged Care Specialist Advisers can provide more information around the various care options and support available. They will also help to clarify the various financial considerations, helping you to understand any immediate and long-term financial outcomes.

We’re here to help, every step of the way

Making an informed decision about aged care is important. Incorrect decisions can have far-reaching consequences for the entire family, potentially leading to conflicts. To learn more about how Alteris’ Lifestyle and Care team assists families in making informed choices at every stage of their aged care journey and achieve their preferred outcomes during emotional and stressful times, please contact the team.

A common question from families transitioning a loved one into aged care centres on asset declaration, particularly about the family home and jointly held assets. Families often feel uncertain about what must be declared for the aged care fee assessment.

In general, the family home is exempt from assessment if a spouse continues to live there or if there is another ‘protected person,’ which may include:

• a carer who has lived in the home for at least two years prior to the resident’s entry into care and is eligible to receive an income support payment (eg Carer Payment), or
• a close relative who has lived in the home for at least five years before the resident moves into care and is eligible for an income support payment (eg Age Pension, JobSeeker, or Disability Support Pension).

Other assets, whether in Australia or abroad, owned individually or jointly by the person or their spouse, need to be declared. This requirement also extends to income. Many people are unaware that the obligation to declare assets and income continues beyond the initial assessment and that future changes, including Refundable Accommodation Deposit (RAD) payments, must be disclosed.

For Age Pension purposes, the family home remains exempt as long as the spouse lives there, extending up to two years after the spouse leaves. After this period, it is assessed based on its net market value. However, for aged care purposes, the two-year exemption does not apply, and the former home becomes an assessable asset, up to a capped amount, as soon as the spouse leaves.

Some common asset assessment scenarios

When the sole occupant moves to a care facility:

If a person living alone enters permanent residential aged care, the net market value of their family home is assessed up to a capped maximum amount. If the property is retained, its value is only assessed up to the capped amount for the aged care asset test. If the former family home is subsequently rented out, the net rental income becomes assessable under the aged care income test.

When a spouse is living in the home

If one member of a couple enters permanent residential aged care while their spouse remains at home, the family home is exempt from the aged care means test during this time. However, if the spouse vacates the home or also moves into residential care, the family home becomes assessable under the aged care means test, subject to a capped maximum amount.

When a carer in the home is eligible for an income support payment

If a carer has lived in the home for at least two years before the resident entered care and qualifies for an income support payment, the home may be exempt from the aged care means test assessment.

When a close relative is eligible for an income support payment

The exemption rule for the family home under the aged care means test also applies when a resident is living with a close relative who has resided in the home for at least five years before the resident enters care and is eligible for an income support payment.

We’re here to help, every step of the way

Aged care finances can be complex, so it’s important to understand your options and how they relate to your family’s situation. If you’re unsure about your current situation or how asset assessments may impact your care situation moving forward, our advisers can put you in touch with Alteris’ Lifestyle and Care team.

Alteris’ team of specialist financial advisers are here to assist you in navigating these rules and making informed choices that consider both immediate and long-term outcomes. They can can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Learn more about Alteris Financial Group’s accredited aged care financial advisers.

On 12 September 2024, the Government proposed legislation and aged care fee changes aimed at enhancing the quality of aged care in Australia. These proposed reforms are also set to impact the fees associated with home care and residential care services.

Whether you’re currently receiving care or supporting a loved one on their care journey, it’s essential to understand what these changes could mean for your situation. This article will guide you through the recent fee adjustments and the proposed changes to the aged care system from 1 July 2025. We’ll break down everything you need to know so that you can feel confident and well-informed.

Aged care fee changes from 20 September 2024 (existing residents)

As of 20 September 2024, existing aged care residents will experience changes to the aged care fees charged.

• The Basic Daily Care Fee has increased to $63.57 per day (previously $61.96).
• The thresholds for means-tested fees have been raised, which may result in a reduction in your means-tested care fee.
• For residents assessed with a Daily Accommodation Contribution (DAC), this amount may also change.

The Basic Daily Care Fee is set at 85% of the single age pension rate. On 20 March and 20 September each year, this fee is adjusted in line with cost-of-living changes. Means-tested fees, including the means-tested care fee and/or Daily Accommodation Contribution, are calculated based on your assessable assets and income, using specific thresholds. These thresholds are reviewed quarterly, so even if your assets and income remain unchanged, your means-tested fees may vary.

Proposed aged care fee changes from 1 July 2025

On 12 September 2024, the Government proposed legislation for a new aged care system, expected to come into effect on 1 July 2025. For residents already in the current system, fees are expected to remain unchanged under the new legislation.

Accommodation

The main changes proposed:

1. Refundable Accommodation Deposit (RAD) retention: From 1 July 2025, providers will be able to apply a retention (non-refundable) fee of 2% per annum on the RAD for up to 5 years, with a maximum retention of 10%.
2. Indexing daily accommodation: For residents choosing to pay a daily fee instead of a RAD, the Daily Accommodation Payment (DAP) will be indexed twice a year in line with CPI.
3. There will be no changes to the treatment of the family home in the aged care means test assessment process. If a spouse or “protected person” resides there, it remains exempt; otherwise, approximately $208,000 of its value (indexed) will be included in financial assessments.

Daily Care Fees

Home Care (Support at Home)

From 1 July 2025, the Home Care Package framework will transition to the Support at Home Program, with funding categorised into three areas: Clinical Care, Independence, and Everyday Living.

1. New classification system: Recipients will be assessed into one of the ten funding classifications to better align funding with individual needs.
2. Independence and Everyday Living Contributions: While the government will pay 100% of clinical care services, individuals may be required to contribute up to 50% of the price for independence services and up to 80% of the price for everyday living services. The amount payable will be based on Age Pension status or Commonwealth Seniors Health Card eligibility.
3. Home Care grandfathering: Individuals with a Home Care Package on 30 June 2025 will keep the same funding and any unspent funds under the new Support at Home program. Those on the National Priority System or approved for a package by 30 June 2025 will get a Support at Home budget equal to their approved package level when available. If a future assessment entitles a recipient to more funding, they will move to the new Support at Home classification when it’s available.
4. Contribution arrangements: If you were receiving a Home Care Package, on the National Priority System, or assessed as eligible for a package by 12 September 2024, you will not pay more because of the reforms. Your contributions will stay the same or be lower than before. When you move to residential care, your contribution arrangements will remain the same unless you choose to switch to the new program. However, changes to accommodation payments in residential care will still apply, as these are agreed upon between the resident and their provider.

What does this mean for those already in care?

If you’re already part of the current aged care system, fees are expected to remain unchanged under the new legislation. The proposed legislation includes grandfathering provisions, ensuring that the existing rules continue to apply.

It’s helpful to reflect on what happened the last time the rules changed. The current aged care laws, which came into effect on 1 July 2014, did not impose the new fee arrangements on those already in aged care or receiving a home care package. Those looking to move between aged care homes were given the choice to either opt into the new system or stay under the existing rules.

Where can I find out more?

On 12 September 2024, the Australian Government introduced the Aged Care Bill 2024 to Parliament. Once passed, this Bill will become the new Aged Care Act, expected to take effect from 1 July 2025. You can find additional details by clicking the following link. https://www.health.gov.au/our-work/aged-care-act

We are here to help, every step of the way

The proposed reforms to residential aged care and home care are significant. If you’re unsure about your current situation or how these reforms might impact your care situation moving forward, our advisers can put you in touch with Alteris’ Lifestyle and Care team.

Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all available options and explain the various financial considerations. The team can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments. Learn more about Alteris’ accredited aged care financial advisers.

Occasionally, people want to change aged care homes. Moving to a new aged care home can offer many benefits for residents, such as being closer to family or enhanced services. However, it is crucial for decision-makers to fully understand the financial implications of moving to another aged care facility, especially if the resident’s circumstances have changed since the initial financial assessment by Services Australia.

What are the financial implications?

Potential increase in fees

• Accommodation Costs: The cost of accommodation can differ greatly between facilities. A new aged care home may charge higher accommodation fees, including a Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP). It’s important to compare these costs to understand how they might affect your budget.
• Additional Services: Some facilities offer services or amenities that may come with additional costs. Make sure you are clear about what is included and what extra charges may apply. It is important to note that homes that accept low-means/concessional residents may have lower-quality fittings and fixtures, but the level of care you receive should be the same as homes that do not accept concessional residents.

Reassessment of financial status

Moving to a new aged care home often triggers a reassessment of your financial status by Services Australia’s residential aged care department. If your financial situation has changed since your initial assessment, the outcome of the reassessment can significantly affect the fees you will be required to pay. The reassessment may lead to one of three outcomes:

• No change: If there have been no significant changes in your financial situation, your status will remain the same. For instance, if you were originally assessed as a low means resident, your accommodation cost will be assessed the same.
• Loss of low means status: If your assessed assets have increased, you might lose your concessional (low means) status, resulting in higher fees as you would be classified as a financial resident. This is explored further in the scenario below.
• Change from financial to low means/concessional: If your financial situation has worsened, you might qualify for concessional status, which could lower your fees if the government assessed accommodation contribution is lower than your current DAP.

Scenario: Supported resident transferring to a new aged care home

To highlight the importance of these financial implications, let’s look at a recent case Alteris’ Lifestyle and Care Team handled for a supported resident.

Initial financial status

The resident originally entered permanent care as a partially supported (concessional) resident. They were paying a low Daily Accommodation Contribution (DAC) because while they had a modest level of savings, their former home was exempted from aged care fees, thanks to a Protected Person living there.

Change in financial circumstances

Later, the resident’s financial situation changed when the Protected Person status ended. This meant their home was no longer exempt from aged care fees. While still receiving subsidised accommodation, the change led to an increase in the DAC to the maximum rate of $68.14 per day. Additionally, a means-tested care fee could also apply at this stage.

Impact of moving to a new aged care home

• New Means-Assessment: Upon moving to a new aged care home, a new means-assessment is triggered if it’s been more than 120 days since the original assessment. In our example case, without the protected person status exempting the former home, the resident would now be re-assessed as a financial resident and pay fees at the rate agreed with the new aged care home.
• Accommodation Fees: The resident would then be required to pay for accommodation as a Daily Accommodation Payment (DAP) or Refundable Accommodation Deposit (RAD). Based on an assumed RAD of $500,000 and the current maximum permissible interest rate (8.36%), the DAP would be $114.52 per day.
• Financial Impact: This represents an increase of $46.38 per day above the original maximum accommodation contribution of $68.14 per day. This increase needs careful consideration to ensure it is sustainable for the resident.

Planning

It’s essential to carefully review changes to cash flow requirements and the overall financial situation thoroughly before the move. To comfortably manage the increased accommodation fees over the medium to long term, there may need to be changes, for example, possibly using the former home to pay the DAP/RAD.

We are here to help, every step of the way

Moving to a new aged care home can greatly enhance quality of life, but it’s important to ensure that the resident and their decision makers are fully informed about the financial consequences. Careful planning and consideration of your financial situation will help ensure that your decision supports both your well-being and financial stability.

Our advisers can help by referring you to Alteris Financial Group’s Lifestyle and Care Team. Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all options and explain the various financial considerations. They can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Moving into residential aged care can trigger a range of emotions, particularly when decisions need to be made about the family home. The home is a major financial asset, and many people believe it should either be kept in the family, or its value preserved for future generations.

Whether the home must be sold to pay for aged care depends on several factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs (DVA) payments.

Cost of care

Services Australia’s residential aged care department determines the cost of aged care based on a person’s income and assets. ⁱ

For aged care fee purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A “protected person” is defined as either a spouse (including de facto), a dependent child or student, a close relative who has lived with the aged care resident for at least five years and is entitled to Centrelink income support, or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support. ⁱⁱ

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $201,231 per person, for the calculation of aged care fees. ⁱⁱⁱ

Once your assessed assets exceed $201,231, Services Australia determines that you will pay accommodation costs at the rate agreed upon with the aged care home. This is known as the advertised Refundable Accommodation Deposit (RAD) or the equivalent daily interest rate, known as the Daily Accommodation Payment (DAP). There’s also the option to pay a combination of both the lump sum RAD and DAP.

The average RAD is $450,000, but just as property values vary significantly, so too do RADs, particularly in upmarket inner-city suburbs. Based on the current interest rate of 8.36% (effective from 1 July 2024), the equivalent DAP for a $450,000 RAD is $103.07 per day ($37,620 per year).

Depending on your combined assessable income and assets, you may also be required to pay a daily means-tested care fee. This means-tested care fee has an annual cap of $33,309 (indexed) and a lifetime cap of $79,942 (indexed).

This fee is in addition to the basic daily fee of $61.96 and any additional or extra service fees charged by your chosen accommodation provider.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that will be left empty, selling it may be your preferred choice.

Other options to cover the costs may include using your other assets or income, renting the home (though this can increase the means-tested care fee and reduce the age pension), borrowing against the property, or asking family to cover the costs.

Centrelink pension rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule if the property is kept.

The home is exempt for pension purposes if occupied by a spouse; otherwise, it is only exempt for up to two years or until sold, whichever comes first.

If you don’t have a spouse living in your home and you move into aged care, then after two years, your property’s full value will be counted towards the age pension calculation. This could result in the loss of the pension.

However, money paid towards the RAD, including proceeds from the sale of a house, is exempt from age pension calculations.

Refundable deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. The full amount will ultimately be paid to the estate and distributed according to the person’s will.

We are here to help, every step of the way

The decisions around whether to sell your home to pay for aged care can often create stress both financially and emotionally for residents and their loved ones. Our advisers can help by referring you to Alteris Financial Group’s Lifestyle and Care Team. Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all options and explain the various financial considerations. They can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Sources

i https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs

ii https://www.myagedcare.gov.au/income-and-means-assessments

iii https://www.myagedcare.gov.au/income-and-means-assessments