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