Choices for the Elderly
Aged care costs
The Australian Governments Aged Care reforms commenced on 1 July 2014 and removed the distinction between high and low-level care, which removes the link this had to the type of accommodation payment required.
Central to the reforms is the adoption of a ‘means tested amount’ which is calculated using both assessable assets and assessable income and is used to determine both entry fees and ongoing fees. This is a change from pre 1-July rules where only assessable assets were used to determine the accommodation payment and only assessable income was used to determine any income tested fee payable in addition to a basic daily care fee. The former home will be included in the calculation of the means tested amount although exemptions can continue to apply, and the home value is capped.
The means tested amount is used to determine whether a resident has sufficient means to pay an entry fee. Residents have the choice of paying this entry fee as a fully refundable lump sum, regular periodic payments or a combination of both. Aged care facilities are required to publish accommodation prices for available rooms and residents are not required to select how they will pay for accommodation until they have been in care for 28 days.
Extra service fees can apply to residents in facilities that offer extra services related to accommodation or entertainment. These fees do not provide a greater standard of care.
Aged care accommodation
According to the Australian Bureau of Statistics, over the next 40 years, Australia’s population over the age of 65 is expected to grow to more than 23% of the population – a proportional increase of 80%. Demand for aged care accommodation will grow accordingly.
Entering aged care can be a daunting process requiring significant personal adjustment and an understanding of complex fee structures based on income and asset assessment.
At home help
For many, the familiarity and stability of the family home make it the preferred option. Home Care Packages are available to assist people to stay in their home and provide a range of services such as personal care, home maintenance, transport and health support. These services can help prevent a premature move into Aged Care accommodation.
Granny flat interests
A granny flat interest involves the transfer of property or cash in exchange for the right to accommodation for life. It is usually a family arrangement to provide company, nearby help and support for an elderly relative. There are potential costs such as stamp duty and capital gains tax associated with transferring assets.
Assessment of the family home
Decisions regarding the family home can impact on Age Pension or Department of Veterans’ Affairs benefits and aged care accommodation fees. Decisions relating to the family home are often not based purely on financial grounds and in many cases, there can be a strong emotional attachment to the family home.
Depending on individual circumstances, there can be a financial advantage in retaining the home and renting it out. However, this could require significant capital to be spent on renovations and could be problematic in terms of paying an entry fee. Careful planning can assist.
The Aged Care system has undergone significant change and it is clear that the need to seek financial advice is now further reinforced. Strategies such as investing in a lifetime annuity still have the potential to reduce fees and issues around the former home continue to be complex.
It is important to consider all aspects regarding Aged Care before making any decision and to seek advice to assist with the complex financial considerations.