Considering aged care?

Tuesday, June 10, 2014

Major changes to aged care that take effect on 1 July 2014 may result in higher ongoing care fees. If you or a family member needs to move into aged care soon, now is the time to start planning.

Summary of changes

From 1 July 2014, the distinction between high-level and low-level care will be removed, giving everyone the choice to pay their accommodation costs as a lump sum, a daily payment amount or a combination of both. You will also be able to select extra services for an additional daily fee in participating facilities.

Importantly, the current income-tested care fee, which is based on assessable income, will be replaced with a means-tested care fee, which will be based on assessable income and assets. For many, this will mean ongoing care fees will be higher if entering an aged care facility on or after 1 July 2014, and in some cases much higher if assessed assets are significant.

Things to consider before moving into aged care

Moving from your home:   

When moving to aged care, you need to decide whether to sell or keep your home. While there are a number of factors that will influence this decision, it is important to know that keeping or selling your home can affect your ongoing care fees if you enter a facility on or after 1 July this year.

Until 1 July 2014, if you keep your home, it is not assessed as an asset to determine your ongoing care fees. 

However, from 1 July, up to $144,500 of the value of your home will be assessed as an asset to determine your ongoing care fees, unless it is occupied by a 'protected' person, for example your spouse. If you sell your home, the entire proceeds will be assessed to determine your ongoing care fees. This would need to be considered alongside the practicalities of keeping the home, such as ongoing bills and maintenance.  

If you decide to keep your home, it is important that your accommodation costs are structured correctly in order to continue to receive favourable Centrelink treatment.

2. Paying for your accommodation

From 1 July, you will have 28 days after entering a facility to decide whether to pay for your accommodation as a refundable accommodation deposit or a daily accommodation payment. Your choice can have an impact on your financial assets, which can therefore influence how much you pay for your ongoing care fees.  For example if you choose pay for accommodation by a  refundable accommodation deposit that deposit will be assessed as an asset to determine your ongoing care fees.

3. Investing your money

Your financial assets are assessed when determining your ongoing care fees, so an appropriate investment strategy may reduce the amount you pay.

Seek advice

If you or your family find yourself in the situation of needing accommodation in an aged care facility it would be worth consulting a financial adviser specialising in aged care to assist you in understanding the impact of these changes and how to best structure your finances.

This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such.  Maher Digby Securities does not accept any responsibility for the opinions, comments and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a financial advisor