Significant reforms are planned for Aged Care from 1 July 2014.
Understanding the changes and how they may impact on your cost of care, eligibility for a pension and estate planning wishes can help you make important informed decisions.
The reforms will impact what people will pay toward the cost of their accommodation and care. The current asset test to determine someone’s liability to contribute towards the cost of their accommodation and income test to determine their liability to contribute towards their ongoing cost of care will be replaced with a comprehensive means test (asset and income assessment).
Residential Aged Care
Accommodation Payments: From 1 July 2014, residents will be able to choose to pay for their cost of accommodation through a Lump Sum (known as a Refundable Accommodation deposit or RAD), a daily Charge (known as a Daily Accommodation Payment or DAP) or a combination of both.
Fees and Charges Choices post 1 July 2014
= RAD or DAP or combination of RAD and DAP
+ Basic Daily Care Fee + Care Contribution
Accommodation payments can be viewed on the North Eastern Community Hospital website and brochures as well as the My Aged Care website.
The Daily Accommodation Payment is calculated from the Refundable Accommodation Deposit (RAD) amount at a government set interest rate, which, effective April 1st 2015, is 6.36%. (Interest rates are subject to change 3 monthly.)
For example, if the market price RAD was $350,000, the DAP would be $60.98 per day. Of course you may decide to pay $200,000 by RAD and $150,000 by DAP in which case the DAP would be $26.13 per day.
Any amount of RAD you pay will be an exempt asset for the calculation of your pension entitlement. However payment of a RAD will be included in the calculation of assets for your care contribution.
The Basic Daily Care Fee, set at 85% of the Age Pension, will continue to apply to all residents of an aged care facility.
Post 1 July 2014 reforms, residents of an aged care facility will be assessed by the government based on their assets and their income to determine their capacity to pay beyond the basic fee.
The formula that is applied is:
- 50c per dollar of income above $24,796 p.a; plus
- 17.5% of assets between $46,000 and $157,051; plus
- 1% of assets between $157,051 – $379,153; plus
- 2% of asset above $379,153; less
- Accommodation Supplement ($53.39)
Income is assessed under the same rules that Centrelink applies for pension entitlement. Assets, both within Australia and overseas, are assessed at market value.
The former home will be assessed at a value of $157,051 unless a protected person is living there, in which case it is exempt from the assessment.
A protected person is:
- A spouse or dependent child.
- A carer, who is eligible to receive an Australian Income Support Payment, who has been living there for at least 2 years.
- A close relative, who is eligible to receive an Australian Income Support Payment, who has been living there for at least 5 years.
A common misconception about moving into an aged care facility is “If I don’t have any money, I won’t get in!” In reality, most aged care facilities need to keep a ration of people who are financially disadvantaged to receive funding from the government.
At the moment, an asset test is used to determine if you qualify to be a supported resident. Post 1 July 2014, your eligibility to have some (or all) of your cost of accommodation subsidised by the government will be based on your assets and your income.
Contact Us To Discuss Your Options
To talk over the best way forward, contact us today for an appointment.
If you would like additional information for:
- Online retirement and aged care directories.
- The latest Department of Social Services Fees and Charges for residential aged care.
- Centrelink Pension rates.