Beware: Aged-care accommodation to get more expensive after July 1, 2014

If you are planning to enter aged-care accommodation, it should be done sooner rather than later. Aged care is likely to get a lot more expensive from July 1, 2014 when means testing for the government accommodation supplement will be based on income and assets of the recipient as opposed to just income-testing alone.

The current income-tested care fee – which is based on assessable income – will be replaced by a means- tested care fee that will be based on both assessable income and assets (which may include your home).

The government will either pay the maximum accommodation supplement or a part accommodation supplement, depending on the recipient’s assessed financial circumstances. For many, this will mean ongoing care fees will be higher if entering into an aged care facility on or after July 1, 2014.

Further, the manner to which payment for the accommodation should be made, the amount of accommodation fees payable and any on-going care fees will also be affected. Critically, the family home may also impact the accommodation fees payable.

The table on the following page summarises the current situation and the post July 1 changes.

The changes will not affect people who are already living in aged care facilities or those who are already receiving care at home — unless they leave care and re-enter after a period of 28 days, or if they change facilities and decide to re-enter under the new rules.

However, anyone now receiving care at home who enters aged-care accommodation on or after July 1 would have to enter into a new agreement with the new provisions.

AGED CARE COSTS — THE CHANGED RULES AFTER JUNE 30

Before July 1, 2014 After July 1, 2014
Aged Care Assessment Team (ACAT) assessments An assessment is needed to determine the appropriate level of care you require – high or low. The distinction between low-level care and high-level care will be removed. Assessments will simply be to determine if any form of care is needed.
Upfront accommodation costs Accommodation is paid as:

  • an accommodation charge (daily payment) if you’re entering a high- level facility, or
  • an accommodation bond (lump sum payment) if you’re entering a low- level care or extra service facility.
You will have the option to pay for your accommodation either as:

  • a daily payment
  • a lump sum refundable deposit (similar to an accommodation bond), or
  • a combination of both.

This is regardless of the type of facility you enter.

The daily payment is paid unless and until a refundable deposit is paid. Daily payments are not required more than a month in advance. You can choose to draw down daily payments from your refundable deposit.

You can find the price of rooms on www. myagedcare.gov.au

Residents will have up to 28 days after entering a facility to decide on their payment method. Your choice can have an impact on your financial assets, which can therefore influence how much you pay for your ongoing care fees.

How accommodation costs are determined Accommodation costs are determined by a resident’s assessable income. Accommodation costs will be determined by a resident’s assessable income and their asset holdings.
Ongoing care fees
  • You are required to pay a basic daily fee.
  • If you’re not receiving the full Age Pension, you will generally be required to pay an additional daily fee based on your level of income.
  • An extra service fee is payable in an extra service facility and is set by the facility.
  • You are required to pay a basic daily fee.
  • If you’re not receiving the full Age Pension, you will be required to pay an additional daily fee based on your level of income and assets.
  • All facilities will be able to offer extra services for an additional fee.
Assessment of your home If you keep your home, it is not assessed as an asset to determine your ongoing care fees. 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 instance your spouse.

What should you do?

People are being advised to bring forward their entry into aged care before July 1, 2014 — meaning they would need to have an admittance date prior to July 1 and have all financial arrangements, such as income- friendly investment structures, in place before that.

As it often takes more than a month after receiving an aged care assessment to enter a subsidised residential aged care facility, it would be wise to act quickly.

While there are a number of factors that will influence this major decision, it is vital to know that keeping or selling your home will affect your ongoing care fees if you enter a care facility after July 1 this year.

If you decide to keep your home, consult this office to structure your accommodation costs and devise an appropriate investment strategy to reduce the amount you pay for your aged care. If you sell your home, the entire proceeds will be assessed to determine your ongoing care fees. This will need to be considered alongside the practicalities of keeping the home, such as ongoing bills and maintenance.

It is important that anyone contemplating entering aged care any time soon fully understands what impact the new rules will have on both the cost of care, and their age pension, plus any other financial implications. Consult this office for advice.

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