Blog

3 Ways to Help Pay for Your Parent’s Aged Care Home Fees

Paying for a aged care home fees can be difficult, and often places significant stress on a family’s finances.

Old age is inescapable, this is why it is crucial to plan for aged care ahead of time, especially when your loved ones require specialised medical treatment.

If you do not have an income that can comfortably support you, your family and the cost of aged care, it is vital you learn more about the options available.

In this article, you will learn 3 options to help pay your parent’s nursing home fees and relieve some of the pressure placed on your shoulders.

3 Tips to Help Pay for Residential Care for the Elderly

  1. Draw Daily Payments From Refundable Deposits

People moving in to residential care homes may be required to pay a one off refundable fee along with other ongoing fees, like:

  • The basic daily fee
  • The means-tested care fee
  • Accommodation fees
  • Addition services fees

It is possible to use the refundable accommodation deposit (RAD) to help pay residential care home fees, where daily accommodation payments (DAP) are covered by drawings against the RAD, reducing the balance over time.

As your RAD is reduced, you may be asked by your aged care accommodation provider to replenish your deposit, or pay a higher accommodation fee, to compensate for the decreased balance.

It is important to note, the Australian Government requires aged care home providers to publish their maximum accommodation fees, i.e. the max RAD and DAP, on their website, in any organisation materials and on the My Aged Care website. This will allow you see and better understand the options available when paying care home fees.

  1. Selling the Family Home

 This isn’t the most popular option for many people, but in some cases it can be the only viable one available.

Often, the majority – if not all – of your parent’s assets are tied up in the family home. If they are no longer able to live in it, it can prove to be more of a financial burden in the long run.

Although, the problem with selling the family home is that the money gained from the sale will now be counted towards assets and means tests carried out by Centrelink to calculate any government assistances available.

Assets exceeding the thresholds for ether individuals or couples are deemed as receiving an income of 3.25% on those assets, even if that number isn’t actually earned in interest.

This deemed income is then used in asset and means tests by Centrelink and will affect your parent’s age pension payments.

To avoid reductions in age pension payments, due to surplus assets from selling the family home, your parents can choose to either:

  • Gift the money – as long as it doesn’t exceed the amount of $10,000 in one year or $30,000 over five years
  • Prepay funeral costs
  • Invest in a funeral bond
  • Investing in investment bonds within a family trust
  1. Sell Other Assets

For some people, selling the family home just doesn’t feel right; either for sentimental reasons or because of the financial hoops they need to jump through in order to minimise aged care fees and maximise pension benefits.

For those people, it may be a wiser option to keep the family home and sell off other assets and investments.

As the value of the family home and the money earned from rent is exempt from income and assets tests, your parents could use the income earned from renting the home towards residential aged care fees.

Although, rent may be exempt from asset testing, it is not exempt from means tested care fees, which will increase by 0.50c per dollar of rent earned after expenses.

As you can see, there are a few options available when looking to pay for your parent’s accommodation in a residential aged care home.

To gain more information specific to your parent’s situation, and to be prepared with the very best strategy available, it is always a good idea to consult a professional financial planner first who will be able to advise and guide you along the way.

How Centrelink Asset Assessments Affect Aged Care Accommodation

Depending on your financial situation, you may be asked to pay part, or all, of your residential aged care fees if it your income and assets allow you to do so.

The fees for aged care you may be required to pay include:

  • A Basic Daily Fee
  • A Means-Tested Care Fee
  • Accommodation Fees
  • Additional Optional Services Fees

Anyone seeking to gain government assistance for aged care accommodation fees are required to have both their income and assets assessed by Centrelink.

How the Centrelink Asset Assessment for Aged Care Accommodation Works  

Your income and assets assessment test will be carried out by the Department of Human Services or the Department of Veteran’s Affairs and will determine how much assistance you are eligible to receive from the Australian Government.

Your assessable income includes:

  • Government Income Support Payments – Aged Pension, Service Pension or Income Support Supplement
  • Income From Financial Investments – Deemed, Not Actual
  • War Widow or Widower Pensions
  • Net Business Income
  • Net Rental Property Income
  • Family Trust Distributions
  • Dividends From Private Company Shares
  • Some Disability Pensions
  • Deemed Income From Excess Gifting
  • Superannuation and Overseas Pensions, and Income From Income Stream Products Such as Annuities and Allocated Pensions

Your assessable assets include:

  • Bank, Building Society and Credit Union Accounts
  • Cash
  • Term Deposits
  • Cheque Accounts
  • Friendly Society Bonds
  • Managed Investments
  • Listed Shares and Securities
  • Loans and Debentures
  • Shares in Unlisted Public Companies
  • Gold and Other Bullion
  • Household Contents and Personal Effects
  • Foreign Assets Including Investments, Business Interests and Real Estate
  • Investment Property
  • Special Collections Such as Stamps, Art Works or Antiques
  • Private Trusts, Family Trusts and Private Companies
  • Net Retirement Village Entry Contributions
  • Refundable Deposits Paid for Accommodation in an Aged Care Home
  • Gifts Over $10,000 in One Financial Year or $30,000 Over Five Financial Years

To begin your assessment you will need to first lodge a request for a combined assets and income assessment form (SA457) after which you will receive a notice of residential aged care fee advice for your situation, valid for the following 120 days.

You can choose to lodge your request for asset and income assessment prior to moving into an aged care facility if you wish. However, the Department of Human Services or Department of Veteran affairs must be notified of any changes in your financial situation. Depending on the changes to your situation you may be sent revised fee advice or asked to submit another assessment form.

If you are a couple seeking government assistance, it is important to know that you will be assessed on half of your combined income and assets, regardless of who owns the assets.

Part 2: What You’ll Need to Pay

The amount you will be asked to pay for aged care accommodation depends on the results of your Centrelink assets assessment.

Depending on your assessment results, you will be placed into either one of the three following categories:

  1. No Accommodation Fees
  2. Contributions to Your Accommodation Fees
  3. Full Payment of Your Accommodation Fees

If at any time you are unable to pay your aged care accommodation fees due to financial hardship you can apply for financial hardship assistance. If this is the case the Australian Government will pay your fees in part or on full.

Financial hardship assistance will aid in covering your basic daily fee, means-tested care fee and accommodation, but will not contribute to any optional extra service fees.

Assisted Living vs Aged Care Homes

Deciding whether to move in to and aged care home or seek some form of assisted living is a big decision that many aging Australians have to make.

Comparing benefits with the costs is an essential part of the process, and what works best for one may not work for another.

The following information has been assembled with the hopes of helping you make the right decision for your future.

Aged Care Homes Services

If you’re finding that a physical disability or illness is beginning to seriously affect your capacity for independent living, you may want to consider aged care as an option.

Services can vary from home to home, and it is important you speak with a few aged care providers to find out more about the services on offer.

General benefits include:

  • Round the clock care for a range of conditions
  • Meals
  • Laundry
  • Hygiene care – Assisted showering, bathing, etc.,
  • Medication management
  • Wound management
  • Catheter care
  • Dementia care
  • Social interactions

Depending on the aged care facility, you may have access to additional services like group excursions or hairdressing.

As aged care homes are subsidised by the Australian Government, you may also be eligible for government assistance to help cover all, or part, of your fees.

All aged care homes receiving government subsidisation must be accredited by the Australian Aged Care Quality Agency, passing a number of requirements related to facility management, health care and the safety and quality of the physical environment.

To find out if you’re eligible for subsided aged care click here to find an Aged Care Assessment Team (ACAT) near you.

Assisted Living Services

Assisted living Heath Care Packages (HCP) are suited for aging Australians wanting to live in their own homes for as long as possible. HCPs provide extra care services currently unavailable under the basic Commonwealth Home Support Programme.

Health Care Packages differ from case to case as they are designed on the individual needs of the person seeking care.

Services may include:

  • Transport to and from appointments, shopping and banking
  • Light gardening work
  • Hygiene care – assisted showering, bathing, etc.,
  • Nutrition – meal prep, meal delivery, etc.
  • Medication and wound care
  • Household duties – cleaning, laundry, changing the beds, floors, etc.

Some providers do offer live-in registered nurse assistance for elderly Australians needing a higher level of care. Live-in assistance provides extra services like medication management, mobility exercises and specialised care for specific illness and disabilities.

It is important to know, having a registered nurse live in your home can cost you a considerable amount of money each day. This is why moving in to an aged care home may be a better option financially for the minority of Australians.

There are 4 levels of home-care package in Australia:

  • Level 1 – Basic care needs
  • Level 2 – Low level care needs
  • Level 3 – Intermediate care needs
  • Level 4 – High level care needs (Dementia Care)

The higher the level, the more hours of care are provided as part of the service. Although, there is currently a high demand for level 4 care, and unfortunately, Australian’s seeking this level of care must first be placed on a waiting list.

Just like aged care homes, HCPs are subsidised by the government. Subsidisations cover each level and range from $8,500 to $45,000. You may be required to contribute to your HCP, on top of your basic fee, depending on your income, though you will not be asked to pay this fee if your annual income falls below:

  • Individuals $25,792
  • Member of couple separated by illness – $25,324
  • Member of a couple living together (combined income) – $40,050

The current maximum basic HCP fee, up until the 19th of March 2017, is $139.58 a fortnight, per person.

The first step for anyone wanting to apply for a home-care package is to get an ACAT assessment. This assessment is designed to determine whether a person needs support, and if so, the level of support required.

To find out about the HCP providers in your area Click Here

Making the right decision really depends on your level of independence, both physically and financially. Be sure to consult your financial adviser to learn more about the potential costs and subsidies you will be eligible for.

How 2017 Changes to the Centrelink Age Pension Will Affect You

From January 1st 2017 there were changes made to the asset tests used for calculating how much you receive from the Centrelink Age Pension. To avoid any unforeseen issues relating to your Age Pension, it is important you know what these changes are, and how they will affect your fortnightly payments.

Below you will find a brief breakdown of the latest changes (prior to March 19 2017) so you can be better informed and properly budget for the future.

Part 1: Changes to Centrelink’s Aged Care Pension in 2017

Test Free Limits

If your total assets fall below the asset-test free limit relevant to your situation, you will not suffer a reduction in your pension payments. At the moment, a family home is not counted as part of the assets test, though, the Australian Chamber of Commerce and Industry (ACCI) is currently proposing its inclusion in the future.

The table below contains a list of the revised test free limits for both FULL and PART Aged Pensions. These asset test limits are effective from the 1st of January 2017 to the 19th of March 2017.

Claimant Situation Asset Test Free Limit – FULL Aged Pension Asset Test Free Limit – PART Aged Pension
Single Homeowner $250,000 $542,500
Homeowner Couples $375,000 $816,000
Single Non-Homeowner $450,000 $742,500
Non-Homeowner Couples $575,000 $1,016,000

Part 2: What will be Affected by These Changes 

Prior to the 1st of January 2017, those with assets exceeding the previously stipulated test free limits would receive a $1.50 reduction in their pension each fortnight for every $1,000 in surplus. This reduction is known as the Taper Rate.

After this date, those with assets exceeding the newly adjusted limits will now be liable for a $3.00 reduction for every $1,000 in excess.

If you’re assets are found to exceed the revised limits for the PART Age Pension your fortnightly payments will be cancelled.

 If your payments were cancelled as a result of these changes on 1 January 2017, you should have been sent a letter from the Department of Human Services explaining why this has happened.

You will also be automatically issued a Low-Income health Care Card and a Commonwealth Seniors Health Card. Because your payments have been cancelled under the new assets test adjustments, you will be exempt from meeting any income test requirements otherwise needed to receive these cards.

If you were receiving the maximum pension benefit prior to 1 January 2017, your pension payments should not have changed. Although changes to aged care fees will apply, as your assets will have an impact on the subsidisation you receive from the Australian Government.

Cost of Aged Care Homes for Elderly Australians

Moving to an Aged Care Home is inevitable for most Australians and whether it’s for you, or for a loved one, it’s important to understand the potential costs involved.

At some stage in your life you may be faced with the financial responsibilities associated with Aged Care Homes. To plan for the future, and avoid encountering any unwanted surprises, it’s important you become familiar with the services, fees and the government assistance available.

Aged Care: What You Will Need to Pay

Anybody entering an Aged Care Home in Australia can be asked to pay the basic daily fee for residential care if their financial situation suggests they are capable of doing so.

The Basic Daily Fee covers everyday living expenses including:

  • Meals
  • Laundry
  • Cleaning
  • Heating and Cooling

The rate for the basic daily fee is calculated at 85% of the single person rate of the basic Australian Aged Pension. This rate applies for both single residents and couples.

The basic daily rate may increase each year inline with any changes to the Aged Pension, and is adjusted twice a year on the 20th of March and the 20th of September.

Click here for a useful calculator to find the potential residential care fees you could be liable for.

There is an additional fee, known as the Means-Tested Care Fee, that you may be required to pay based on an assessment of your income and assets by the Department of Health and Services. If you are in a couple, your combined assets and income will be assessed together, regardless of who owns the asset or differences in income.

There is both an annual and lifetime cap applied to the means-tested care fee, regulated by the Australian Government, limiting the amount you will have to pay and includes any income-tested fees already paid towards home care packages.

The Australian Government may cover your Accommodation Fee if you are eligible and your qualification will be based on an assessment by the Department of Health and Services. Your assessment in this area is similar to the means-tested care fee in that couples are assessed on their combined assets and incomes.

You may be faced with additional fees when entering an Aged Care Home with a higher standard of accommodation or one that offers additional services like pay TV. The best way to find these additional costs is to call the Aged Care Home or visit their website for details.

Aged Care Fees: Government Assistance

The Australian Government aims to make aged residential care available for all Australians by subsidising a number of aged care services.

Your eligibility and the level of assistance you receive for the Australian Government depends on the assessments conducted by the Department of Heath and Services mentioned earlier.

If at any time you feel you cannot pay your fees due to financial difficulties, you may be eligible for Financial Hardship Assistance.  Likewise, if you are a veteran you may be eligible for assistance from the Department of Veterans’ Affairs.

To get the best advice, regarding the payment of your fees, it’s always a good idea to consult your financial adviser first before moving forward.