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Aged Care - Means Tested Care Fee

Means Tested Daily Care Fee (MTCF)

Depending on an assessment of your income and assets you may be asked to pay an additional "means-tested care fee" (MTCF), in addition to the basic care fee. It is a contribution towards your day-to-day care costs such as nursing and personal care.

The calculation of the MTCF is complex and the precise contribution is based on the information provided within an income and assets statement that must be completed on entering an aged care home. As mentioned previously, it is a contribution you will not be required to pay if your assets and income fall below certain thresholds and are regarded as a Low Means Resident.

The complexity of the calculation means that many individuals and advisors simply rely upon advice from Centrelink. There is also Residential Care Fee Estimator on the Myagedcare website which will provide an estimate of fees payable and allow you to avoid the tortuous arithmetic we go through in our examples below.

Bear in mind that your contribution level may change, both up and down, if your income and assets change, and consequently you should advise Centrelink if there have been any substantial changes which may impact your assessment.

We receive a considerable number of inquiries seeking to confirm the calculation of the MTCF, but cannot assist in this regard without substantial details surrounding an individuals income and assets. Accordingly, these queries should be directed to Centrelink unless your circumstances are complex and you are seeking professional planning advice around how best to structure arrangements in individual situations and there is an understanding that professional fees will apply in relation to advice provided.

How is your individual Means Tested Care Fee Calculated?

Your fee is based on a calculation of your "Means Tested Amount" (MTA) in comparison with the Maximum Accommodation Supplement Amount (MASA) - currently $59.49 per day. The MTA is a function of your income and assets, calculated as follows for a Single Individual entering Aged Care and with thresholds current as at September, 2021.

Income Tested Amount
50% of your income in excess of the “Income Free Area” (Currently $28,472.60)
Plus
Asset Tested Amount
17.5% of your assets in excess of $51,500 up to $175,239.20 (indexed)
Plus
1% of your assets in excess of $175,239.20 up to $422,717.60 (indexed)
Plus
2% of your assets in excess of $$422,717.60 (indexed)
= Means Tested Amount (MTA)

The impact of this test is that the Means Tested Care Fee is payable only once an individual has income/assets beyond certain thresholds - beyond Region "B" in this illustration of how Aged care costs apply.

Briefly, what Income and Assets count when Calculating Aged Care Fees

  • If you pay a RAD, or indeed your family contributes to a RAD, the entire amount paid will count as an asset for aged care fee purposes.
  • If you retain your principal residence it will count, up to a capped amount of $175,239.20, as at 20 September 2021, unless it continues to be occupied by a "protected person".
  • The assessable income includes age pension, DVA pensions, foreign pensions, deemed investment income etc and, if you rent your house out, the net rental income. Note that the minimum pension supplement and energy supplement are not included within assessable income.

n individual is on the basic single Age pension of $882.20 per fortnight, and has financial assets of $100,000 which are deemed to generate $1,964 per annum of income. What would be their means tested care fee (MTCF)?

50% of your income in excess of the “Income Free Area” (Currently $28,472.60) Income = pension + $1,964.00 per annum = $22,937.20 + $1,964.00 = $24,901.20
No income in excess of income free area and therefore Income Tested Amount = 0
17.5% of your assets in excess of $51,500 up to $175,239.20 (indexed) + 17.5% of ($100,000 - $51,500)
= 17.5% x $48,500 = $8,575.00
1% of your assets in excess of $175,239.20 up to $422,717.60 (indexed) + Nil
2% of your assets in excess of $422,717.60 Nil
Asset Tested Amount = $8,487.50

Means Tested Amount (MTA) = Income + Asset Tested Amounts
Means Tested Amount (MTA) = $0 + $8,487.50
MTA daily rate = $8,487.50/364 = $23.32

MTA of $23.32 is less than the MASA of $59.49. Therefore, no Means Tested Care Fee (MTCF) applies, but an accommodation contribution ( DAC/RAC) of $23.32 per day will be payable. .

Example 2

An individual is on the basic single Age pension of $882.20 per fortnight, and has financial assets of $500,000 which are deemed to generate $10,190 per annum of income. What would be their means tested care fee (MTCF)?
50% of your income in excess of the “Income Free Area” (Currently $28,472.60) Income = pension + $10,190 per annum
= $22,937.20 + $10,190 = $33,127.20
50% of ($33,127.20 - $28,472.60) = $2,327.30
Income Tested Amount = $2,327.30
17.5% of your assets in excess of $51,500 up to $175,239.20 (indexed) + 17.5% of $175,239.20 - $51,500)
= 17.5% x $123,739.20 = $21,654.36
1% of your assets in excess of $175,239.20 up to $422,717.60 (indexed) + 1% of ($422,717.60 - $175,239.20)
= 1% x $247,478.40 = $2,474.78
2% of your assets in excess of $422,717.60 2% of ($500,000 - $422,717.60) = $1,545.65
Asset Tested Amount = $25,674.79
Means Tested Amount (MTA) = Income + Asset Tested Amounts
Means Tested Amount (MTA) = $2,327.30 + $25,674.79
MTA daily rate = $28,002.09/364 = $76.93
MTCF = $76.93 - $59.49 (MASA) = A Means Tested Care Fee (MTCF) applies of $17.44 per day, and in addition a RAD/DAP will be payable.

Annual and Lifetime Caps

There are both annual and lifetime caps applying in relation to the means-tested care fee. Note that any income-tested care fees paid within a Home Care Package also count towards your annual and lifetime caps in residential aged care. The maximum means-tested care fee you can currently, effective September 20, 2020, be asked to pay is:

  • $28,792.36 annually
  • $69,101.75 over your lifetime

- both of these caps are indexed, and typically increase annually.

Once either cap is reached, you cannot be asked to pay any more means-tested care fees until the next anniversary of the date you first began receiving aged care. The Government (should) notify you when you reach either your annual or lifetime cap.

Just as aside, and to highlight how unnecessarily complex this area can be, note that when calculating the daily MTA above, you divide by 364 to arrive at a daily amount. Conversely, when converting a RAD into a DAP, or RAC into a DAC, the divisor is 365.

If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.