Aged Care Homes - Financial Considerations

The Fees payable in Residential Aged Care

Introduction

Aged care costs in Australia are complex in nature and consequently lack transparency. You are strongly recommended to seek advice from an experienced financial planner prior to anyone entering aged residential care accommodation. The adviser should be able to explain to you exactly what costs will be payable and the best approach in respect to any options you may have in terms of financing or arranging your care. As in other endeavours, not all financial planners or advisers are as experienced as others in this particular area, and your focus should be on finding experienced assistance.

In the following pages we attempt to provide an overview of residential aged care finance, including some examples, in an effort to provide you with an introduction to the subject and place you in a position where you or your family can discuss this issue on an informed basis with your adviser. It will sometimes be the case that very little time is available to choose a provider, because of medical reasons, but nevertheless every effort should be taken to arrange professional advice prior to making any financial commitments.

The following illustration provides a broad introduction to the fees associated with residential aged care accommodation Australia, and then we then provide more detail in the sections below.

Australian Residential Aged Care Cost Summary

Overview

The extent to which you will need to contribute to the cost of maintaining your place in an aged care home depends almost entirely upon an assessment of your assets and income - what is referred to as a Means Test Assessment (MTA). When entering residential aged care, residents have the option to complete Centrelink's ‘Residential Aged Care Calculation of your costs of care’ SA457 form - see below. Where individuals choose not to disclose their means, they are ineligible for any government support towards their aged care costs and are required to pay all care costs.

As a result of the Means Test Assment you will fall into one of three categories and each contributes differently to their aged care costs. There are 3 basic costs payable in residential aged care accommodation:; 1) the Daily Care Fee, 2) the Means Tested Care Fee and 3) Accommodation Costs. We discuss each in more detail in the website, but note at this stage that the only fee payable by all three categories of resident is the Basic Daily care fee, which is calculated at 85% of the Age pension. See the Table below for an overview:

 

It is often the case that individuals will simply follow Centrelink notifications, following the asset and income test, without attempting to understand how the figures are derived. That is probably adequate in relatively simple situations, where for example the individual is a low means applicant with relatively low income and assets, where there are few, if any, options available - and the individual perhaps only needs assistance in terms of identifying an appropriate aged care facility. We concentrate on how the figures are derived for individuals who are required to make contributions to age care, and therefore need to understand the alternatives available to them in any discussion with an advisor. We absolutely believe that professional advice should be sought in the circumstances, but you should seek to be an informed client.

Advisors will often talk about how you are situated from an assets and income perspective, and the chart below visually illustrates the three categories of aged care resident appearing in the Table above. The figures provided are as at January 2020, and because the chart is normally used for illustrative purposes only we only intend to update it only occasionally.

Age Care Costs - Asset and Income Test