“Aged care is a complex area and one that requires a solid understanding of how the rules impact on social security and the tax system” says Demelza Lister, Senior Financial Planner from Potts & Schnelle Financial Planning.
“The costs to enter an aged care facility can be quite high and as such, clients need financial advice that enables them to:
Manage these costs
- Maximise their social security benefits
- Manage tax
- Choose suitable investments
- Plan for the distribution of their assets
- Understand the payment options and implications available to them
- Or, simply assistance with the form filling”
The costs associated with entering and residing in an aged care facility, is summarised into four parts. These rules commenced from 1st July, 2014;
- Basic Daily Fee – This fee applies to everyone and is calculated by taking 85% of the single aged pension amount. It is currently $49.07 per day and covers daily living costs; such as nursing, personal care and meals.
- The Accommodation Payment – This may be payable if the resident’s assets are over $47,500. The accommodation payment is a lump sum payment known as a Refundable Accommodation Deposit (RAD) which is fully refundable on departure (This used to be known as a bond and was not fully refundable). The RAD is calculated on entry to the facility. The maximum that can be charged is $550,000 and is published on each facility’s website. Local RADs are usually in the order of $350,000. Rather than a RAD, the resident may instead choose to pay a Daily Accommodation Payment (DAP) which is effectively interest on the RAD amount (currently 5.73%), but enables the resident to keep their assets. The interest rate is fixed on entry.
- Means Tested Care Fee – this is based on an income and assets test undertaken by Centrelink. This test is a complex calculation and is impacted by any income of the resident, their financial investments and other assets (sometimes including their home).This test has generous concessions and cannot be more than $26,176.80pa. This fee is regularly re-assessed as the resident’s financial circumstances change.
- Extra Services Fee – this fee is charged by the facility for additional services provided, or for a higher standard of accommodation. Examples include pay TV, a larger room, extra therapies eg. Massage
“Most of the clients that meet with us have already had their health situation assessed by an aged care assessment team (ACAT) and as such are seeking assistance in completing the paperwork required by Centrelink to determine their means tested fee”, adds Paul Schnelle, Partner and Certified Financial Planner.
“Everyone’s situation is different, so the strategies end up being different for each client. That’s the nature of Aged Care advice, there is no one fits all solution!”
“I think what differentiates us from other providers is that we are dealing with people who want a financial outcome. They want you to hold their hand, walk them through the process and help them to understand the rules”.
“One of the most important questions we ask of our financial planning clients is ‘How are your parents?’” adds Demelza, “All sorts of retirement plans are often put on hold whilst clients care for their elderly parents. The financial planning process has to make allowances for these situations and they are best addressed earlier on, rather than in an emergency.”
“The early stages of care are usually non-financial. Most carers wish to look after their loved ones for as long as possible in their own home. There are all types of assistance packages available. A phone call to the My Aged Care contact centre on 1800 200 422 will get things started, or visit their website at myagedcare.gov.au”.
“It is a very tough call to place a loved one into an Aged Care Facility. It is never an easy decision and families need to work through emotions such as guilt and fear and of course the logistics of the variety of choices available. Eventually, the decision is made and that’s when we usually get involved, to help with the financial side of things.”
Should you require advice in this area please do not hesitate to contact Potts & Schnelle. Phone 02 60332233, to make an appointment to talk about your financial needs with someone who cares.