RSM Australia

Aged care, how much could it cost?

These days when people move into an aged care home they must pay a basic daily fee of $47.49. They may also be required to pay a means tested daily care fee based on assets and income, an accommodation payment and fees for extra optional services.

The maximum annual means tested care fee is $25,529 or $70 per day. There is also a maximum life time cap on means tested care fees of $61,270. Once this fee cap is reached you will not be asked to pay any more. However the basic daily fee and any agreed accommodation costs are still payable.

Let us look at two examples of how much in the way of means tested residential care fees are payable.

Gerard is single with two adult children and is suffering from dementia. He owns his own house in Ballarat, is owed $100,000 by his farming son’s family trust, has $20,000 in the bank and gifted his $1.5m farm to his farming son two years ago. His intention is that all of his non farming assets will eventually pass to his daughter who has no involvement in farming. As we can see Gerard has minimal cash and does not receive the aged pension, but he will be required to pay the maximum annual means tested care fee of $25,529.

This is because the gifting of the farm will still be counted as his asset until the fifth anniversary of the gift. I suspect there will be some interesting discussions between his son and daughter as to who will be contributing their intended inheritance to Gerard’s residential aged care costs. We should also keep in mind that there will be substantial accommodation payments to be made also.

In the second example, Bob is married to Nancy but very soon he will need to enter a residential aged care facility. They have a combined income of $40,000 including the aged pension and live in Ararat. Their assessable assets are $350,000 in bank accounts and shares, a car worth $10,000 and modest home contents of $5,000. Their house will be excluded from the test because Nancy will continue to live in the house.

Therefore Bob’s share of the assets will be $182,500 and his means tested care fee will be a total of $400 a year. Again there could be accommodation payments to be made.

In summary, all of these calculations are very complex, everybody’s circumstances will be different and as the value of your assets or income fluctuates, your fees may change. It could be worthwhile to seek expert advice in relation to retaining or selling the house in Gerard’s case.

And given the high probability of entering aged care in later life, how much you give away now and who will provide you with financial support for at least the next five years should be very carefully planned. In my next article we will explore the accommodation costs and how they can be paid.