RSM Australia

What aged care means

We know there is high probability of entering aged care in later life. Quite likely, due to ill health at that time we will be unable to cope with all the decisions and forms required at that time. Making sure we have nominated somebody as our trusted financial power of attorney, long before that event, will make the process so much easier. And when it comes the time, one of the main questions that is always asked is, how much will it cost?

As I mentioned in my last article, everybody pays a basic daily fee of $47.49 per day. This amount increases in March and September each year and is based on 85% of the single rate of the basic aged pension. This applies even if you are a member of a couple.

The next step is to calculate the amount of the means-tested care fee as a contribution towards the cost of living and care expenses. The calculation is based on an assessment of your income and assets. Everyone moving into an aged care home is subject to this test. In a future article we will discuss the cost of accommodation and the varying ways of making those payments.

The assessment process commences with the completion of a 31-page form. If you are currently receiving a means-tested government pension, the amount of questions to be answered will be less. Where you are involved in a farming business, or have an interest in a private trust or private company or a self-managed superannuation fund there will be additional forms to complete. In this situation you are very likely to require the assistance of a professional advisor with the appropriate expertise in this area.

Income for aged care assessment purposes is never the same as taxable income. Assessed income can include aged pension, deemed income from financial investments, superannuation pensions and deemed income from excess gifting.

Assets for aged care assessment purposes will include household contents, personal effects, superannuation balances, loans to private trusts and companies and retirement village entry contributions. Further, where you have made gifts in excess of $10,000 in one year or in excess of $30,000 over five years, the excess will be an assessable asset for the next five years.

There are asset test exemptions for specific farming land and expert advice is required. Also in relation to the gifting of farm assets during the previous five years, the amount of the gift can be reduced in some situations, particularly where the younger generation has not been paid fully for farm labour on the expectation of inheriting the family farm.

Regardless of occupation, the value of your residence may be included as an asset but there are some exemptions. For instance, it will excluded from the assets test if your partner or dependent child is living there. Also if an eligible carer has been living there for at least two years or an eligible close relative has been living there for at least five years, your residence will be excluded. The maximum value attributed to you house is currently just over $157,000.

Next time we will indicate how much the daily means tested amount could be using examples. Fortunately there is an annual maximum and a lifetime cap on means tested care fees.