Moving into Aged Care
Accommodation
Industry changes from 31 March 2015
Financial Advice
Moving into aged care accommodation
can be a stressful experience for
residents and their families.
It’s important to view a number of facilities
and have a good understanding about the
services provided, such as low-level and
high-level residential care, and any fees
and charges you are likely to pay, before
making a choice.
The one question that concerns most is:
“What is my choice of care really going
to cost me?”
Aged care industry
changes
Changes to fees were part of the recent
Government reforms to the aged care
system to make it more sustainable and
affordable and these took effect from
1 July 2014.
■■ The changes only affect new residents.
■■ Nothing changes for anyone already in
care pre 1 July 2014 unless they leave
care for more than 28 days. When they
re-enter however, the new changes will
apply. They will also have the option to
change to the new system if they move
to a new aged care facility.
■■ New residents in aged care facilities
can choose how they want to pay
for their care and they do not have to
decide this upfront. They have 28 days
after entering care to decide.
■■ Aged care operators must make any
price changes public in advance.
Accommodation payments greater than
$550,000 will need to be approved by
Aged Care Financing Authority (ACFA).
Financial Advice
■■ Home Care Package costs have also
changed. If you have the financial
capacity to pay you will be asked to
contribute.
■■ There is now a ‘one care’ system
(no separate low and high care
systems) and only one type of aged
care assessment team approval for
residential care.
Accommodation prices
Aged care operators can set their
accommodation prices for the different
types of rooms. However, they are
required to publish the prices in advance,
showing payment options including
periodic payments, a lump sum payment
or a combination of both. They are
also required to publish a description
of the key features of each room type.
Accommodation prices above $550,000
need to be approved by the Aged Care
Pricing Commissioner.
Information about accommodation
prices and features must also be made
available on the My Aged Care website
www.myagedcare.gov.au and provided in
writing to prospective residents and
their families.
Payment choices
New residents have three choices to pay
for their accommodation:
1. An equivalent daily payment (also
known as a ‘Daily Accommodation
Payment’ or ‘DAP’) and paid no more
than one month in advance.
2. A lump sum payment, also known as a
‘Refundable Accommodation Deposit’
or ‘RAD’) or
3. A combination of both. With this option,
residents can pay daily and draw down
from the refundable deposit.
Drawing daily payments
from the refundable
deposit
Residents can choose to draw down
daily payments from their refundable
deposit and may also be able to draw
down additional amounts, subject
to arrangements with the aged care
operator.
However, if any amounts are drawn
down, the daily payments may be
increased to cover the impact of lower
earnings from a reducing deposit
balance.
Minimum assets after
paying a refundable
deposit
A new resident must be left with at least
minimum assets, calculated as 2.25 times
the basic age pension amount after paying
a refundable deposit. As at 1 April 2015,
this amount is $46,000 in assets which is
determined quarterly (by the Department
of Social Services) and can be found on
their website www.dss.gov.au.
Aged Care Accommodation
How is the equivalent daily
payment calculated?
To calculate the equivalent daily payment
of a refundable deposit, the refundable
deposit is multiplied by the maximum
permissible interest rate (MPIR), currently
6.36% as at 1 April 2015, and divided
by 365 days.
For example, a refundable deposit of
$400,000 would have an equivalent daily
payment of $69.70 per day.
(Refundable deposit x MPIR)/365
= ($400,000 x 6.36%)/365
= $69.70 per day.
An example of a combination payment for
a $400,000 price may be a combination
of a refundable deposit of $300,000 and a
daily payment of $17.42 per day, with the
daily payment determined as follows.
(Balance of price x MPIR)/365
= [($400,000 - $300,000) x 6.36%]/365
= $17.42 per day.
What is the MPIR?
This is updated every three months and
is available on the Department of Social
Services website www.dss.gov.au.
Aged care operators must reflect a
change in the MPIR in their published
prices.
Fees
Basic daily fee
This covers living costs such as meals,
power and laundry. For some people this
is the only fee they are required to pay.
It is set at 85% of the single person rate of
the basic Age Pension and applies to both
singles and members of a couple.
Means-tested care fee
■■ This is an additional contribution
towards the cost of care determined
by the Department of Social Services
based on an assessment of your
income and assets. Annual and lifetime
caps apply to the means-tested care
fee. Once these caps are reached,
you cannot be asked to pay any more
means-tested care fees. Any incometested care fees you have paid in a
Home Care Package prior to moving
into an aged care home will also
contribute to your annual and lifetime
caps.
Government accommodation
supplement
■■ Eligibility for residents will be
determined through a combined
income and asset test the Government
will either pay the maximum
accommodation supplement or a
part accommodation supplement,
depending on the resident’s assessed
financial situation.
If a resident is eligible for the maximum
accommodation supplement aged care
operators cannot charge any more. If a
resident is eligible for a part supplement,
they may charge the difference between
the assessed supplement amount and
the maximum supplement for the facility.
Additional fees
Financial hardship
If you believe you will face financial
hardship in paying your aged care
costs, either for an aged care facility or
a Home Care Package, you can ask
to be considered for financial hardship
assistance. To find out more go to
www.myagedcare.gov.au.
How can Crowe Horwath
help you?
There is a lot to consider when looking
at aged care options. Before making a
final choice about which facility is best,
or even if you’re in aged care and looking
to make a change, we strongly urge you
to seek professional financial advice. We
can assess your current financial situation
and determine any strategies that may
reduce the level of ongoing fees paid and/
or qualify for, or increase any Centrelink
entitlements.
Our financial advisors can also provide a
portfolio management service and, review
account based pensions. We will work
closely with your lawyer to ensure you
are fully protected with relevant Powers
of Attorney and a Will that reflects your
current wishes.
Call your local Crowe Horwath financial
advisor today to make an appointment.
■■ These may apply if you choose a
higher standard of accommodation or
additional services and vary from home
to home.
Aged care homes with dedicated extra
service places must publish their extra
service fees on the My Aged Care website,
their own website and in other relevant
materials they provide to prospective
residents.
www.crowehorwath.com.au
Talk to one of our advisors
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