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Factsheet IS82 - Aged Care and Your Finances

Purpose

This Factsheet provides an overview of aged care fees and payments.  It contains basic information on the arrangements following the 1 July 2014 aged care reforms changes, with general references to the rules that apply to those who commenced care before July 2014.

How are my aged care costs determined?

All care recipients are assessed by the Aged Care Assessment Team (ACAT), or Aged Care Assessment Service (ACAS) in Victoria, which determines what care you require.  They will recommend the type of aged care services that are the most appropriate for you.

Once you commence care, the level of Government subsidy payable to the provider for your care will be determined.  Reductions may be made to the amount of Government subsidy if you have the means to contribute to your care and accommodation.  An approved provider will be able to recoup this reduction by asking you to contribute to the costs of your care and accommodation.

Some aged care fees are the same for everyone, while some are determined by your care needs and the level of your income and assets, capped at maximum rates.

What can I be asked to pay?

For residential aged care, you can be asked to pay:

  • a basic fee which all residents pay
  • a means tested fee if you have sufficient income and assets (or an income tested fee for pre 1 July 2014 continuing care residents)
  • an accommodation payment or contribution dependent on your income and assets (or an accommodation bond or charge for pre 1 July 2014 continuing care residents); and
  • an extra service fee if you to choose to purchase extra services, or you are receiving care on an extra service basis.

For a home care package, you can be asked to pay:

  • a basic fee which all care recipients pay; and
  • an income tested fee if you have sufficient income.

Are there special provisions for former prisoners of war and Victoria Cross Recipients?

DVA pays the basic fee for Australian former prisoners of war and Victoria Cross Recipients.  These care recipients are exempt from paying any income/means tested fees, but can be asked to contribute towards the costs of their accommodation for residential care, depending on their capacity to pay.

Is there a cap for aged care fees?

If you are in residential aged care

An annual cap of $26,964.71 will apply to the amount you pay in means tested care fees, together with a lifetime cap of $64,715.36. Caps do not apply to pre 1 July 2014 continuing care residents.

These caps are all indexed.

If you receive home care

The amount of income tested fees that you may be asked to pay is limited by a $5,392.91 annual cap for those receiving a part pension (or have equivalent income), a $10,785.85 annual cap for self-funded retirees, and a $64,715.36 lifetime cap.  Caps do not apply to pre 1 July 2014 continuing care residents.

These caps are all indexed.

If you transfer from home care to residential care and vice versa, the income/means tested fees you have already paid will count towards the annual and lifetime caps in either type of care.  The Department of Human Services (DHS) will let you and your provider know when you have reached one of the caps.

Do I need to have my income and assets assessed for aged care?

Yes, aged care income and means test assessments are undertaken to establish if you are eligible for Government assistance towards your aged care costs. If you do not complete and return the relevant assessment form with your current income and/or asset information, you may be asked to pay the maximum fees.

An income test is applied to home care recipients who commenced care on or after 1 July 2014. Whereas a means test, including both income and assets, is applied to residential aged care residents who have entered care on or after 1 July 2014.

Existing arrangements apply to pre 1 July 2014 care recipients, but you can ask to be assessed under the new means test if you move to a new provider. If you leave care for more than 28 days after 1 July 2014 without approved leave and then re-enter care, you will be assessed under the new rules.

Both DVA and the Department of Human Services (DHS) conduct aged care income and means test assessments to determine how much subsidy the Government pays to the aged care provider on people's behalf (if you are eligible for Government assistance) and whether you can be asked to contribute towards your aged care costs.  

The forms used to collect your income and assets information are:

These forms are available on the Forms page of the Department of Human Services’ website at http://www.humanservices.gov.au/customer/forms/

Which Department should I send my income/means test assessment form to?

DVA is responsible for completing the income and means test assessments for the following eligible members of the veteran and war widow(er) community:

  • Veterans, their partners and war widow(er)s in receipt of one of the following income support pensions- Service Pension, Income Support Supplement or Age Pension administered by DVA;
  • Veterans, and partners of veterans, in receipt of DVA Disability Pension and who have Qualifying Service (QS);
  • War Widow(er)s in receipt of the War Widows Pension and who have QS; and
  • Australian Defence Force former prisoners of war and Victoria Cross recipients.

Once the level of assessable income and assets for aged care is assessed by DVA, this information is provided to the Department of Human Services (DHS) who will advise you of the outcome of the assessment and the estimates for your care and accommodation fees.

DHS is also responsible for completing the income and means test assessments for all other DVA clients and members of the Australian community e.g. Veterans or war widow(er)s who do not meet the criteria listed above.

Your assessment may change over time as your personal and financial circumstances change.

Once you have entered care, you should continue to update the relevant Department (DVA or DHS) of any changes to your personal or financial circumstances. This will ensure that the calculation of your ongoing aged care fees and payments accurately reflect your current situation.

What is counted as income?

For aged care purposes, your income includes:

  • your income support payment, such as the age pension, service pension, or income support supplement, but excluding the minimum pension supplement component of your income support payment; and
  • income that is assessed for pension purposes (half of your combined income if partnered), such as:
    • war widows’/widowers’ pensions and disability pensions*
    • deemed income on financial assets and on excess gifting amounts
    • overseas pensions
    • payments from superannuation pensions
    • income from annuities, allocated pensions, transition to retirement pensions, market linked pensions or term allocated pensions
    • net income from businesses, including farms;
    • rental income from investment properties; and
    • family trust distributions or dividends from private company shares.

The following items are not considered income for calculating your aged care fees:

  • the energy supplement; and
  • the 4% GST component of the disability pension and war widow’s/widower’s pension.

*In addition to the above exemptions, DVA disability pension or war widow’s/widower’s pension may be exempt income, if the recipient of that income also has qualifying service.

What are counted as assets?

Assets are generally assessed in the same way for aged care purposes as they would be for income support purposes. Common types of assets that are assessable include money in bank accounts, investments, real estate, motor vehicles, household contents, personal effects and deprived assets.  

However, while lump sum payments to the aged care facility for the cost of accommodation, such as Refundable Accommodation Deposit (RAD) or a Refundable Accommodation Contribution (RAC) are non-assessable assets for pension purposes, they are counted as assets for the calculation of aged care fees.

How your former home is assessed for aged care purposes is explained below.  

Members of a couple are considered to have half of the combined assets of both partners.

Is my home counted as an asset?

Your former home is not counted as an asset for aged care assessment purposes, if at the time of your entry into permanent residential care, your home is occupied by a protected person.  Protected persons include:

  • your partner;
  • a dependent child;
  • an eligible carer who has been living with you in that home for the previous 2 years; or
  • an eligible close relative who has been living with you in that home for the previous 5 years.

If the protected person vacates your home, then the asset value of your home may no longer be exempt from your aged care means test.

If the former home is not occupied by a protected person, the value of the principal home will be included in your asset assessment for aged care purposes.  If you entered care after 1 July 2014, the home value will be capped.  However, if you entered care prior to 1 July 2014, the value of your home will not be capped, and the full value of your home will be an assessable asset.

If you sell your former home then the capped asset value will no longer apply.

If you choose to use some or all of the proceeds to pay a refundable lump sum accommodation payment (RAD or RAC), then the full value of that lump sum will be counted as an asset for aged care purposes. This is because you may request the aged care facility to use some of the lump sum to pay for your ongoing aged care costs.

The refundable lump sum accommodation payment is not counted as an asset for pension purposes.

Is rent received from my former home counted as income?

If you entered permanent residential care on or after 1 January 2016, rental income from your former principal home is included in the aged care means test assessment.

However, rental income from your former principal home is exempt from the aged care means test assessment if you:

  • entered care before 1 January 2016; and
  • are paying your accommodation costs by periodic payment, or a combination of periodic and lump sum payment

If you are formally discharged from residential care for more than 28 days on or after 1 January 2016, rental income from your former principal home will be included in the aged care means test if you re-enter care.

Who can answer questions about my aged care fees?

Information on fees and charges and any other matters you (or your carer/s or representative/s) have negotiated with your care provider, must be specified in your agreement.  You should also receive a regular statement from your provider detailing the amount of your fees and charges and the period covered.

As part of the aged care reforms, the My Aged Care website and a national contact centre have been established to help people navigate the aged care system.  For information about aged care, please visit the My Aged Care website at http://www.myagedcare.gov.au/ or call their information line on 1800 200 422.

Who can support me if I have a concern or complaint about my aged care costs?

Often the best way to resolve a complaint is directly with your aged care service.  If you prefer not to discuss a matter of concern with the facility or provider, or your complaint cannot be resolved, there are a number of avenues available through My Aged Care.  They are:

  • the National Aged Care Advocacy Services (1800 700 600), which can help you understand the information you receive and speak to the service provider on your behalf; and
  • the Aged Care Complaints Scheme (1800 550 552), which provides a free and confidential service and they will advise whether it can deal with your complaint, or whether it can be more appropriately dealt with elsewhere.

Am I entitled to a net medical expenses tax offset?

If you are required to pay tax and you are incurring aged care costs, you may be entitled to a tax offset where your net medical expenses exceed the threshold during the financial year.  For information about eligible out-of-pocket medical expenses, please contact the Australian Taxation Office general enquiries helpline on 132 861, or seek professional tax advice about your particular circumstances.

More Information

DVA General Enquiries

Phone: 1800 555 254 *

Email: GeneralEnquiries@dva.gov.au

DVA Website: www.dva.gov.au

Factsheet Website: www.dva.gov.au/factsheets

* Calls from mobile phones and pay phones may incur additional charges.

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Disclaimer

The information contained in this Factsheet is general in nature and does not take into account individual circumstances. You should not make important decisions, such as those that affect your financial or lifestyle position on the basis of information contained in this Factsheet.  Where you are required to lodge a written claim for a benefit, you must take full responsibility for your decisions prior to the written claim being determined.  You should seek confirmation in writing of any oral advice you receive from DVA.

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19 October 2018