Aged Care Costs
Helen Penman - 30 November 2016
Ongoing Care Costs (Mandatory)
There are two layers of fees:
The calculation of accommodation costs is relatively straightforward. You can pay either as a one-off lump sum (which is fully-refundable when you leave), a daily fee (equivalent in a way to rent), or a combination of the two.
The key thing to keep in mind is that any portion of the accommodation that you do not pay as a lump sum will be charged to you at a rate of 5.76% per annum (this is a government regulated rate, based on the MPIR).
While it could be argued that a return greater than 5.76% could be earned on investments (thus allowing the resident to invest the capital and pay the daily fee with the earnings), this strategy is highly risky and not recommended, particularly as assets held outside the accommodation deposit will be counted toward the Assets and Income tests.
Accommodation Deposits (the lump sum payment) is not counted toward the Age Pension assets test (it is, however, including in calculating the MTCF).
Note: You must be left with assets of at least $46,500 after paying your accommodation deposit. For example, if you have $400,000 cash and the accommodation deposit is $400,000, you can only pay a maximum of $353,500 as a lump sum. The remainder must be paid as a daily payment.
Additional Services Fee
You may be asked to pay an “Additional Services Fee”. Be very wary of these expenses as they can be quite high – sometimes as much as $30 per day ($10,920 per annum).
These fees are not directly representative of the “Additional Services”. In fact, you may find that there are other residents who receive the same care and services who pay not fee at all.
To understand why, we need to look at the changes to aged care fees, introduced in 2014. These made the fees schedules much fairer for residents and took away all the major loopholes that advisers liked to use (some of which were ridiculously generous; up to $30,000 p.a.). Under the old system, if you didn’t know about the loopholes you missed out. While the new system is better for those moving into aged care, it has made it much harder for aged care facilities to earn a profit. To recover some ground, many facilities introduced or increased the costs of their “Additional Services” fees.
In other words, Additional Services fees are primarily a way for facilities to keep their doors open and maintain their standard of care. However, be very wary of the costs as they rapidly escalate the cost of care.
Move in/out/refurbishment costs
You may be asked to pay a move in/out and/or refurbishment costs. This can be a few hundred for a move-in, and several thousand for moving out (some facilities charge refurbishment costs as high as $15,000. This is generally a one-off expense, and can be deducted from the accommodation deposit).
Estimate of Total Costs (Equivalent Cost of Care)