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Aged Care Strategies

Refundable Accommodation Deposit – RAD

How much you could be asked to pay towards your accommodation costs will depend on your financial situation. You may be asked to pay only part of or no accommodation costs.

The Australian Government will conduct an assessment of your income and assets. They will then advise you and the aged care home if you can be asked to pay towards your accommodation costs, and if so how much.

If you are required to pay for your accommodation, you will now have greater choice in how you pay. You can use a:

  • lump-sum payment, called a ‘refundable accommodation deposit’
  • regular rental-type payment called a ‘daily accommodation payment’, or
  • a combination of both.

If you are required to pay an accommodation payment, you will have 28 days from the day you entered care to decide on your payment method. Aged care homes cannot refuse you a place based on how you want to pay for your accommodation.

Until you decide on your ongoing payment method, you will need to pay your accommodation costs by rental-type ‘daily accommodation payment’ until you decide on your ongoing payment method.

Refundable accommodation deposit

If you choose to make your payment as a lump sum, this is called a ‘refundable accommodation deposit’. A refundable accommodation deposit works like an interest-free loan to an aged care home. The balance of the deposit is refunded when you leave the aged care home less any amounts you have agreed to have deducted.

Daily accommodation payment

Instead of paying for your accommodation as a lump sum you can choose to pay as periodic payments. The amount you pay is based on a daily rate which is why this type of payment is called a daily accommodation payment. However, you will pay in instalments up to a month in advance, as agreed with your service provider. Daily accommodation payments, unless you have paid in advance, are not refundable if you leave the aged care home.

Using a combination

You can choose to pay for your accommodation as a part lump-sum refundable accommodation deposit and part rental-type payment known as ‘daily accommodation payments’.

Financial advice

The payment method which is most suitable for you will depend on your personal and financial situation. You may want to consult with a financial adviser before you make a decision. There are various government services and resources that can help you obtain appropriate financial advice. It’s a good idea to do some research to see what options work best for you.

For example, choosing a particular payment method may affect your pension, if you receive one.

Drawing down your refundable accommodation deposit

If you choose a combination approach, there is the option to have your rental-type daily accommodation payment taken out of your lump-sum refundable accommodation deposit.

This will mean that the total amount in your refundable accommodation deposit will be reduced over time as your daily accommodation payment is deducted.

As your refundable accommodation deposit is reduced, your provider may ask you to top up your refundable accommodation deposit or pay a higher daily accommodation payment.

Aged care homes must now publish their maximum accommodation prices

Since 19 May 2014, all aged care homes have published their maximum accommodation prices on the My Aged Carewebsite, their own website and in other relevant materials they provide to prospective residents.

The prices are shown as:

  • the maximum lump-sum refundable accommodation deposit you could be asked to pay
  • the maximum rental-type daily accommodation payment you could be asked to pay
  • an example of a combined payment method, such as 50% payment by lump-sum refundable accommodation deposit and 50% rental-type daily accommodation payment.

You get to choose how you pay for your accommodation.

The aged care home must also publish their extra service costs, if any. These are packages of higher standard accommodation, meals and services which the home can provide at additional cost.

The published accommodation prices are the maximum an aged care home can charge. You and the aged care home can agree to a lower price, so it is recommended that you discuss the options with the aged care home you are interested in.

You cannot be charged more than the maximum published price. If there is no published price, the provider is unable to charge for accommodation.

There may be different maximum accommodation payments for different room types in a home. Aged care homes must provide details of the type of accommodation they will provide for a particular accommodation price. This will allow you to compare the prices of different room types, for example a private room with an ensuite bathroom.

Aged care homes wanting to charge accommodation payments of more than $550,000 as a lump sum, or as rental-type payments based on a daily rate, must have their prices approved by the Aged Care Pricing Commissioner.

Is my lump sum refund guaranteed?

The Australian Government guarantees the repayment of your lump sum if the aged care home becomes bankrupt or insolvent and is unable to refund the balance of your lump sum.

This means that you can be sure that your refundable accommodation deposit balance will be refunded to you or your estate.

Retaining the Family Home and Renting it Out

As mentioned previously, you are able to pay the bond in instalments, and there are advantages in not paying the bond in full.

If, for example, you pay $399,000, (ie. $1,000 still to pay) not only is the bond an exempt asset for Centrelink purposes, but the family home also then becomes an exempt asset and any rental income, exempt income.

Note that home rental income is taxable.

Age Care Fees – Daily Care Fees

Daily care fees comprise a basic daily care fee and an income tested daily care fee (ITF).

These fees are a contribution to the cost of your care. You may be asked to pay the income-tested fee if you are not in receipt of a full means-tested pension. This fee will be paid directly to the aged care home as part of your care fee.

The basic daily care fee is set by government and is currently $46.50 or $16,972.50 pa (from 1 July 2014), and all aged care facility residents pay this fee.

Means-tested care fee

The Australian Government pays for the bulk of aged care in Australia, but as with all aged care services, you may be asked by your service provider to contribute to the cost of your care. Depending on your income and assets you may be asked to pay a means-tested care fee.

The following can potentially reduce the above Means Tested Care Fee.

 

Care Annuity – This is an immediate annuity for people who have been approved by ACAT as needing low or high level care and who intend reside, or are already in, a care facility. The annuity provides a fixed earnings rate and regular payments for the rest of the resident’s life.

In reviewing your situation we determined that a Care Annuity was of no value to you.

Funeral Bonds or Pre-Paid Funerals – A funeral bond or pre-paid funeral plan (up to the value of $11,500) may be purchased to reduce the value of your assets, which in turn reduces the amount of deemed income.

Gifting Assets – Centrelink will allow a single person or couple to gift up to $10,000 per financial year up to a maximum of $30,000 over a rolling 5 year period, without it being assessed under the Assets test or included as a financial asset under Deeming for the Income test.

This information is of general nature only and is not intended as a personal advice. It does not take into account your particular investment objectives, financial situation and needs. Before making a financial decision you should assess whether the advice is appropriate to your individual investment objectives, financial situation and particular needs. We recommend you consult a professional financial adviser who will assist you.