Basic Understanding of Residential Aged Care Fees
Residential Aged Care refers to the facilities where older Australians can live in the later stages of life where they are often unable to stay at home for health reasons.
The financial decisions on Residential Aged Care can be quite daunting and this article aims to provide you with a basic understanding of Aged Care Fees.
The easiest way to think of Residential Aged Care is to consider two types of costs. One type of Aged Care costs cover the cost of accommodation and the other covers the cost of care.
Aged Care – Accommodation costs
The cost of accommodation can be paid as a Refundable Accommodation Deposit (RAD) which is a lump sum that is generally refundable to the resident or their estate when the resident leaves the facility. The RAD is limited to a maximum of $550,000 unless the facility has government approval to charge a higher rate. Every facility is required to make these figures publicly available.
A resident can choose to pay the full upfront RAD or part of the RAD. Any unpaid amount can be paid in instalments (known as a Daily Accommodation Payment or DAP) based on government provided interest rates and the amount of RAD unpaid.
For people with assets and income below certain levels, these payments may not be required at all or only part payment required.
Aged Care – Care Costs
The second type of cost associated with Residential Aged Care covers the cost of care. This can come in three forms.
* The Basic Daily fee which is 85% of the basic single person Age Pension rate and is payable by everyone.
* The means-tested care fee which is an additional fee for those people whose financial assets and income indicate they can afford to contribute more towards their cost of care. This fee has a maximum of $27,232 per year or $65,357 over the residents lifetime.
* Fee for additional services which is a fee that is charged when a resident or their family chooses to have additional services (such as Pay TV, a glass of wine with dinner and or newspaper each day)
The major Aged Care decisions
There are significant decisions to be made when considering Aged care of which the choice of a specific facility being top of the list. Understanding the services they provide and support they offer is crucial in the decision making. How you pay for your Aged Care can have quite a dramatic impact on your Centrelink entitlement, cash flow and the eventual value of assets that will be passed on to your beneficiaries.
The major financial decisions and questions when considering Residential Aged Care are;
* What facilities and services can I afford?
* What do I do with my former home? Do I sell it or keep and possibly rent it?
* How much of the lump sum deposit (RAD) do I pay and how much do I pay in instalments?
* How will my Centrelink entitlements be affected?
The decisions are complex and the outcomes for your cash flow and wealth can be significant. Getting professional Aged Care advice can provide great peace of mind that you are making informed decisions that leave you and/or your beneficiaries in the best possible position.
Any advice on in this text is general in nature and does not take into account your personal circumstances, objectives and needs. Therefore, before making a decision, you should consider the appropriateness of the advice with regard to those matters.
Please see our Financial Services Guide for more information.
Precept Financial Services Pty Ltd (ACN 140 538 147) as trustee for SF Unit Trust trading as Precept Financial Services is an authorised representative of Charter Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee No. 234665