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Aged Care

Aged Care – a quick strategy idea

Chris Morcom
Partner/Private Client Adviser
3 Feb 2014

Many Baby Boomers are finding themselves with elderly parents who require more daily care than the family can provide. This ultimately leads in a search for an aged care solution that works for the whole family, including the parent(s).

I often find a major concern of the family is how to best navigate the complex aged care fees environment, so I have broken this down into three types:

  1. Basic Daily Care fee
  2. Income Tested Daily Care fee
  3. Accommodation Charge

The current maximum basic daily care fee is $45.63 per day.
The income tested fee is based on a formula which takes into account the aged care residents’ assessable income, with a maximum fee of $72.48 per day. This fee does not apply if the residents’ income is below $936.40 per fortnight (for singles) or $918.40 each per fortnight for couples.

For those entering Low Level care or an Extra Service facility, the Accommodation Charge is usually quoted as a Bond, payable upon entry to the facility

The bond is a negotiable amount, and the payment of that bond must leave the person entering the aged care facility with at least $44,000 in assets.

One key issue with a bond is that usually the family can be faced with the question of whether to sell the parent’s home to pay the bond. While the bond is not counted when calculating income tested aged care fees, any residual asset left over from the sale after payment of the bond may result in an income tested fee being payable.
It pays to be aware of an alternative strategy.

You can opt to pay a bond via periodical (monthly) payment rather than as a lump sum. While you do pay interest on the outstanding bond amount, it can allow you to consider retaining the resident’s former home. The home can be rented with the income used towards payment of the monthly bond payment and interest.

The main benefit of such a strategy is that the house is not counted as an asset for Age Pension purposes, and the rental income is not counted as income for the age pension or income tested fee purposes.

As a result, a pensioner can retain a higher pension and pay lower aged care fees.
The interaction of Centrelink pension, investments and aged care costs can be complex and I recommend anyone contemplating entering this area to obtain advice from a suitably qualified professional.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.