Aged care finance is complex.
Our office specialises in aged care finance-a complex area as there are three sets of rules, all managed by different parts of the Commonwealth Government:
- Income tax
- Centrelink or Veterans' Affairs benefits
- Aged care fees
When you come to see us about aged care for your partner, your parent or somebody else, our recommendations are designed to reduce aged care fees, increase Centrelink or Veterans' Affairs benefits and reduce tax. Unfortunately, these three areas all have different rules, so knowledge of all three is required to advise you on the best solution.
For example, an aged person's house is not counted in calculating their Centrelink age pension, but could be counted in calculating their aged care fees. However, for many people, our recommendations result in the house not being counted in calculating aged care fees, thereby reducing their aged care fees, increasing cashflow and providing a better lifestyle. However, if you rent the house out, you also need to consider the tax consequences such as tax on the rental income and any potential capital gains tax when the house is sold (as the primary residence exemption may not apply). So to get the best result overall, all three areas need to be considered.
A person who enters low-level care (e.g. a hostel) will typically be asked to pay an accommodation bond. The amount is almost always over $200 000 and the cost can be double or triple that, depending on the facility.
- Did you know that accommodation bonds are negotiable?
The value of the bond has nothing to do with the value of the aged person's assets, although the aged care facility will probably tell you that the bond will be bigger, the more assets the aged person has. This is not true. Aged care facilities know that a person with a lot of assets can afford to pay a higher bond, so the facility will quote a higher bond amount. Talk to us first to avoid paying an excessive bond.
- Once you have negotiated a bond, the next question is where to get the money?
There are a number of options, including:
- Obtain a reverse mortgage on the family home, possibly renting it out to go towards the interest?
- Not pay the bond but instead pay the aged care facility the penalty rate of interest?
- Pay part of the bond and pay the aged care facility the penalty rate of interest on the unpaid amount?
- Sell other investments, if possible, or use another strategy altogether?
Likewise, most other aspects of age care costs can be negotiated.
Note: An accommodation bond may also apply if a person enters a high-level care facility which is classified as extra services.
Income-tested daily care fee
The income-tested daily care fee applies to both low-level and high-level care. Depending on how a person's finances are organised, it may be possible to reduce this fee. Furthermore, our recommendations may also result in the person receiving a higher Centrelink or Veterans' Affairs pension (or in that person getting a pension where previously ineligible).
The family home
Depending on how a person's finances are organised, the family home may or may not be counted in calculating aged care fees.
There are also tax rules to consider if the family home is rented out (e.g. rental income, capital gains tax).
The tip of the iceberg
Please note that this page is only designed to give you a brief introduction to aged care and the ways in which we can help you.
There are other rules not discussed on this page and many other strategies which we can advise you on.
To speak with one of our advisers about how we can help you, please call us on (03) 9875 4300 and one of our friendly receptionists will quickly connect you through. Alternatively, you can book a time to see one of our advisers in person through any of our receptionists.
Our office hours are 9am to 5pm, Monday to Friday.