Since the Living Longer Living Better changes to aged care fees and charges came into effect on 1 July 2014, the costs of aged care have become very complicated and confusing. It is easy to find information about the costs of residential aged care by doing a google search or going on to the myagedcare.gov.au website. In summary, the costs are:
1. Daily care fees which every resident pays. These are pegged at 85% of the full aged pension, currently $47.15 per day and revised every March and September.
2. Means tested daily fee which, as the name suggests, are calculated using a very complicated formula on the resident’s income and assets. The formula is not only complicated because of the convoluted definitions of the various elements of the formula but also because of the rules around what is included and excluded from each of the elements of the formula.
2. Extra service fees which are some facilities (but not all) have the option to charge, provided they meet certain thresholds. These fees have no bearing on the care provided; they are just extra services such as wine with meals or podiatry or other items that can usually be purchased independently of the facility.
4. Accommodation Payment (what used to called the bond). This can be paid to the facility in whole or in part as either cash which is called a Refundable Accommodation Deposit (RAD) or as a Daily Accommodation Payment (DAP). The DAP is calculated as an interest payment on the amount of Accommodation Payment that is not paid as a RAD. The interest is fixed by the Government, currently 6.63% per annum, and paid for each day in care. The RAD is guaranteed by the Federal Government and refunded when the resident leaves the facility.
The aged care residential facility, in conjunction with Centrelink, will work out the payments for you if you want them to or if you do not take control. Residents will need to complete the Centrelink assessment form and aged care residential facilities now often hand them out during a tour of the facility. However, it is not their job to optimise these costs. There are numerous ways to ensure that you are not paying more than you should for aged care and every situation is different. It is nigh impossible to work out how to do it unless you are a specialist financial planner. Pensions can be affected by the way that aged care is funded and paid for and often to the financial detriment of the resident. We nearly always recommend to our clients that they seek advice from a financial planner who specialises in this area. The only time that we do not is when the client is a full pensioner with assets worth less than around $150,000 since the outcome is unlikely to be any different. All of our clients who have been referred to an appropriate planner have redeemed the cost of the session from the advice they have received.
So, if you do not already have a financial planner, given the current bad press around financial planning, how do you choose the right one? As this area is seen as a growing source of revenue, a lot of planners will tell you they have the requisite knowledge when they do not. Here are some tips (although not foolproof):
▪ you can google ‘aged care financial advice’;
▪ screen the results for those who, on their website, focus on financial planning for aged care;
▪ ring around those firms and find out the cost of the advice. The cost varies from around $500 to over $2,000. Cost does not indicate quality. The cost is generally a function of the manner in which they deliver the advice; and
▪ choose one that charges a fixed fee for that advice.
This article was copied from Margaret and Sarah at http://signpostlms.com.au. You can also contact them for further information & clarification on the above.