Aged Care
If you (or your loved ones) are getting older, it's important for you to understand as much as possible about the options available when moving into the next phase of life. With complicated Aged Care reforms recently introduced by the Government, the need for competent advice is now more important than ever.
Your parents or family members may have reached a stage in life where they need more help with day-to-day activities, and are counting on you to help them with major life decisions (including financial ones). Even if this hasn’t happened yet, it is important to be prepared; and the first step is being informed.
It’s no secret that Australians are living longer. In 2007, 14.5 million Australians were aged under 50; but in just 50 years, 8.7 million of these people are likely to be aged between 50 to 92.
Over the last 25 years the Australian Government has introduced measures to help meet the needs of our ageing population, including compulsory superannuation for employees and relaxing the laws on the retirement age.More recently, the Gillard Government introduced a string of reforms that will affect the way we pay for aged care, most of which came into force in 2014.
Below is a rundown of the new Aged Care reforms. These can be viewed as points of consideration when moving into a retirement/nursing home.
Bonds and daily care fees (under the old law)
If your loved one decides to move into an aged care facility, they usually needed to pay an accommodation bond. These bonds can be quite substantial, with many people selling the family home to fund this expense. In addition, daily care fees were set by the aged care facility.
Often people chose to pay a larger bond upfront – often the full value they receive from the sale of their home – in return for lower daily care fees. By doing this, they effectively reduced their means-tested assets, meaning they could become eligible for a higher age pension.
What’s changing?
From 2014, this is set to change, with new laws capping accommodation bonds at $500,000.
This will push the cost of daily care fees higher. However, the new laws also set an annual cap for care fees of $25,000, and a lifetime cap of $60,000 for those living in residential care and nursing homes.
For people being cared for at home, there will be an annual cap of $5,000 in care fees for pensioners, and up to $10,000 for seniors with an income over $43,000.
How these changes may affect your parents
Under the new laws, if your parents decide to keep the family house it will be exempt from means testing for the age pension.
However, if they choose to sell it to cover the cost of their accommodation bond and to pay for their daily care, they will no longer be able to protect some of the money from means-testing by paying a larger bond, as permissible under the old law.
Instead, any money remaining from the sales of the house will be assessed. This could have an impact when working out their aged-care contribution, daily fees and age pension entitlement.
How to help your parents or loved one
None of us look forward to the day when our loved ones are no longer able to take care of themselves, and sadly this time may come sooner than you think. This is why it makes sense to talk to have the conversation now to find out what your loved one would want to do if they need additional care into the future.
It’s also a good idea to find out more about what options are available. A good place to start is at agedcareaustralia.gov.au.
It is important that you and your loved ones understand the new Aged Care reforms. It is essential to know how it could affect retirement savings and entitlements to the Age Pension. As everyone’s situation is different, you should seek professional financial advice. Please give us a call on 08 7477 8252 to book an appointment.