Our practice Price Financial Intelligence in Thornleigh NSW has been assisting seniors in navigating their entry requirements into Aged Care Facilities for more than 15 years.
Just prior to the 1 July 2014, the Tony Abbott Government changed the system in relation to Aged Care Services and introduced a new Means Tested Fee.
On the 1 July 2017, the government modified the rules again and introduced changes to the application of the Means Tested Fee, removing concessions where self-funded retirees could rent their family home and use the rent to assist with the aged care needs.
Firstly, this Means Tested Fee is a lie, it is an Aged Care Tax, and this tax makes Aged Care the only service in Australia where you are required to pay a tax before you are allowed to use this service. At present this tax may cost your family up to $79,942.44 over a 3-year period.
Imagine going to a doctor and being required to pay a tax to see the Doctor before you can engage his services and that doctor is then required to offset this amount against monies that the Federal Government provides to the doctor under bulk billing arrangements to support low-income patients.
With Aged Care, this is exactly what is currently happening to Self-Funded Aged Care Residents, and I am not talking about rich Australians.
Scenario: Husband dies, and wife can no longer look after herself and/or maintain her home.
As a couple they worked all their lives to pay off their family home and accumulated about $300,000 and she now needs to move into an Aged Care Facility because she can no longer look after herself at home! Up to this point in her life they have received the full age pension as they are below both the Income Test and the Assets Test – The only thing that has changed in her life is the need for care and her husband has passed away.
- The first issue that confronts her is the need to fund a Bond to secure a bed in an Aged Care Facility. These Bonds range from $450,000 to $1,500,000. To raise this money, they must sell her family home which she will receive about $1.5m if she lives in Sydney or Melbourne. This is the only way she can raise the money required to fund her bond, and under the current rules they have little or no choice.
- Once the exchange of contract is complete and she receives the proceeds, for Age Pension Purposes the Bond is exempt from the Assets Test, now let’s assume they find a facility with a $500,000 Bond. They will still have $1,000,000 left over from the sale of house plus $300,000 in investments, therefore their total assets are now at least $1,300,000+ and as a Single Pensioner she will cease to be entitled to the Age Pension once their Assets exceed $916,000. She will now lose her Age Pension in full including all Fringe Benefits.
- She paid her Bond of $500,000 and has taken up residence in her chosen facility, however she must now submit an Aged Care Income & Assets assessment to determine her Means Tested Fee/Aged Care Tax.
- How is this fee calculated – Whilst the Bond is exempt in relation to the Age Pension, the full cost of the Bond is included in the calculation of the means tested fee together with all other assets owned by the resident. What does this mean? She will pay the full Means Tested Fee as their assets are now calculated at $1.8m. This tax will be $79,942.44 which will be spread over 3 years plus indexing twice every year.
False & Misleading Information
This Aged Care Tax is presented as a Means Tested Fee which is also a Fee for No Service which is deemed by our government to be illegal.
One must ask oneself what benefits the resident receives upon the payment of this fee – the only benefit is the right to obtain a bed in an Aged Care Facility.
The resident must still pay the Aged Care Operator for her own care which comprises of 2 or 3 components, the Daily fee of $61.96, a supplement amount with a maximum of $68.14 plus the Aged Care facility will benefit in receiving an interest free loan of $500,000 plus.
What happens to the Means Tested Fee – This fee is offset against the funds received from the Federal Government to provide care for low-income residents residing in the same facility.
Not one cent is allocated to the resident that pays this Tax.
Current Political Environment
Right now, there is very little opportunity to repeal this Tax, as the government needs the money.
This Government criticized the Banks for Fee for No Service and demanded that they refund these fees to everyone that had paid them. This cost the Banks many Billions of dollars and the Government has had no hesitation in imposing very strict rules on how financial services can operate in the future.
The Royal Commission into Aged Care was not permitted to review this fee as it was outside their term of reference. Their Report has now been tabled.
What are we going to do?
We intend to assist every senior Australian that plans to enter an Aged Care Facility to minimize this tax.
Price Financial Intelligence has assisted many families is successfully navigating the complex process of moving a family member into an Aged Care facility.
We can help you with specific Aged Care Services: –
Assistance with your ACAT Assessment if required, Assistance with finding a placement in an Aged Care Facility, preparing the Income & Assets Assessment for submission to Services Australia, plus advice on the funding of your Aged Care needs.
We offer you a flat fee which covers all our services regardless of the time taken to complete your placement. Alternately we can offer an hourly rate if you only require limited assistance.
Understanding the rules with Aged Care is the first step in successfully managing this complicated process.
