Financial Stability - Aged Care Part 3 - Fees & Funding

Aged Care – Part 3: Fees & Funding

Aged care can be a tricky area to navigate, and requires careful thought. To help you or your loved one obtain the best outcomes, this three-part guide will take you through the process of applying for, receiving, and paying for suitable aged care services.

This third part of the series will look at some of the costs involved in transitioning to permanent residential aged care.

The basic daily fee

Cost: $52.25 per day (as at 20 March 2020)
Amount paid by you in a year: $19,071.

What is it?

The basic daily fee is used to cover the day-to-day expenses such as meals, laundry and cleaning etc. Everybody entering residential aged care is expected to pay this fee.

Usually the aged care provider will ask this fee to be paid fortnightly or monthly, and to be paid up to one month in advance.

The basic daily fee is an amount equivalent to 85% of the maximum basic rate of the Age Pension for a single person. As the Age Pension rate indexes twice a year, so will the basic daily fee. Find out more about the basic daily fee at www.myagedcare.gov.au.

The means-tested care fee

Cost: Between $0 and $28,087 (capped) a year (as at 20 March 2020)
Generally, if you have financial assets of $208,000 or more you can be asked to pay a means-tested care fee.1

What is it?

The means-tested care fee is a contribution towards day‑to‑day care costs in an aged care home.

The amount payable depends on two components – a combined income and assets assessment and your cost of care. However, there are annual and lifetime caps in place to limit the amount of the means-tested care fee you can be asked to pay.

Accommodation costs

Cost: $0 to $550,000 (refundable accommodation deposit)2

  • Average published price in major cities: $447,000.3
  • Average published price in regional areas: $348,000.3
  • Average published price in remote areas: $293,000.3

What is it?

Each residential aged care home has different costs for living there. These can vary significantly depending on the location and status of the home.

You can pay the accommodation costs as a refundable lump sum, referred to as a refundable accommodation deposit (RAD), or in periodic payments, referred to as a daily accommodation payment (DAP). Or a combination of both.

If you pay a RAD, this will be refunded to you or your estate when you leave the care home.

The accommodation costs are negotiated between you and the aged care home but cannot exceed the amount published by the facility on the Government website www.myagedcare.gov.au.

Other costs

Other costs charged by the aged care provider should be advertised.

There are two types of extra fees:

  • extra service fees for aged care homes with extra service status. These fees could be for higher standards of food, accommodation and hotel-type services.
  • additional fees for other care or services that are in addition to those that the home must provide.

Government assistance

If the value of your assets and income are below the relevant Government thresholds, the cost of your aged care will be further subsidised by the Government. In these cases, some or all of your accommodation costs can be subsidised by the Government and you will only need to pay the basic daily care fee.

Case study

Meet Jane

Jane is 86 and widowed. She was living on her own for some time after her husband passed away but has become frail with age. After researching her options with the help of her family, Jane was assessed by an Aged Care Assessment Team (ACAT) as requiring residential care and found a suitable aged care home to move into.

The basic daily fee

This fee is paid by everyone entering residential aged care and is currently $52.25 per day
(as at 20 March 2020). Jane will be required to therefore pay $19,071 a year.

The means-tested care fee

Jane has a home worth $750,000, $50,000 in cash and $5,000 in personal effects. Jane will be required to pay a means-tested care fee of $551 a year.

Accommodation costs

Jane’s residential aged care home is advertised for $400,000.

Total fees and costs

Jane will therefore need to fund a total of $419,622 in the first year. This includes $400,000 for her accommodation in the aged care home which she can choose to pay as a lump sum refundable deposit or rent style periodic payments or a combination of both.

How to fund residential aged care

There are many ways to help fund your residential aged care costs. These range from renting or selling the family home, to specialised investment solutions offered by financial service providers.

The best place to start is by having a conversation with a financial adviser. They can help you navigate the complexities of funding aged care, leaving you to focus on finding the right aged care home or home care provider.

1 Based on rates and thresholds as at 20 March 2020, including the new deeming rates of 0.25% and 2.25% taking effect 1 May 2020. This asset amount applies to a single and is different for members of a couple.
2 Aged care homes wanting to charge accommodation prices of more than $550,000 as a lump sum must have their prices approved by the Aged Care Pricing Commissioner. Aged Care Financing Authority.
3 Aged Care Financing Authority | Annual Report on the Funding and Financing of the Aged Care Sector – 2019.

Leave a Reply

Your email address will not be published. Required fields are marked *