Aged care

5 min read

Ageing is a natural part of life and just as we plan for early milestones like buying a home or the arrival of kids, it’s worth laying foundations for old age.

Aged care – know what’s involved

Aged care can be a tough subject for many families to broach, but as we enjoy longer lives, there’s a growing likelihood that at least part of our final years will be spent in formal care.

The decision to move into aged care doesn’t just come with a raft of emotional issues. There are also financial considerations. That’s because nursing home accommodation can involve substantial costs, especially for self-funded retirees.

The costs involved

New residents entering aged care are often asked to pay an upfront accommodation bond. There is no set level for this bond – the only proviso is that residents must be left with at least $46,500 in assets (excluding the family home) after the bond has been paid.

An accommodation bond works like an interest-free loan to an aged care home. Any income earned from the bond is used by the aged care home to improve accommodation and services for residents.

As aged care facilities are generally free to set their own bond, it’s usually open to negotiation between families and the home’s staff. This can be a source of discomfort as it means revealing your financial worth to complete strangers. Simply being aware of how the system works can help you plan for it.

How do I pay my accommodation costs?

You can choose to pay an upfront bond by:

  • a lump-sum style ‘refundable accommodation deposit’

  • rental-type payments called a ‘daily accommodation payment’, or

  • a combination of both.

The accommodation bond is generally returned to residents or their estate, if they move out or pass away. 

But don’t expect to get the original sum back. The aged care facility is entitled to keep any interest earned on the bond and it can also withhold up to around $345 each month for the first five years as a contribution towards the upkeep of the facility. 

Bonds vary widely and in some of our capital cities, the cost is running into hundreds of thousands of dollars. So it’s extremely important to consider all the facilities available and consider if a particular aged care home is the right place for you or your loved one. 

Unfortunately, high demand for aged care, particularly high level care, often means families who haven’t done their research have to accept the first place that becomes available and that can see a mad scramble to find the bond money.

Basic daily fee

In addition to the accommodation bond, a basic daily fee is used to contribute towards your day-to-day living costs such as meals, cleaning, laundry, heating and cooling. Everyone entering an aged care home can be asked to pay this fee. 

The maximum basic daily fee for new residents is $48.25 per day. This equals 85% of the basic age pension rate and it increases on 20 March and 20 September each year in line with changes to the age pension. 

Means-tested care fee

This is an additional contribution towards the cost of care that some people - self-funded retirees in particular, may be required to pay. The Department of Human Services will work out if you are required to pay this fee based on your income and assets.

There are annual and lifetime caps that apply to the means-tested care fee. Once these caps are reached, you cannot be asked to pay any more means-tested care fees.

The government’s Aged Care website features a Residential Care Fee Estimator to help gauge the sorts of fees you could be looking at.

Funding it all

Meeting the future cost of aged care is just one aspect retirees need to factor into their investment portfolio. 

The way your portfolio is structured can impact on your age pension entitlements as well as the costs you’ll pay for aged care.

Need help understanding your aged care options? Contact us to arrange to speak to a BT adviser
"Why salary sacrifice? Well, because it's a way of enjoying great savings by paying less tax. Want to know how it works?
No matter what special abilities you have, one of the most important skills every young professional needs to master is connecting with others in their industry.
Stage of life 15 Aug 2016
The loss of a loved one can leave you feeling devastated and distraught. But there is also much to organise. We explain what you need to know at a time of great loss.
5 min read
Stage of life 15 Aug 2016
When a family home becomes too burdensome or simply ties up too much family wealth, downsizing can be a way to streamline your life and release additional financial resources.
5 min read
Stage of life 15 Aug 2016
There is a whole world of benefits seniors can tap into – from extra income to valuable discounts. Check out what’s available to help you get more from your retirement.
4 min read

This information is current as at 15/08/2016.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. 

This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.  

Westpac Banking Corporation ABN 33 007 457 141, AFSL number 233714