Aged care

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.

Let’s talk about aged care

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 may be spent in aged care.

The decision to move into aged care can come with a raft of emotional issues, in addition to financial considerations. That could be because nursing home accommodation can involve substantial costs, especially for self-funded retirees who need their finances to last the distance. 

The cost of an aged care facility

New residents entering aged care may be asked to pay an upfront refundable accommodation deposit.[1] There is no set level for this deposit – the only proviso is that residents must be left with at least $49,500 in assets (excluding the family home) after the deposit has been paid.[2]

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

As aged care facilities are generally free to set their accommodation payments up to a certain limit, 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, however, 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 for accommodation by:

  • a lump-sum style ‘refundable accommodation deposit’
  • interest-type payments called a ‘daily accommodation payment’, or
  • a combination of both.

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

Unfortunately, you will not receive the original sum back if you have arranged to have fees deducted from it.

Accommodation deposits vary widely and in some of our capital cities, amounts can run into hundreds of thousands of dollars. This makes it 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 accept the first place that becomes available, which can see a mad scramble for deposit money. 

Basic daily fee

In addition to accommodation costs, a basic daily fee is charged for 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 $51.21 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.[3]

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.[4]

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 your age pension entitlements as well as the costs you’ll pay for aged care.

[1] https://www.myagedcare.gov.au/costs/aged-care-homes-costs-explained/paying-accommodation-aged-care-home
[2] https://www.myagedcare.gov.au/costs/aged-care-costs-before-1-july-2014/accommodation-bonds-if-you-entered-care-1-july-2014
[3] https://www.myagedcare.gov.au/costs/aged-care-homes-costs-explained/aged-care-home-basic-daily-fee
[4] https://www.myagedcare.gov.au/costs/aged-care-homes-costs-explained/means-tested-care-fee

Explore the financial costs of funding home care and options for private funding.

Longer life expectancies mean you could be in retirement for 20, maybe 30 years.

Eventually, many of us may find we are called on to help aging parents and other relatives. 

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.
Gifting, or financially assisting family members, can be a great way to help out but it’s important to understand how it could impact your Age pension or other social security benefits.
While the Australian retirement age can differ for everyone, there are a few things to consider when planning for a modest or comfortable retirement.

The article was prepared by BT. BT is a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 14 March 2019. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.                         

This article 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. 

This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it.