The term ‘aged care’ encompasses a broad range of services and support designed to help older people with everyday living and other needs.1 It can be as simple as occasional assistance with certain tasks or as complex as around-the-clock care in a specialised environment.
Understanding the breadth of support on offer and the wide range of government support and subsidies available can help you plan for a comfortable retirement, secure in the knowledge your needs can be met as they evolve.
Early and informed planning can ensure that when the need for aged care arises, the transition is as smooth as possible, aligning with your personal preferences and financial circumstances.
Planning for the financial aspects of aged care can ensure you are looked after without compromising your financial security.
This starts by taking a thoughtful and deliberate approach to understanding the costs of different types of care and considering how best to budget for these costs from your savings and investments.
The cost of aged care depends on the type of services required, the provider you choose and your financial situation.2
Thinking about retirement, but not sure where to start? Get tips and information in our Planning for Retirement guide, to help you get started today.
Planning how to pay for aged care should consider all available resources, from personal savings and superannuation to government support and the aged pension.
Most Australians aim to pay aged care costs from their traditional income sources like the age pension and superannuation before having to tap assets like personal savings. Also available but less commonly used are financial products like equity release schemes, aged care loans, and personal loans.3
Involving family members in the discussion is important. Family members can provide alternative perspectives and help you ensure decisions are made objectively. They may also help identify options you may not have considered. Being transparent with your family can mitigate concerns about estate management and ensure decisions align with your wishes and best interests.
Perhaps most importantly, family can offer emotional support and ease the stress of decision making.
Consulting with a financial adviser can also be worthwhile. Advisers can help you plan and budget for your individual aged care needs. The federal government’s free Financial Information Service is a good place to start, with live and recorded webinars as well as the option of phone, video chat, or face to face appointments.
In-home care helps support people who wish to stay in their own homes for longer by helping with everything from daily tasks like cooking, cleaning, and bathing to comprehensive care options like nursing and rehabilitation.
The cost of this assistance is supported by the Commonwealth Home Support Programme and Home Care Packages, with government subsidises provided to various organisations across Australia.
Providers set their own fees based on the level of care required and you may need to contribute to the cost based on your income. Eligibility for government support requires an assessment, which is usually done in person at your home.4
Residential care in aged care homes is for people who can no longer live at home and need ongoing help with everyday tasks or health care. These homes offer a range of services including personal and nursing care, meals, laundry, and social activities.
The government subsidises a range of aged care homes and there are also non-government funded providers available.
Short-term care provides support for a set period from a few days to months at a time to help with day-to-day tasks and to restore or maintain independence.
Aims to improve the ability to perform everyday tasks and prolong independence.
For recovery after a hospital stay, this care helps individuals regain independence and adapt back to daily life.
Temporary support for caregivers, offering care from a few hours to several days.
The government subsidises short-term care for people assessed as eligible, but you will need to contribute if you can afford it. The maximum amount payable for people assessed as eligible for short-term restorative or transition care is $12.75 per day for care received at home and $61.96 per day for care in a residential setting.5 For residential respite care in an aged care home, fees will include the basic daily fee, and potentially also a booking fee and extra service fees.
Retirement villages, often termed ‘independent living villages’, are regulated by state and territory governments and offer residents an independent lifestyle enhanced by community engagement.
Costs generally involve an upfront entry fee, ongoing maintenance fees, and potentially additional charges for extra services. These villages are designed for seniors desiring a low-maintenance lifestyle, featuring amenities like social clubs and recreational facilities. Retirement villages are different from residential aged care because they have less of a focus on medical and care services and instead cater to people who do not need care and are seeking social activities and independence.
Fees for residential aged care are broken down into four6 components:
1. A basic daily fee (the maximum is currently $61.96 per day) payable by everyone for living expenses and charged as a lump sum, daily payment, or a combination of both.
2. An accommodation payment that is means tested and covers the cost of the room. This fee varies and can attract a government subsidy of up to $68.14 per day. Accommodation payments can be paid as a lump sum (known as a ‘refundable accommodation deposit’) or a daily payment or a combination of both. Without regulatory approval, the maximum a provider can charge for a room or part of a room is $550,000 or the equivalent daily payment. However, thousands of places are approved each year above that limit.
3. A means-tested care fee, capped at $33,309.29 per annum with a lifetime cap of $79,942.44. This covers the cost of ongoing health care.
4. An extra service fee that covers additional amenities above the minimum standard.
Eligibility for government assistance is based on need and determined through an assessment. To be eligible, you must be unable to live independently at home. Typical scenarios that trigger eligibility include changes in what you can do or remember, diagnosis with a medical condition, or a recent fall or hospital admission.
Your financial situation does not affect your eligibility to live in a government-subsidised aged care home, but it does impact the amount you have to pay.
Ultimately, choosing residential aged care is a complex process with many interacting features. Many choose to seek help from a financial adviser to assess the best options.
As we age, our living spaces need to adapt to match our changing needs.
Making changes to your home can help you stay independent for longer, allowing you to continue with your familiar routines and maintain local community ties. This can contribute to better mental health.
The cost of making changes to your home is typically lower than the cost of moving into retirement accommodation or aged care.
Modifying your own home also lets you make specific changes that suit your individual needs and preferences as not all changes are needed for all people.
Some common changes to consider9 include completing any outstanding repairs, removing clutter to prevent tripping, keeping your home brightly lit and adding night lights, adding non-slip flooring to stairs and in bathrooms, and checking and replacing smoke detectors. If required, larger changes10 may include installing grab rails in bathrooms, changing floor coverings to reduce trip hazards, and installing a personal safety alarm.
Government assistance may be available to help with the cost of modifications.
For further information on aged care and support options available, visit the Australian government’s comprehensive My Aged Care website.
1 https://www.health.gov.au/topics/aged-care
2 https://www.myagedcare.gov.au/understanding-costs
3 https://www.health.gov.au/sites/default/files/documents/2019/11/acfa-report-on-how-consumers-plan-and-finance-aged-care_0.pdf
4 https://www.myagedcare.gov.au/am-i-eligible
5 https://www.myagedcare.gov.au/short-term-care
6 https://www.bt.com.au/content/dam/public/btfg-bt/documents/professional/knowledge-centre/client-strategies/your_guide_to_aged_care.pdf
7 https://www.ihacpa.gov.au/sites/default/files/2023-10/ihacpa_annual_report_2022-23.pdf
8 https://www.myagedcare.gov.au/short-term-care
9 https://www.carergateway.gov.au/home#a1
10 https://www.health.qld.gov.au/__data/assets/pdf_file/0028/429814/33381_full.pdf
Things you should know
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 1 July 2024. 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 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. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any 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. Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of super investments can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.