"I've noticed the last few weeks there has been a lot of attention on how much it is going to cost to fund long term aged care later in life due to the funding changes the government has introduced. What can I do to prepare for these expenses for later in life?"
- Question from Jason in Ashfield, NSW
Top answer provided by:
Rob Chertok
The question of how best to financially plan long-term Aged Care needs involves 2 phases, both of which are equally important. The first phase involves understanding what type of care is required, and the second involves understanding the financial impact of receiving the required care. As a further starting point, it is recommended that those considering Aged Care solutions, familiarise themselves with My Aged Care, a free government-funded website that has ample resources on the process of receiving care and fee estimates. They can be found at www.myagedcare.gov.au
Aged Care Reforms in 2025
On 21 November 2024, the new Aged Care Bill 2024 passed both houses of parliament and at time of writing is now awaiting Royal Ascent. To summarise the financial impact to those requiring care will mean that individuals with greater means will have a larger out of pocket cost through the establishment of a Hotelling Contribution and Non-Clinical Care Contributions. Some fees have annual and lifetime caps whilst others do not. In addition, aged care providers will now be able to retain 2% of residents’ Refundable Accommodation Deposit for a maximum of 5 years. This may create cashflow concerns, as well as Estate Planning Considerations.
Phase 1
Ideally, Phase 1 starts well in advance of requiring care and should involve family members or those close to an individual requiring care. Conversation points may include:
- Can I live by myself/what care do I require? Depending on the care you require, you may be able to stay in your home and not be forced to enter a Residential Aged Care Facility (RACF). The new Support at Home (SAH) program may be a more affordable and flexible avenue to receive care if your circumstances allow.
The Aged Care Process always starts with an Aged Care Assessment Team (ACAT) assessment, where a qualified healthcare practitioner will assess your physical and cognitive abilities, as well as your domestic requirements to determine the level of care you are eligible for. - If entering Residential Care, will family/friends visit: Finding a facility close to Urban areas may attract higher fees. SAH and RACF providers are mandated by the Government to publish their fees on My Aged Care
- Cultural and Religious Alignment: If being separated from family/friends, finding a RACF that has a strong connection to your cultural and religious beliefs may ease your transition
- Respite Care: If approved by ACAT you can enter care on Respite, which is a “try before you buy system”. It allows a care recipient to spend a handful of days at a RACF to form a view if they can see themselves living there permanently.
Phase 2
When comfortable with the type of care you require, head to the My Aged Care website and start to preview SAH and RACF providers. Depending on the service, you will need to understand all forms of fees you are required to pay. To maximise your opportunities:
- Understand what you are required to pay: Aged Care fees usually attract a combination of 3 or more types of fees. Understanding your obligations and what government supplements may be afforded to you
- Be clear on your asset pool: Funding Aged Care fees, whether at home or in a facility will require a financial asset pool to generate income. This may include the proceeds from a sold home, superannuation, cash in bank or shares as an example
If moving to a facility, you’ll usually be required to pay a downpayment called a Refundable Accommodation Deposit (RAD). The Government has mandated that the provider is required to offer flexibility with paying your RAD and may allow you to pay fees from your RAD too - Understand that there is an Aged Care and Centrelink means assessment: Being clear on which assets are and are not assessed from both an Aged Care and Centrelink perspective can have an extensive financial impact
If you require assistance, Please reach out and get in touch with me HERE
Background: Prior to becoming a Financial Adviser in 2017, Rob spent 5 years working for the Federal Government’s Department of Health resolving complaints and compliance queries regarding federally funded Aged Care Providers. With his rare background in the Aged Care Sector, Rob is uniquely placed to guide those requiring care as well as providing expert financial advice on the structuring of assets as well as assessing income requirements.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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Comments1
"It’s an informative article "
Rennie 11:30 on 16 Jan 25