Are You Thinking Of Moving Into An Aged Care Facility?

What does it cost to live in an aged care facility? Rachel Lane is here to explain.

Whether you are considering moving into an aged care facility for yourself or a loved one, there is no doubt it can be a very stressful and emotional time. In addition to concerns about being able to get the care you need, you might be worried about what it is going to cost and whether you can afford it. The cost of aged care can vary widely depending on the location, your means, and the aged care facility you choose. Let’s look at how the costs of an aged care facility are determined, how you can work out what you will pay and where you can go to get help. The cost of an aged care facility can be broken down into: a Basic Daily Fee, your accommodation cost, your means tested care fee, any extra or additional services and your personal expenses.

Basic Daily Fee

The basic daily fee, set at 85% of the Age pension, applies to everyone living in an aged care facility. As at 20 March 2024 the Basic Daily Fee is $61.96 per day. The fee is indexed twice a year in line with increases to the Age Pension on 20 March and 20 September. Beyond the Basic Daily fee your ability to pay towards the cost of your accommodation and your care is based on a means test that includes your assets and income.

Means Test

The means test formula is: 50c per dollar of income above $32,820 per year (single) $32,196 per year (member of a couple) + 17.5% of assets between $59,500 to $201,231 + 1% of assets between $201,231 and $484,694 + 2% of assets above $484,694. If your means tested amount is $68.14 per day or less then you are a low means resident. The calculated amount is your accommodation contribution. The government may provide a supplement to the aged care facility for your accommodation and will provide funding for your care.

For example, let’s say you are a full pensioner with assessable assets of $100,000. Your means tested amount would be $19.47 per day which is your daily accommodation contribution and you don’t pay a means tested care fee. Your cost of care would be the Basic Daily Fee of $61.96 plus an accommodation contribution of either $19.47 per day or a lump sum of $84,779 (or a combination) plus any additional services and your personal expenses. If your means tested amount is more than $68.14 per day then you pay the price agreed with the aged care facility for your accommodation, the government provide funding for your care. You can pay a contribution towards this, known as a means tested care fee. Your means tested care fee is the amount above $68.14 per day.

What is Income?

Income is assessed based on Centrelink’s income test for the pension. Financial assets, which typically include bank accounts, term deposits, shares, superannuation and gifts in excess of the allowed limits are subject to deeming. Deeming is a simple set of rules that determine the amount of income you are considered to receive from your financial assets (regardless of what they actually earn). The deeming rates are 0.25% on the first $62,600 (single) or $103,800 (couple) and 2.25% on the assets above.

Income from trusts, some income streams and investment properties are included in your assessable income together with any Age Pension you receive.

What are Assets?

Assets both within Australia and overseas are assessed at the market value. Your home has a capped value of $201,231 applied unless a protected person is living there, in which case it is exempt. A protected person can include your spouse or dependent child and in some cases a carer or close relative. Any amount you pay to the aged care facility as a Refundable Accommodation Deposit or Contribution will be included in your assessable assets for the aged care means test. If you are a member of a couple your assets and income are assessed on a 50/50 basis. Your means tested care fee is capped at $33,309 per year and there is a lifetime cap across home care and residential aged care of $79,942.

Watch out for this: The means test is reviewed regularly (normally monthly), changes to your assets or income can mean a change to your fees. Low means residents can have their accommodation contribution increase and start paying
a means tested care fee. Market Price residents will have their means tested care fee adjusted. Services Australia will write to you and your aged care facility to advise of the new amount/s, they will also advise when you have reached your annual and lifetime caps.

Accommodation Costs

You can pay for your accommodation by a Lump Sum (known as a Refundable Accommodation Deposit or RAD), Daily Payment (DAP) or a combination. Aged Care homes publish their accommodation prices on their website, in their brochures and on the government’s MyAgedCare website.

The Daily Payment is based on any unpaid lump sum and calculated at a government set interest rate, as at 1 July 2024 it is 8.36%. For example, if the RAD is $500,000, the Daily Accommodation Payment would be $115p.d if you chose to pay nothing as a lump sum. But if you decided to pay $200,000 by lump sum the daily payment would be $69p.d. If you pay a RAD it will be exempt from the calculation of pension entitlement, but it is included in your assets for the aged care means test. Your RAD is guaranteed by the government and will generally be refunded to you or your estate shortly after you leave the aged care facility.

Means Tested Care Fee

Your means tested care fee is like a co-contribution between yourself and the government towards your cost of care. You don’t pay a means tested care fee if the calculated amount is less than $1 per day and you cannot pay a means tested care fee greater than the cost of your care. For example, if the funding for your care was $100 per day and your calculated means tested care fee was $130 per day you could only pay $100 per day. Your means tested care fee can be as high as $416 per day based on your means and your care needs. There is an annual cap of $33,309 and a lifetime cap across both home care and residential aged care of $79,942.

Extra or Additional Services

Many aged care facilities provide extra or additional services to their residents, these services often include a choice of meals, beer and wine at meal times, newspapers, hairdressing, massage and outings. The services may be provided as a “set menu” or you may have the choice to receive none, some or all of the services. The range of services and the fees associated with them vary widely so you should speak to the aged care facility to find out what their services are and how much they cost.

Personal Expenses

No matter which aged care facility you choose you need to meet the cost of your own personal expenses such as medications, clothing, birthday and Christmas presents, mobile phone, insurances etc.

You can get an estimate of your aged care costs by going to the fee estimator on the government’s MyAgedCare website. Your actual fees will be determined when
you complete the means assessment, it is a good idea to understand what the outcome of your assessment will be before you complete it and to seek specialist advice to ensure that you understand all of your options and can employ strategies to make sure that your aged care is affordable now and in the future.

Figures are current as at 1st July and will change on 20th September

Rachel Lane explains the ins and outs of retirement living and aged care like no-one else. Her ability to break down complex arrangements and explain the pros and cons is embraced by millions of readers and she frequently speaks on radio and television. As Principal of Aged Care Gurus she oversees a national network of specialist financial advisers. Rachel holds a Masters in Financial Planning and has written several books including the best seller “Aged Care, Who Cares?” and “Downsizing Made Simple”