industry & policy
7
Why does the government tax people in aged care?
The standard daily care fee for a resident in an aged-care
facility ($47.86 a day) is set at 85 per cent of the full Age Pension.
However, it does not cover the full care costs of the resident. The
government pays a subsidy for each resident’s care needs to make
up the shortfall. The Centrelink fee enables the government to
provide this subsidy.
a RAD, it can result in a new or increased pension entitlement.
More often, a family home is sold to fund the RAD. In this case,
while the home is excluded, the proceeds from its sale are
counted as an asset. As a result, the cash remaining after paying
the RAD can often result in a pension being reduced or lost
entirely. However, there are ways to maintain, or even increase,
one’s current entitlements.
8
11
What is the extra services fee and should I pay it?
The extra services fee, which can be as much as $120 a day,
is supposed to give the patient extra services, including more
attention and access to people like podiatrists, hairdressers, etc.
If your aged-care facility is charging an Extra Services Fee, you
should ask what services are being delivered and assess whether
or not you are receiving value for money.
9
Paying the RAD will affect my cash flow. What strategies are
there for dealing with this?
It is possible to negotiate to pay some or all of the daily fees
from the RAD. This means, of course, that less of the RAD will be
returned at the end of the care period.
10
What implications are there for my social security or
pension?
The RAD is an excluded asset for social security purposes.
Therefore, in some cases, where existing cash is used to pay for
Will I need to sell the family home to pay the RAD?
Not necessarily. Four key questions are: Do you need to
sell the home? Can you afford to keep it? What happens if you
rent it out? Will your decision have an impact on any pension
or aged-care fees? The family home is often a couple’s most
valuable asset and many advisers wrongly assume that it needs
to be sold to provide funds for RADs. The key driver is to make
sure that, like any valuable asset, the home generates a financial
return. This return takes the form of rental income and capital
growth (which RADs certainly don’t provide). The home is treated
on a concessional basis for the age pension and aged-care fees.
If a home is rented out before January 1, 2017, its value will be
excluded from the age pension assets test and the rental income
will be excluded from the income test. The value of the home is
capped at $157,987 for aged-care means testing. ■
John Rawling and Rod Horin are aged-care consultants at Joseph
Palmer & Sons (Victoria).
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