When it comes to making aged care decisions for someone you love, there are so many things to consider, and making the wrong choice could have a big impact on their financial future.

That’s why it’s a good idea to have a plan in place, and seek help from a qualified financial adviser who specialises in aged care. They can help you understand how decisions will impact on your relative’s financial position, and take care of the paperwork.

A financial adviser will help you make decisions around:

• the options you have to fund an accommodation bond where one is payable
• funding the daily care fees
• how you can achieve an optimal mix between bond, daily care fees and income-tested fees
• whether you should sell the family home or rent it out
• the impact on Centrelink entitlements
• making sure the money lasts and cash flow

Aged Care Accommodation Overview

There are two types of Government subsidised aged care accommodation:

1. Low level care (hostels) and high level care (nursing homes) referred to as ‘aged care accommodation’; and
2. Otherwise there is also a category of accommodation for older people referred to as ‘special residences’ - technically these are not ‘aged care accommodation’ as they do not provide formal care and do not receive government subsidies. These include Retirement Villages and Granny Flat arrangements.

Aged Care Accommodation - Hostels and Nursing Homes

Hostels and nursing homes are classified as aged care accommodation as they receive a government subsidy and provide formal care to their residents.

The difference between hostels and nursing homes is in the level of care required by their residents. Hostel residents require a lower level of care, whereas nursing home residents require a higher level of care.

Prior to entering a hostel or nursing home, the individual’s circumstances must be reviewed by an Age Care Assessment Team (ACAT) to determine the level of care required.

Aged Care Accommodation - Retirement Villages

A retirement village is a housing development designed for people aged 55 and over. There are two general levels of accommodation available:

1. Self-care units for those who are independent and healthy.

2. Serviced units for those requiring assistance.

The level of accommodation, facilities and services available may vary considerably between different villages. Some retirement villages may also offer hostel and nursing home accommodation on the same site, but not necessarily on a preferential basis.

There are several different types of ownership structures for retirement villages and the terms of occupancy and ownership are set out in individual contracts which will differ between facilities. Retirement Villages will typically withold a substantial portion of the sale price when you leave, so it is important to understand the contract terms before you sign up.

Retirement villages are not technically considered ‘aged care accommodation’ as they may not provide formal care and do not receive government subsidies. Talk to a financial adviser to determine whether this is a good option for you.

Aged Care Accommodation - Low Level Care Fees

Residents of low level care (hostels) are required to pay a daily care fee and may also be required to pay an income tested fee, if their Centrelink assessable income exceeds a threshold.

The daily care fee is paid by all residents in low care and high care.

The income tested fee may be payable when a resident becomes permanent in either low care or high care, depending on their Centrelink assessable income. Residents receiving the full Age Pension do not pay this fee.

Talk to a financial adviser to determine what fees you could expect to pay, how you plan to fund them and how this will impact on your financial position.

Accommodation Bonds

An accommodation bond is a lump sum paid by all people entering a low level care facility or an extra service nursing home. It is effectively an interest-free loan to the facility to fund construction, renovations and other services provided to residents. The bond is Commonwealth Government guaranteed and is returned, less the retention amount, within 14 days of the resident leaving the facility or grant of probate.

Bonds vary from facility to facility. Hostels with better facilities in more popular locations will tend to charge a higher Bond. There is no maximum level of Bond that a facility may require, but intending residents must be left with a government regulated minimum amount of assets following payment of the Bond.

An accommodation bond is exempt from both the income and assets tests so the amount paid can have a huge impact on your Centrelink benefits. There are also different strategies available to maximise the hostel resident’s financial situation. Talk to a financial adviser to help you negotiate the right bond to put you in the best financial position.

Aged Care Accommodation - Granny Flat Interests

While the traditional view of a granny flat is a self-contained section of a house, it may cover any arrangement whereby one person gives another person cash and/or property in return for the right to live in that property for life.

There are different ways in which a granny flat interest can be created. For example, a person may:

• transfer the legal title in their home to another person, usually a relative, in exchange for the right to reside in the property,
• fund the construction of accommodation on another’s person’s property in exchange for the right to reside in the property,
• provide part or all the purchase price of a property that will be registered in another person’s name, in exchange for the right to live in the property, or
• pay a 'reasonable' amount to a person in exchange for the right to reside in a property. The person may use some (or all) of the money to improve the property but there is no requirement to do so.

Granny Flats are not technically considered ‘aged care accommodation” as they do not constitute formal care and do not receive government subsidies. The amount that you pay to establish a Granny Flat interest may be assessed by Centrelink under a 'Reasonable Value Test' and will also determine your Centrelink homeowner status which may affect your age pension or other entitlements. Talk to a financial adviser to determine whether this is a good option for you.

Aged Care Accommodation - Centrelink Treatment of the Family Home for Low Level and High Level Care Residents

If the family home is retained after moving into an aged care facility, it is exempt from the Centrelink assets test for at least two years but this exemption may be longer in certain circumstances.

During this two-year period the resident will be treated as a home owner, and any rent received will count under the income test (exceptions may apply). If the individual remains in the hostel or nursing home at the end of the two-year exemption period, then they are considered to be a non-homeowner, and the market value of the family home counts as an asset.

Talk to a financial adviser to determine whether keeping the family home is the right option for you and what strategies may be available to maximise your benefits.

Aged Care Accommodation Bonds Payable by Low Level And High Level Care Residents

Residents entering low level care (hostels) may be asked to pay an accommodation bond. While high level care (nursing home) residents do not normally pay an accommodation bond, residents entering ‘extra service’ nursing homes may be asked to pay an accommodation bond. The bond is effectively an interest free loan which is used by the facility to fund capital works and improve the range and quality of services provided.

Aged Care Accommodation - High Level Care Fees

Residents of high-level care (nursing homes) are required to pay:

• a basic daily care fee,
• an income tested fee, if their Centrelink assessable income exceeds a threshold, and
• an accommodation charge, unless they paid an accommodation bond to enter an ‘extra service’ nursing home.

Talk to a financial adviser to determine what fees you could expect to pay, how you plan to fund them and how this will impact on your financial position.

Aged Care Accommodation - Sale Leaseback Residences

A sale leaseback residence is an arrangement under which a person sells their home but continues to live there for a set period, often for life. Payment for the home consists of an ‘initial payment’ and a ‘deferred payment’. The arrangement allows home owners to access funds for living costs without having to move out of their homes. Note that a sale leaseback residence is different from a reverse mortgage. These can also have Centrelink implications so it is important to speak to an experienced adviser to ensure that you maximise your entitlements.

Accommodation Bonds

Residents entering low level care (hostels) may be asked to pay an accommodation bond. While high level care (nursing home) residents do not normally pay an accommodation bond, residents entering ‘extra service’ nursing homes may be asked to pay an accommodation bond. The bond is effectively an interest free loan which is used by the facility to fund capital works and improve the range and quality of services provided.

Low Level Fees

Residents of low level care (hostels) are required to pay a daily care fee and may also be required to pay an income tested fee, if their Centrelink assessable income exceeds a threshold

The daily care fee is paid by all residents in low care and high care adjusted twice a year in line with movements in the single rate of Age Pension. The income tested fee may be payable when a resident becomes permanent in either low care or high care, depending on their Centrelink assessable income.

Talk to a financial adviser to determine what fees you could expect to pay, how you plan to fund them and how this will impact on your financial position.

Granny Flat

While the traditional view of a granny flat is a self contained section of a house, it may cover any arrangement whereby one person gives another person cash and/or property in return for the right to live in that property for life.

Granny Flats are not technically considered ‘aged care accommodation” as they do not formal care and do not receive government subsidies. Talk to a financial adviser to determine whether this is a good option for you.

Centrelink

Different aged care arrangements have different impacts on your Age Pension and other Centrelink entitlements, so talk to a financial adviser before making any decisions. A financial adviser can help you maximise your overall financial position, taking into account your family circumstances and living arrangements, your assets, cash flow and any impact on Centrelink entitlements.