FAQs About Residential Aged Care

When you move into residential care you will be asked to contribute towards the cost of your care but the government also pays a large part of the costs for most residents.

The fees may look confusing as they are divided into four categories but each category has a different purpose.

1. Accommodation Payment – Pays for your room and amenities within the aged care service – paid as a refundable lump sum or a daily fee.
2. Basic Daily Fee – A contribution towards your cost of living expenses including meals, electricity, laundry, cleaning, nursing care etc.
3. Means-tested Daily Fee – You may be asked to contribute more than the basic fee towards your care, based on your income and assets. This reduces the amount the government pays on your behalf.
4. Additional Fees – The service provider may offer you a package of additional services for an extra daily fee.

We have a full blog post for this question. Click ‘Do I need to sell my home for aged care?‘

When you move into care, you will be asked to pay for your accommodation as either a refundable lump sum (refundable accommodation deposit – RAD) or a daily “rental” payment (daily accommodation payment – DAP).

Some residents may choose to sell their home to make these payments. Other residents may choose to keep their home so that other family members can live there or so they can earn rental income.

The choice is up to you. You are not forced to sell your home.

The choice you make may impact how much you pay for your care as well as how much age pension you are eligible to receive. Paying for advice from a financial planner may help you with your decision. It is important to make sure whichever choice you make, that you have enough cash flow (or available assets) to pay your fees and meet other expenses.

If you have low levels of income and assets you might qualify as a low-means resident. The amount you pay towards your accommodation will be based on your income and assets. The government will also pay some of the cost.

As a general rule, you are only likely to qualify if you do not own your own home or if your spouse or other “protected” person will continue living in your home and you have income and assets under certain thresholds. A protected person includes carers or close family members who qualify for income support from Centrelink or Veterans’ Affairs and have already lived in your home for at least two years as a carer or five years for a close family member.

If you think you might be eligible, you will need to fill in the assessment form and send to either the Department of Human Services (DHS) or Veterans’ Affairs (DVA).

If you do qualify you should ask your chosen service provider whether a place is available for a low- means resident and check the fees that you will be asked to pay for your accommodation.

One option to pay for your accommodation is to pay the requested lump sum. This is called a refundable accommodation deposit or a RAD for short.

You can check the service provider’s website to see the maximum RAD you may be asked to pay if you accept an offer of a place.

The Federal Government guarantees the repayment of refundable accommodation deposits (RADs) which have been paid to an approved residential aged care service.

This means if the service provider goes into liquidation or faces bankruptcy and cannot afford to repay your RAD, the Government will pay you back the full amount owing. This makes your money very secure.

You should always check that the service provider is an approved service to make sure it is covered by the guarantee.

If you pay for your accommodation as a refundable accommodation deposit (RAD) you will receive this money back after you move out.

If you pass away, the RAD is repaid to your estate. The service provider will generally ask to see a copy of probate for your estate. The full RAD should be refunded to your executor within 14 days of seeing probate.

The full amount that you paid as a RAD is refunded unless you have asked the service provider to deduct any other fees from the RAD or you have unpaid fees outstanding which the provider is able to deduct from the RAD. Your accommodation agreement will explain which outstanding fees can be deducted from the RAD.

If you receive a payment from Centrelink or Veterans’ Affairs you need to update your records every time your circumstances change. This includes when you move into aged care.

How much you pay for accommodation will depend on the residential service that you choose. This is much the same as buying a house where you may pay more for a house that is bigger or in a better location or with better facilities.

You are now able to compare the cost of accommodation for all service providers on the government website www.myagedcare.gov.au.

The basic daily care fee is the same for all residents in all services because it is a flat fee set at 85% of the basic rate of single age pension (indexed every six months).

The amount you will pay for the means-tested fee depends on your income and assets, not the service you choose to live in. Department of Human Services (DHS) or Veterans’ Affairs will calculate your assessable income and assets and use a formula to work out the fee you will be asked to pay.

The fees for any extras you choose to access will vary and you can ask for a schedule of fees to decide if you wish to pay for them.

Most people find this does not become a problem.

Before accepting an offer of a place you should check that you have enough assets to pay the refundable accommodation deposit (RAD) or ongoing income to pay the daily accommodation payment (DAP) or enough to make a combination payment (part RAD / part DAP). If you have lower means you may qualify as a low-means resident and pay lower fees. Financial advice can help you to structure your finances to ensure you can continue to meet your payments.

The amount you contribute towards your ongoing care is based on your income and assets. If your income or assets reduce, your fees may also reduce or vice versa. The government has also introduced caps on the means-tested fee to limit how much you will pay. There is a daily, annual and lifetime cap.

If circumstances beyond your control do place you in financial hardship and you can’t meet your ongoing fees you can apply to the government to have fees waived or reduced.

Navigating through the financial aspects of aged care can be complicated, especially as you should take into consideration:

• How your age pension is affected?

• How to pay for your accommodation?

• What you will pay for your ongoing care?

• Whether you need to pay any tax?

• Whether you have enough cashflow to pay for your care and living expenses?

• The impact on your net wealth and your estate?