The Financial Consequences of Moving Between Aged Care Facilities

The decision to move between aged care facilities is often driven by medical needs, service quality, location preferences, or family proximity. While the emotional and logistical implications of such a transition are widely acknowledged, the financial consequences of moving between aged care facilities are frequently underestimated. Transitioning from one facility to another is not simply a matter of transferring belongings and updating paperwork—it can trigger a cascade of cost implications, both overt and hidden. These consequences can impact everything from accommodation payments and means-tested fees to Centrelink entitlements and estate planning.

The Financial Consequences of Moving Between Aged Care Facilities

Exit Fees and Refundable Accommodation Deposits (RADs)

One of the most immediate financial implications of relocating is the handling of the Refundable Accommodation Deposit (RAD). Many facilities apply administration or exit fees when a resident departs, and the timing of RAD refunds can vary significantly. Although RADs are government-guaranteed, delays in repayment can affect a resident’s ability to fund a new RAD at their next facility. Coordination between facilities is essential to ensure a seamless transition. Additionally, any deductions previously agreed upon—such as daily accommodation payments (DAP) or retention amounts—may reduce the refunded amount, leaving less capital to negotiate at the new residence.

The Impact on Daily Care Fees

Daily Care Fees, typically set at 85% of the single Age Pension, remain relatively consistent across facilities. However, some providers may bundle additional services into this daily fee, creating discrepancies that surprise families after relocation. Changes in the resident’s means-tested care fee assessment—especially if financial circumstances have altered—can result in higher or lower fees. When moving, reassessments are often triggered, which may result in an increased cost burden depending on the resident’s current assets and income position.

Means-Tested Care Fee Reassessments

Upon changing facilities, Services Australia may automatically initiate a reassessment of the Means-Tested Care Fee. If financial circumstances have changed—such as a home being sold, investment income adjusted, or account balances fluctuating—this reassessment could produce markedly different outcomes. While some residents may see a reduction in fees, others may incur a significant rise. These means-tested contributions are capped annually and over a lifetime, but the transition point can reset timing and eligibility for further concessions.

Potential Loss of Accommodation Payment Discounts

Some aged care facilities offer discounts or concessions on the RAD or DAP based on specific agreements, tenure, or upfront commitments. These arrangements may not be transferable to a new facility. A resident who was previously benefiting from reduced fees due to longevity incentives or upfront pre-payments may face increased costs upon entering a new contract. It’s essential to understand that aged care contracts are not standardised—what is included in one facility may not be offered elsewhere, especially when moving from a not-for-profit to a private provider or vice versa.

Disruption to Centrelink or DVA Payments

Aged care transitions can inadvertently affect Centrelink or Department of Veterans’ Affairs (DVA) entitlements. For example, if the former home is sold to fund the new RAD, the proceeds can dramatically alter asset and income assessments. This may result in reduced Age Pension or DVA payments. Similarly, gifting arrangements made to help fund the new accommodation may trigger deprivation rules. These changes can have ongoing implications, requiring updates to financial declarations and affecting broader eligibility for concessions and health cards.

Changes in Additional and Extra Services Fees

Not all aged care facilities offer the same level of service under standard fee arrangements. Some facilities bundle higher-end amenities—like gourmet meals, beauty treatments, or cultural outings—into additional or extra service packages, which incur extra costs. These fees can significantly increase the ongoing cost of care and are generally non-negotiable. A move to a facility with mandatory extra services could add thousands of dollars annually to a resident’s cost base. Conversely, residents moving from a premium facility to a standard one may lose access to valued services unless they pay a la carte.

Estate Planning Implications

Relocating between facilities may prompt the need to revise estate planning strategies. If a RAD is refunded and a new payment is made, this may alter the size and structure of the estate. Executors may also face complications if a resident passes away shortly after relocating—especially if RAD refunds are delayed or disputes arise over contractual obligations. Testamentary trust arrangements, power of attorney permissions, and binding nominations may also need revision to reflect the new provider relationship and financial commitments.

Timing Gaps Between Facility Departure and Entry

One of the most financially precarious aspects of moving is the potential timing gap between leaving one facility and entering another. During this interim, the resident may need to pay for temporary accommodation or short-term respite care, both of which can be more expensive than permanent care options. Furthermore, if the RAD has not yet been refunded, the family may need to bridge the gap using personal funds or interim financing. This added cost, even if short-term, can stretch the financial capacity of residents and their support networks.

Taxation Considerations When Assets Are Reallocated

Selling assets—such as an investment property or shares—to fund a new RAD can trigger capital gains tax (CGT) liabilities. If the home is sold, although typically CGT-free, associated investment strategies might have tax implications. Timing the sale to coincide with the new accommodation commitment requires careful tax planning to avoid unintended tax bills. Engaging a tax adviser to coordinate the liquidation of assets with aged care entry timelines is essential to avoid overpaying the ATO.

Emotional Costs with Financial Flow-On Effects

Although intangible, the emotional toll of relocating can also lead to financial consequences. Stress-related health deterioration might increase medical or pharmaceutical expenses. Family members may need to take time off work or pay for professional transition services. Moreover, disputes over the choice of facility or the use of financial resources can fracture family harmony, leading to costly legal or mediation expenses. These emotional upheavals, while not quantifiable on a spreadsheet, often result in real-world financial implications.

Comparing Contracts and Financial Disclosure Documents

Every aged care provider is required to furnish a financial disclosure document outlining their fees and services. However, the complexity and variability of these documents make comparison a challenge. Hidden clauses around cancellation, retention, or reassessment of fees often surface only after relocation. Families should engage a financial adviser accredited in aged care to perform a clause-by-clause analysis of both the old and new contracts to ensure informed decision-making. Misreading one clause could result in thousands of dollars lost annually.

Financial Advice Before and After Transition

Before making the leap to a new aged care provider, it is essential to seek comprehensive financial advice. An accredited aged care financial adviser can model various scenarios, including RAD shortfalls, cash flow stress tests, pension eligibility outcomes, and taxation impacts. They can also review existing Wills, enduring powers of attorney, and superannuation structures to align with the new care arrangement. Post-move, an adviser can help recalibrate financial strategies to adapt to the new fee structure and identify possible avenues for cost recovery or increased entitlements.

Conclusion

Moving between aged care facilities is not merely a lifestyle change—it’s a complex financial transaction with wide-ranging implications. Each step in the transition journey—from RAD refunds and care fee reassessments to pension eligibility and estate considerations—can carry costly consequences if not carefully navigated. With the support of an accredited aged care financial adviser, residents and their families can mitigate risks, preserve entitlements, and optimise their financial standing through what is often a tumultuous time. Strategic foresight, meticulous planning, and expert guidance are critical to ensuring that a move designed to enhance quality of life doesn’t inadvertently compromise financial security.