The decision to move into an aged care home is often a difficult one. With the loss of autonomy, and often the family home, it is an emotional time for the person moving and their family and friends.

Planning ahead is essential to maintaining control and choice and minimising stress as there are a lot of financial issues to consider. Unfortunately, there is no rule of thumb when working out how to finance residential aged care but understanding the fee structure can help to make an informed decision.

Costs

The Australian Government subsidises a range of aged care services, however, you will contribute towards the cost of care if you can afford to do so. The level and range of fees will depend on the individual’s financial situation. In residential aged care, you may need to pay one or more of the following fees:

• A basic daily fee: covers living expenses such as food, electricity, cleaning and laundry This may be the only fee some people are required to pay.
• A means-tested care fee: is an additional cost which may be payable based on an assessment of income and assets by the Department of Human
• A full or partial accommodation payment: this will depend on your assessment of income and some people will have their costs met by the Government, while others will need to pay the agreed accommodation price set out by the aged care facility.
• Fees for additional services: such as higher standard of accommodation or extra services, a larger room or wine with meals. These fees will vary from home to home.

Structuring finances

One of the major decisions faced when entering into residential aged care is whether or not you should sell your family home. The decision will depend on your individual circumstances such as the value of your home, income and other assets, and the accommodation payment required.

• Selling the family home to pay for aged care

The family home will be considered an asset unless:

• your partner or dependent child lives there
• a carer who is eligible for an income support payment has been living there for at least two years or
• a close relative who is eligible for an income support payment has been living there for at least five years

For those who retain their home but are required to pay a refundable accommodation payment, a periodic payment may be provided by the aged care provider. If you do not sell your home when entering into an aged care facility it will be exempt from the age pension assets test for two years from the date you entered into care. This two year exemption will vary if  you are or were a member of a couple at the time you moved in.

• Renting the family home to pay for aged care

From 1 January 2016, new aged care residents will have any rental income from their recently vacated home included in  their resident’s income for the purpose of calculating their means tested care fee. Rent will continue to be exempt for those people who entered residential aged care before this date and whose former home has been retained and rented out to help pay the refundable accommodation payment.