Understanding nursing home costs can be challenging. When it comes to finances, there can be stress involved and it can take a while to work through everything that is required. We have looked at this topic before in our 7 Frequently Asked Questions About Aged Care Fees. The below information delves a bit deeper into nursing home costs and the fees associated with aged care.
Although Aged Care Decisions are not a financial advice service, we have tried to simplify the information for you so that you can work out what you MAY be required to pay regarding aged care expenses.
We do recommend seeking professional financial advice where greater understanding is needed.
Income and Assets Assessment
What is an Income and Assets Assessment?
Once you have completed the Aged Care Assessment via My Aged Care, the second step is to complete the ‘Income and Assets Assessment’ via Centrelink or the Department of Veteran Affairs (DVA).
This assessment will help determine how much you will need to pay for aged care services including: home care, respite and nursing homes and how much the Commonwealth government will contribute.
The Income and Assets Assessment is the second vital step in the aged care entry process for most families. Detailed financial information is provided through a 31-page form submitted to Centrelink or the Department of Veterans Affairs (DVA).
The outcome of this assessment should be available prior to someone entering permanent residential aged care. If this assessment is not completed prior to entry the person receiving care may be charged the highest level of fees.
** Note: An Income and Assets Assessment is not required for respite or transition care.
Why is the Income and Assets Assessment required?
The assets and income of a potential nursing home resident are assessed to determine the level of fees and charges that will be charged to the resident and how much the Commonwealth will contribute. If this financial information is not provided to Centrelink, an aged care resident may be required to pay the highest level of fees and charges.
However, those who receive an Age Pension and do not own a home, do not have to complete any Centrelink forms.
Checklist of information required:
- Details of existing Centrelink / DVA payments;
- Details of existing primary residence, including mortgage details and valuation;
- Details of income payments (pension, annuities, business income, trust dividends, investment property income, rental income, share income);
- Details of non-primary residence assets (e.g. bank accounts, savings accounts, superannuation, cars, boats, caravans, annuities, stocks, bonds, shares, investment properties, gifts, etc);
• Details of liabilities (e.g. credit cards, personal loans, outstanding medical bills, outstanding household bills, etc); and
- Details of carer or family members – particularly those who provide carer services or live in the primary residence.
How can you organise the Income and Assets Assessment?
Aged Care Decisions cannot organise an Income and Assets Assessment on your behalf. You will need to contact Centrelink by phone or their website to organise this assessment.
- The Residential Aged Care Calculation of your cost of care form (SA457 form) is to be filled out by those who are NOT receiving an age pension but have assets over $178,839.20.
- The Residential Aged Care Property details for Centrelink and DVA customers form (SA485 form) is to be filled out by those who are receiving the age pension and own a home.
- No form is required for those who receive an age pension and do not own a home.
Before completing the form, you should read the Information you need to know about your claim for Permanent Residential Aged Care Request for a Combined Assets and Income Assessment booklet.
The completed form will need to be filled in, signed and returned to Centrelink or to the DVA, together with all the required supporting documents.
If the form is returned prior to entering a residential care service, the initial fee notification advice will be valid for 120 days unless there is a significant change in circumstances.
How long does the process take?
Relevant documents should be compiled in the months prior to a nursing home being required. Filling out the form itself may take a few hours.
The form must be submitted to a Centrelink office or the DVA, along with copies of required documentation. The results of the assets and income assessment will typically be sent to the potential resident within 4-6 weeks after submitting the form to Centrelink.
Selling the family home or not to cover nursing home costs?
Selling the family home to cover nursing home costs is a decision with a significant financial impact. The decision will impact pension eligibility, assessed assets and the means-tested care fee.
In general, a potential resident will be liable to pay an out-of-pocket accommodation payment if their assets are above $178,839.20. This asset threshold will include the former family home if a spouse, family member or carer is not, or has not recently been, living in the home.
The following flow chart is a simple guide that will help you to understand the rules around the accommodation payment, and options to pay the Refundable Accommodation Deposit. The decision to sell or not sell the family home needs to be made utilising specialised financial advice.
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Understanding nursing home costs
How do I pay for a nursing home?
Depending on the results of your Income and Assets Assessment, you may be entitled to aged care services that are fully or partially funded by the government. An aged care home must meet the Aged Care Quality Standards in order to receive government subsidies.
What are the different nursing home costs?
Four types of fees potentially apply for nursing homes:
- Basic Daily Fee
- Means Tested Care Fee
- Accommodation payment
- Extra Services Fees (Additional Services Fee)
All amounts nominated below are current as of 20 March 2022 but are revised twice a year.
1. Basic daily fee
Every potential aged care resident must pay the basic daily fee. This fee is used for covering the day-to-day livings costs of residents such as meals, heating, cleaning. The maximum daily fee which can be requested by a provider is $54.69.
2. Means-tested care fee
The amount, if any, of a means tested care fee will depend on the outcome of an Income and Assets Assessment. Generally, if assets and are above $178,839.20 or assessable annual income is above $28,974.40, a means tested care fee will apply.
If the means tested care fee is applicable, it is capped at an annual amount of $29,399.40. A lifetime cap of $70,558.66 also applies.
The former primary residence may count as an asset if a family member or carer is not, or has not, been living at the house. If the former house is included, its value is capped at $178,839.20.
3. Accommodation payment
If assessed assets are between $52,500-$178,839.20, a partial accommodation payment (called an accommodation contribution) will be required.
An incoming resident with assets above $178,839.20 will be required to make a full accommodation payment. This accommodation payment can be paid in several ways:
- Lump sum or RAD / RAC (see below)
- Daily fee or DAP / DAC (see below)
- Partial lump sum + partial daily fee – This scenario involves paying the accommodation payment partially with a lump sum, and partially as a daily fee. The daily fee component (DAP/DAC) can be deducted from the lump sum component (RAD/RAC).
A resident has 30 days from placing into aged care to decide how they will pay the accommodation payment – using one of the methods above.
4. Extra / Additional Service Fees
Additional monthly fees will be charged if a resident opts for extra services, such as satellite TV, hairdressing, special therapies, etc. This fee is called different things at different facilities and can be negotiated between the potential resident and the aged care provider. The extra / additional services fees are not compulsory but must be paid if a potential resident selects a room that has extra/additional services that apply to that room.
What is a RAD?
The ‘Refundable Accommodation Deposit’ (RAD) or ‘Refundable Accommodation Contribution’ (RAC), is the amount charged when you move into residential aged care. This amount will vary from facility to facility, and from room to room. The amount you pay will usually be refunded upon exiting the aged care facility.
Aged care providers publish their maximum RAD, but a lower RAD can be negotiated one-on-one.
The average RAD across Australia is approximately $440,000 and can be as much as $1 million or more in inner city areas.
If the lump sum (RAD) method is chosen to cover the nursing home costs, a resident has 6 months to physically pay the lump sum to the provider, until which time they will be charged a DAP.
What is a DAP?
The Daily Accommodation Payment (DAP) or Daily Accommodation Charge (DAC), is charged if you do not pay the RAD.
It is calculated by applying an interest rate (currently 4.07%) to the agreed upon lump sum amount (RAD) and dividing it by 365 to make a daily fee.
Any amount paid as a DAP is not refundable upon exit.
Extra information about aged care costs – Home Care Packages
To meet everyone’s different care needs, there are four levels of Home Care Packages available. They offer different funding amounts that cover what is assigned to you based on your needs.
Level 1: Basic care needs – $9,026.45 per year
Level 2: Low care needs – $15,877.50 per year
Level 3: Intermediate care needs – $34,550.90 per year
Level 4: High care needs – $52,377.50 per year
You can discuss with your chosen service provider how to best spend your home care package funding.
How do I pay for Home Care Packages?
Depending on the results of your Income and Assets Assessment, you may be entitled to a home care package that is fully or partially funded by the government.
The Australian Government can provide subsidies for the cost of home support services.
What the government pays for and what you need to pay out of your own pocket depends on your situation. This is calculated by the Income and Assets Assessment.
If you do not complete an Aged Care Assessment or you have completed one and are not eligible for government funding, any home care that you require must be self-funded. This will usually be established before you receive care so there will not be any surprises.
Here are the three types of home care payments, you may be eligible to pay:
- Basic daily fee (up to $11.26 from 20 March 2022).
Your provider may ask you to pay a basic daily fee based on your home care package level.
- Income-tested care fee (up to $32.30 from 20 March 2022). Some people may also have to pay an income-tested care fee. Whether you pay it, and how much of it you pay, is determined through an income assessment. There are annual and lifetime limits on how much you can be asked to pay.
- Additional fees. These are any other amount you have agreed to pay for extra care and services that have not been covered by your Home Care Package.
Read more about Home Care Package costs and fees.
Estimate your fees HERE.
Respite or Transition Care
If there is a need for urgent aged care or respite, there is a different fees process involved.
An Income and Assets Assessment is not required for respite or transition care. An Aged Care Assessment from My Aged Care is still required but can be fast-tracked in some cases.
An elderly person can access up to 63 days of subsidised respite in an aged care facility per financial year if they have been assessed for respite care and have a respite care referral code.
Aged care can be complicated but the job of the aged care experts here at Aged Care Decisions is to make the process of placing a loved one into aged care less stressful and more streamlined. To discuss how we can assist, please give our team a call on 1300 775 870 or fill in this form and we will get in contact with you.