When you’re thinking about a move into an Aged Care home, you might be wondering about the financial aspects and how they will affect you. Having this information can help you make informed decisions and the earlier you know, the sooner you can focus your attention on the Aged Care homes that are within your budget.
Aged Care fees can vary – from the initial Refundable Accommodation Deposit (RAD) to ongoing Aged Care fees like the Daily Accommodation Payment (DAP) and the Means-Tested Care Fee, each element affects your overall expenses.
In this article we’ll show you a clear breakdown of the key financial components involved in Aged Care, so you’re equipped to make the right choices for your financial wellbeing, ensuring that your transition into Aged Care is smooth and as stress-free as possible.
1. Basic Daily Fee
Your Basic Daily Fee covers your day-to-day living costs, including meals, cleaning, laundry, and some utilities. The basic daily fee is set at 85% of the single person rate of the basic age pension. This fee is mandatory for all residents, regardless of their income or assets.
2. Means-Tested Care Fee
The Means-Tested Care Fee is an additional contribution towards the cost of your care, that is determined by an assessment of your income and assets. The government uses this assessment to decide how much you can afford to pay, with the fee being capped both annually and over your lifetime. Depending on your financial circumstances, you may not need to pay any Means-Tested Care Fee, or you may have to pay a reasonable regular amount. You can use the fees estimator on the government’s My Aged Care site to see what your fees may look like.
3. Accommodation Fee
The cost of your accommodation will depend on the accommodation type, location and provider. Whether you are required to pay this fee will depend on the outcome of your means test and income. The Accommodation Fee covers the cost of your room, bathroom facilities, and acces to all communal areas. It can be paid by a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two.
The RAD is a lump sum payment you can make when you move into an Aged Care Residence. As the name suggests, this Aged Care fee is refundable if you move out. If you would like to space out your costs, you can make periodic payments known as the DAP. The DAP is calculated based on the RAD amount, plus an interest rate set by the government (known as the Maximum Permissible Interest Rate, or MPIR). It’s important to understand how these payments can accumulate over time and how they compare to paying the RAD upfront, so you can make an informed choice about what suits your situation best.
4. Extra services fees
Some Aged Care homes offer extra services or higher standards of accommodation. As with any other types of accommodation, it’s important to have a range of options to choose from, and those with a touch of luxury can, of course, come with additional fees. These can include enhanced meal options, larger or more luxurious rooms, extras such as streaming services or newspaper delivery, or additional recreational activities. It’s important to clarify what’s included in these fees, so you can make a decision about whether the added benefits are worth the extra cost for you.
You can learn more about how these payments work at TriCare on our payments page.
6. Impact on pensions, government benefits, superannuation and retirement planning
Entering Aged Care can sometimes affect your eligibility for government pensions and benefits. For instance, the treatment of the RAD, your home, and other assets can influence your pension entitlements. It’s important to seek independent financial advice on how your move into Aged Care will impact your income support payments and whether you’ll need to adjust your financial strategy accordingly for areas such as pensions, superannuation and retirement planning.
7. Estate planning and inheritance
How you fund your Aged Care can have implications for your estate and the inheritance you leave behind. For example, using a significant portion of your assets to pay for a RAD might reduce the amount available for your beneficiaries. It’s important to consider how your Aged Care financial arrangements fit into your broader estate planning goals and to also seek independent financial advice on the best approach for you.
8. Financial Hardship Assistance
If paying for Aged Care places you in financial difficulty, you may be eligible for financial hardship assistance. This government program can help cover the cost of Aged Care if your assets and income aren’t enough to cover it. Understanding the eligibility criteria and application process for this assistance can provide a safety net if your financial situation changes.You can learn more about financial hardship assistance, and apply for help, on the My Aged Care website.
Still confused? It can feel like a lot to think about when you’re considering moving into Aged Care, but a chat with an independent financial advisor can help you navigate the complexities of estate planning, retirement planning and pension and benefits. Plus TriCare’s Aged Care Specialist team are happy to talk you through how charges work, and what might apply to you in your circumstances. Call us on 1300 874 2273 or make an enquiry by clicking the link below.
