A guide to aged care

Key takeaways

• There are generally five steps to follow when it comes to planning for aged care including getting your relative’s care needs assessed and finding an aged care home
• Contrary to what many people believe, you don’t have to sell the family home to pay for aged care, as facilities must offer lump sum, daily, or combined payment options
• Even if your relative is not getting the Age Pension now, they may qualify after paying a lump sum for their accommodation.

Moving into residential aged care can be an uncertain and overwhelming experience for everyone involved.

On top of the personal and emotional challenges, there are a number of important decisions to make including which facility is most suitable for your loved one, what fees will they be required to pay and what to do with the family home.

In this article, we outline the steps to helping your relative enter aged care as well as the fees that may apply. We also address some of the key things to consider when it comes to the family home.

Steps to entering aged care

There are generally five steps to follow when it comes to planning for residential aged care.

Step 1 – Get care needs assessed

Before your relative can move into a residential aged care facility, they will need to have their lifestyle and health needs assessed by an Aged Care Assessment Team (ACAT) member.

ACAT members are usually doctors, nurses and social workers who specialise in aged care. They will ask a series of questions to determine whether your relative requires full time residential aged care or another type of care.

The assessment is free and can be done at home, a health centre or hospital.

To find your nearest ACAT visit the Government’s My Aged Care website or call 1800 200 422.

Step 2 – Find an aged care home

A list of aged care homes is available on My Aged Care website. An ACAT member can also assist in finding a suitable aged care home in your area. Local Government Departments or third party placement companies may also be able to assist in locating an appropriate facility.

All facilities are different, so consider visiting a few to determine which is the best for your relative’s needs. Not all facilities will have vacancies, but it’s worth asking whether you can be placed on a waitlist.

Step 3 – Work out the costs

While some aged care costs are generally partly funded by the Government, your relative may need to pay a number of fees, some of which are determined by their income and assets.

These fees may include:

Step 4 – Apply for a residence

To apply for an aged care facility, you will need to complete a specific form and decide if you want to disclose your relative’s income and assets.

You aren’t required to provide this information to the facility, but if you don’t, your relative won’t qualify for government subsidies, meaning they will have to pay the full cost of care.

If you choose to disclose their financial information, you can send it directly to Centrelink who will determine the fees. Depending on your relative’s situation, you may need to fill out a specific form if they receive income support, for example.

Centrelink will then inform you and the facility of the fees, without sharing your personal financial details with the facility.

Step 5 – Move in

Just before your relative moves in, you will be provided with an Accommodation Agreement. This is a legal document which sets out the terms of their residency, their rights and responsibilities, and the rights and responsibilities of the aged care facility.

You will need to inform the aged care facility within 28 days of your relative entering care, whether you will pay a refundable lump sum, daily payments, or a combination of part lump sum and daily payments for their accommodation.

What to do with the family home

When your relative moves into aged care, some important decisions may need to be made regarding their home.

Selling the property

Contrary to what many people believe, you don’t have to sell the family home to pay for aged care, as facilities must offer lump sum, daily, or combined payment options. Seek professional financial advice if you lack sufficient funds as there may be ways around it.

If the property has always been your relative’s principal place of residence, it is generally exempt from CGT when sold; if retained and not rented, it remains CGT exempt indefinitely, but if rented for more than six years continuously, CGT may apply if it is sold.

Renting the property

Renting your relative’s home can provide income to help with aged care costs, but it may require preparation expenses, a trusted person to manage it, and your relative could pay income tax on the rent.

Social security entitlements

Any decisions you make regarding the main residence could impact your relative’s current or potential social security entitlements.

Means test care fee

Their property will not be assessed by Centrelink for the monthly aged care means-test if certain eligible people, such as:

• your relative’s partner,
• their immediate family member who has lived there for at least five years and receives government support, or
• their carer who has lived there for at least two years and receives government support

continue to live there.

If none of these people occupy the home when the monthly means test is applied, a portion of its value will be included in your relative’s assessable assets. Rental income (after deductions) is always assessed for the income test.

If you sell the home, the sale proceeds will generally be assessable under the aged care means test rules.

Age Pension entitlements

When your relative moves into aged care, it’s important to notify Centrelink so they can update their benefits, determine whether your relative is eligible for accommodation subsidies and calculate their means-tested care fee.

Even if they’re not getting the Age Pension now, they may qualify after paying a refundable lump sum for their accommodation, as this payment won’t be counted for the social security means test, potentially making them eligible for more benefits.

If they are part of a couple, and one or both of them moves into care, they may get higher Age Pension payments too because they’ll each be eligible for the single rate pension based on their combined assets and income. Talk to a financial adviser for more details.

The information in this article is current as at June 2024 and may be subject to change.

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