Online at http://www.financialcareservices.com.au/newsletters/vol-1-ed-2
Newsletter Volume 1 Edition 2
Sent March 2011
When self funded retirees need residential aged care
Any Australians who is ‘assessed’ as needing residential aged care may enter a Commonwealth regulated aged care hostel or nursing home. The cost of living in a Commonwealth regulated aged care facility is shared between the Commonwealth and the resident.
The notional split is that the resident pays for their accommodation, meals, cleaning, laundry and general running costs. The accommodation component is met via a prescribed level of daily Accommodation Charge or an Accommodation Bond of an amount negotiated by the individual resident or their legal representative. The other costs are met via a daily fee linked to the basic Age Pension.
The Commonwealth pays the prescribed costs for the individual resident’s ‘personal and nursing care’ less the means tested resident contribution, the “Income Tested Fee”. The Commonwealth also pays a subsidy for ‘supported residents’ who had insufficient assets to pay a reasonable Accommodation Bond or Charge. Applications for ‘supported resident’ status require full disclosure of the assets of potential resident and their partner to Centrelink.
The assessment of the individual’s Income Tested Fee is undertaken by Centrelink on behalf of the relevant Commonwealth agency. As at 1 March 2011, the maximum rate of Income Tested Fee applies to single person with an assessable income of $77,000 per annum. At current “deeming rates” a single person with financial assets of $1,725,500 would be deemed to have an income of $77,000 per annum.
Self funded retirees have a choice. One option is to submit complete details of their own and their partner’s assets and income to Centrelink resulting in an assessed rate of Income Tested Fee. The other option is to just pay the maximum rate of Income Tested Fee and maintain their privacy.
Neither of these options is attractive to a self funded retiree who has a modest income but a complex asset position. For example, the widow of the founder of a family business might be paid a regular “living allowance” which is recorded in the company accounts as a “dividend” on her shares in the company.
The family might not be able to provide a true commercial valuation of the shares. But the Centrelink Asset and Income Assessment form cannot be completed without an independent valuation of her shares in the family company.
Inclusion of the partner’s assets and income in the Centrelink declaration opens another set of challenges. Next month we will look at “Who is a partner at Centrelink?” and the impact of the “Personal Circumstances” provisions.
A few families have other problems with making income and assets declarations to Centrelink who are known to cross check client data with the ATO.
Supported Residential Services (“SRS”) is a category of ‘private hotels’ which offer full board, personal care and supervision to vulnerable residents. A typical SRS could look like an aged care hostel with a similar clientele and similar facilities and services. Some SRS have the staffing and facilities to provide nursing care but many cannot support immobile or high dependency residents.
The SRS sector is subject to some regulation by the Victorian government. But each SRS operates as a small business which determines the level of services provided to its residents and sets its own fee scale.
Thus the self funded retiree may choose to receive residential care in an SRS at an agreed fee rate without any financial or ‘care needs’ assessment by the Commonwealth. Assessing the financial aspects of residential care for self funded retirees is complex.
About Us
Clients of Financial Care Services receive impartial confidential financial advice from an actuary. Financial Care Services is an independent professional financial advisory service which holds Australian Financial Services Licence number 299570.
Clients are charged flat fees for advice and assistance; no upfront commissions are accepted in respect of clients’ investments. Home visits and out of hours appointments are available to assist client families.
For more information call Christine on 9808 0338 or visit www.financialcareservices.com.au
Financial Care Services specialises in advising seniors through life’s transitions.
Remember, referring your clients for impartial professional financial advice enhances your profile and reduces the potential for later complaints.
Christine Hopper
Fellow of Institute of Actuaries of Australia
Director and Authorised Representative
Financial Care Services
Telephone 03 9808 0338
www.financialcareservices.com.au