The decision to transition a parent or loved one into Aged Care is significant, and accompanied by several emotional, legal and financial complexities. The first step to making informed choices is to learn as much as you can about the Aged Care landscape before establishing a roadmap.
It’s common to have several questions about the assessment process, the steps involved in transitioning to Aged Care, associated costs and legal requirements. Getting these questions answered can feel overwhelming.
Here’s a key overview of the key steps to take when moving a loved one into Aged Care to help secure the best possible outcomes.
Understanding the Aged Care system
Australia’s aged care system offers several care options:
- Support at Home: Government-funded support for those who wish to remain in their homes. This can include assistance with daily tasks, personal care, and nursing services.
- Short-term care: Temporary residential care providing respite for carers or rehabilitation after hospitalisation.
- Aged Care homes: Residential facilities offering 24/7 care and accommodation for individuals with higher care needs.
Accessing services
The journey into aged care typically involves three steps:
- Assessment: Contact My Aged Care (1800 200 422) to arrange a comprehensive assessment of your loved ones needs. This assessment determines their eligibility for government-funded services.
- Finding a provider: Once your loved ones needs are assessed, you can search for suitable aged care providers through My Aged Care or independently. Consider factors like location, services offered, and the overall environment.
- Negotiating accommodation fees: If your loved one is entering residential care, you’ll need to negotiate the accommodation payment with the provider. Not all residents will need to pay this cost based on whether they’re eligible for government support based via means-testing.
Understanding the costs
Aged care costs can vary significantly depending on the type of care, the provider, and your loved ones’ individual circumstances. Three main cost components apply to residential care:
- Basic daily fee: Covers day-to-day services such as meals, cleaning and laundry. The fee is set at 85% of the single person rate of the basic age pension and is currently capped at $61.96 per day or $23,203.05 per year.
- Means-tested care fee: A contribution that some people pay toward the cost of their care, determined by a means assessment. This fee is income-tested and capped at $403.24 per day. The amount you pay depends on your financial situation.
- Accommodation costs: These costs cover your living expenses in the Aged Care home and are influenced by the room type and the provider. This cost is only incurred by some depending on means-testing.
For a full breakdown of fees including income and asset (such as the family home) thresholds impact these costs visit the Department of Health & Aged Care’s schedule of fees for residential and home care.
Changes on the horizon
Significant reforms are underway in the sector, with the new Aged Care Act slated for commencement on 1 July 2025. Key changes include:
- Reform of Accommodation Costs: The Refundable Accommodation Deposit (RAD) approval cap will increase from $550,000 to $750,000, allowing residents to contribute more upfront capital. Up to 10% of the RAD can be retained by the resident, offering greater financial flexibility.
- Reform of Residential Care Costs: A new means-testing system will be implemented to determine residents’ contributions towards their care.
Accommodation Payment Options
For those required to contribute towards accommodation costs, three options are available:
- Refundable Accommodation Deposit (RAD): This is a refundable lump sum payment that is refundable minus any agreed deductions when your loved one leaves the Aged Care facility. In this instance the full amount is paid for by you rather than subsidised by the government. May be suitable if you have significant capital and want to minimise ongoing costs.
- Daily Accommodation Payment (DAP): A daily payment based on a price negotiated with the provider. In this instance the full amount is paid for by you rather than subsidised by the government. May be preferable if you want to preserve capital or have limited liquid assets.
- Refundable accommodation contribution (RAC): A government subsidised lump sum payment determined by Services Australia based on a means assessment.
- Daily accommodation contribution (DAC): A government subsidised daily payment determined by Services Australia based on a means assessment.
Speak to a financial adviser to determine the best financial strategy for your loved one. The costs associated with Aged Care and how assets are means tested can be complicated, so getting advice is preferable.
Legal considerations
Moving into aged care raises various legal issues that require professional advice. These include:
- Power of Attorney: Ensuring you have appropriate legal arrangements in place for decision-making if you lose capacity.
- Guardianship: Understanding guardianship orders and their implications for Aged Care.
- Wills and Estate Planning: Updating your will to reflect your Aged Care arrangements and ensure your wishes are respected.
- Aged Care Agreements: Reviewing and understanding the legal agreements with the Aged Care provider, including the accommodation contract and any additional service agreements.
By proactively addressing the financial and legal aspects of aged care, you can navigate this significant life transition with greater confidence and peace of mind.
Kristy Hatcher is an accomplished Estate Planning Solicitor with Owen Hodge Lawyers. With an impressive reputation that stems from her extensive experience, Kristy’s credentials include a Master of Laws specialising in Wills and Estates. Kristy uses her experience and specialty to achieve outstanding results for her clients.
Main photo by cottonbro studio
