Financial Keys - A member firm of Genesys Wealth Advisers


Aged care begins at home

by Financial Keys

Major changes to aged care are underway and should be in full swing by mid 2014, with the focus on care in the home.

The Federal Government’s Living Longer Living Better reform package is aimed at encouraging older Australians to receive help in the home. Almost $1 billion will be spent over the next five years to increase the number of in-home care places by 40,000 to almost 100,000.1 The reforms are good news for retirees who require care but would prefer to continue living at home. In many cases finding the money to pay the bond for an aged care facility can be a complex task, sometimes involving the sale of the family home.

The government’s increased funding is made up of $75 million to establish a single Commonwealth Home Support Program to bring together all existing home support services and $880 million to increase the number of Home Care packages available.2 Right now, almost one in three people have to wait more than three months for home care packages.

Means-tested fee

The new Home Support Program will consolidate the following government programs into a single scheme:

  • Home and Community Care Program for Older People
  • National Respite for Carers Program
  • Day Therapy Centres Program
  • Assistance with Care and Housing for the Aged Program.

But there will be a means-tested fee for these services on top of the existing basic fee.

While it won’t cost full pensioners anything, other retirees will have to pay a fee although there will be an annual cap of $5000 for part-pensioners and $10,000 for self-funded retirees. A lifetime cap of $60,000 on care fees will also apply.3

Home care services include Meals On Wheels, transport, home modifications and maintenance. Extra funding of $41 million over five years will also be available for those suffering from dementia so they can stay in their homes for longer.

To qualify for aged care help you need to have an assessment made by an Aged Care Assessment Team. Apart from the expanded government offering, which has been generally welcomed by the aged care community, you can of course choose to pay for private care in the home. Many providers exist across Australia.

Planning ahead

Home care is not for everybody and that is where planning ahead is vital. If you plan to enter an aged care facility, then getting financial advice will be important to minimise costs and maximise your position.

Every case is different. Selecting the right facility depends on your level of assets and your level of need. Take the case of Peter who is 91 with no children and living in an aged care facility. Because the bond of $450,000 had seemed a little steep, he had chosen to make periodic payments instead of paying outright. (Interest rates on periodic payments are now at around 7.6 per cent.) It wasn’t that Peter didn’t have the money to pay for the bond, but that he thought it would reduce his income. In fact he had $930,000 sitting in his bank account, earning almost nothing in interest.

If he had sought financial advice, he might have discovered that paying the bond outright was the much smarter way to go. He could have taken the $450,000 out of his bank account, paid the bond and then invested the balance. Not only would he have saved on not having to pay the interest on the bond, but also by moving the balance to an investment he was likely to have received a much better rate of interest than from his regular bank account.

This may not be a solution for everybody, but Peter’s situation shows that you should not automatically baulk at the size of the bond without working out the repercussions of not paying. And it’s also important to remember that the bond is just that – you do get most of it back. It is basically an interest-free loan to the provider. At present the aged care provider is allowed to retain $323 a month for a maximum of five years so that when you leave the facility you receive the bond back minus the retention amount. If you live for more than five years in an establishment, the retention amount would be $323 x 60 months, which would equal $19,280. In Peter’s case about $430,000 would be returned to his estate.4

It is difficult to work out the best strategy for aged care and it’s even harder if the decision has to be made at a time of crisis. That’s why a financial adviser can help you map the road ahead. Hopefully, the new Living Longer Living Better changes will help to simplify the process.

1 ‘Living Longer living Better – Aged Care Reform Package’, April 2012, Australian Government Department of Health and Ageing, <>
2 as above, chapter 3
3 as above
4 ‘The Accommodation Bond in Residential Aged Care’, 2012, Aged Care Connect, <>


February 27, 2013
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