This is why your financial future matters… 18



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The cost of aged care services in Australia is rising, with both residential and community (in-home) care increasingly shifting to a “user pays” model. Are you prepared to cover your bill when the time comes?

Unpopular budgets cuts make for a popular discussion point at the moment and proposed cuts of $2.5bn to aged care funding for an aging population has caused significant outrage. Australians are becoming more aware of the expense of aged care services however despite the ongoing discussion, few are really prepared for the emotional and financial considerations and impact on costs. Do you know how you will pay for your aged care bill?

Entering a residential aged care facility or accessing in-home aged care services is commonplace however complacency can often hinder essential planning for retirees.

To make the right choice, it is important to consider:

  • the availability of the type of care you want;
  • affordability of care;
  • the impact on any pension entitlement;
  • tax consequences; and
  • the impact on plans for your estate.


How will changes to aged care legislation impact on costs?

From 1 July 2014, new age care legislation came into force which will result in higher costs to access support services. Reforms include:

  • Assets and income will become the basis of new means testing for residential accommodation and care. Annual indexed contributions are capped at $25,000, with $60,000 over a lifetime.
  • The distinction between low care and high care has been removed.
  • 85% of the basic single person Age Pension rate will form payment of a basic daily fee to cover costs such as laundry, electricity and meals for each resident. Optional services such as extra leisure activities or larger rooms will incur additional fees.
  • Residential care entry fees are calculated as a fully refundable lump sum with no retention amount. Fees can be paid as a refundable accommodation deposit (RAD), daily accommodation payment (DAP), or a combination of the two.
  • Up to 17.5% of the single basic Age Pension (plus an income-tested fee) will form payment of a basic daily fee for home care recipients. This is capped at $5,000 or $10,000 annually (depending on income), with a lifetime cap of $60,000 (indexed).

You may still feel young at heart but retired Australians need to confront the reality of aged care sooner rather than later so we can be prepared without financial strains. Tell us – do you feel prepared?


This article has been sponsored by MLC. IT provides, what we feel, are valuable insights to help you make informed financial decisions. For more information click here.


Important information and disclaimer

This article is intended to provide general information only and has been prepared by MLC Limited ABN 90 000 000 402 (AFSL number 230694) without taking into account any particular person’s objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision. 

Katie Whiffen

Portfolio Specialist Manager, Retirement Solutions. Katie is responsible for developing and implementing insights into the issues, risks and opportunities for building a retirement philosophy and constructing retirement focussed portfolios. Prior to joining MLC, Katie was Research and Product Development Manager at Fidelity, Director of AMP Lending Services and Head of Research and Financial Planning at Hillross. Katie holds a Bachelor of Economics, Graduate Diploma in Applied Finance and Investment, and is a Graduate of the Australian Institute of Company Directors.

  1. Being expected to pay such high entry and management fees, one wonders why how people with out assets can face aging?

    There must be a better way, with mutual care between members of a mutually owned and operated planned community with friends. This we can call it a Living Village, not a dying village.

    See: or FB/Living Villages Australia
    Both are developing sites so please be patient.

    John Waters
    0409 646 993

  2. How can you prepare when they keep shifting the goal posts!We were also told at one aged care facility that it would cost $120,000 to get in!

  3. And I mean subsidising the rich non taxpaying corporations! Not people who have worked and paid tax all their lives and deserve to be helped to live well, moderately!

    1 REPLY
    • I agree with you Lesley,
      If the government needs to raise extra money, why not make the large corporations the super wealthy pay their fair share first. And what about all these trust accounts the very wealthy have? Just because they can afford to pay for clever lawyers they can avoid paying the correct tax like us mere mortals. We worked and saved for our superannuation and only get a miserly amount of social security pension, enough to get the benefits and perhaps a few loaves of bread a week.

  4. some people may call me a grasshopper, but i do not subscribe to this future that the SYSTEM has planned for me. i have no intention of being caught up in the hospital or nursing home roundabout. I treat all that ails me with raw cannabis and cannabis medicine and i have total faith in this treatment because keeps me healthy. I saw my dad with a saucer full of pills to swallow with his morning coffee every day and he used to say i hope they all know what they are supposed to be doing …. not for me! Aged care and health budgets could be drastically reduced if raw cannabis were introduced into everyone’s diet – it has been shown in science based research to be incredibly preventative and curative for many common ailments including chronic pain, parkinsons, dementia, copd, and even cancer. it is a SAFE anti inflammatory and WHEN IT IS COLD PRESSED it has none of the properties that get you high … the govt needs to invest more into preventative measures that would in turn substantially reduce the need for such wasted money on the PBS health budget and impact on the aging population

    7 REPLY
    • I am spreading the word Bronwen 🙂 every chance i get… i belong to a Medical Cannabis Users Association on f/b – 3600 members in 6 months = other people agree the benefits of legalizing cannabis for everyone to grow would solve many more problems than it would create …. (ps a great percentage of the people in that group are people middle aged or older)

    • You cant have it ! its still “illegal” .BUT it would work really well for you. People who use it now, do so at risk of prosecution (but most who can prove medical use get off) you can help make it legal by joining with the rest of us in pummeling the pollies with emails/ phone calls and visits and using a collective voice to get them to listen .. especially with election coming up in qld and nsw early next year…

    • You dont have to smoke it David to get the benefits. There are many ways to administer it as medicine. It is made into oil by herbal extraction and put into capsules or made into suppositories or into topical creams or inhaled using a vaporisor (no smoke) good if you got lung cancer … It is still used by a great many people in the arts because of its ability to enhance creativity …. this is one of natures miracle plants … and the medicinal value of it is finally being recognised

  5. Beware if the Governments Aged Care Agenda.Find an advisor/ lawyer/ accountant well versed in the changes from July 1st, 2014 before making any decision. Remembering the govt will adjust the goal posts to suit their budget ,not yours. Shameful …..the other question is how are facilities going to staff these institutions when they pay a pittance.

  6. I recon the only thing that started when I turned 60 was the grade of the hill I’m falling down!

  7. Having worked in aged care and disabilities for the last twenty years I have been acutely aware of the rising costs of aged care etc. We really need to consider raising the GST no matter how painful and considering alternative forms of medicine. Some people thrive in nursing homes and others exist and some just hate it-what a shame we can’t have alternatives because it will become a huge problem, especially with a conservative Govt.

  8. Any wonder the NZ State superannuation fund just bought a 50% share in RetireAustralia the largest privately owned operator of retirement villages in Australia, securing the financial futures of NZ pensioners. Whilst on the other hand our financial future in Australia is being eroded by the Abbott government and big corporations.

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