Why you need to think about home care before you downsize

Your downsizing decisions can have a range of financial effects, from the amount of money you have to invest and the amount of government pension you will receive, right through to the asset that will form part of your estate.

These decisions can also play a significant role in what you will pay towards the cost of your aged care and the choices that will be available to you, and while that may not be something that you want to think about now, it is important to know where you would stand should the need arise.

If you are going to get aged care services in your home (whether that’s an apartment, granny flat or unit within a retirement community) then you may want to look into getting a Home Care Package.

The starting point for receiving a Home Care Package is to have an Aged Care Assessment Team (normally just called ACAT) assessment. At the assessment, they will talk to you about the daily activities you are able to manage on your own and those that you need help and support with. They may also discuss other aged care services that might suit your needs such as respite within an aged care home or even permanent entry into an aged care home.

Based on your discussion, the ACAT may approve you for one service, for example, a Home Care Package (HCP) or they may give you approval for more than one. Don’t be concerned if you are approved for residential aged care even if you don’t wish to make that move in the short term. Think of your ACAT like a passport – if you are approved then you can access that service and the government will provide funding, but if you don’t use it that’s up to you.

If the ACAT approve you for a HCP they will designate the level of HCP you qualify for. There are four levels of packages, with level one designed to meet the lowest level of care needs, and provide the least funding and level four designed to meet the highest level of care needs and provide the greatest amount of funding.

In addition to the HCP basic subsidy, if you have particular care needs, such as dementia or cognition-related needs or you require oxygen or assistance with feeding then additional funding is provided. The amount you will pay towards your HCP will depend on the level of package you receive and your assessable income.

Everyone who receives a HCP can pay the basic daily fee, which is between $9.52 per day and $10.63 per day depending on the level of the package. This fee can be negotiated or even waived, but you will need to discuss with your HCP provider. Here is an example of the basic daily fee involved:

• Home care level 1                $9.52
• Home care level 2               $10.07
• Home care level 3               $10.35
• Home care level 4               $10.63

The formula for calculating the income-tested care fee is 50c per dollar of income above the threshold. People who receive the full Age Pension do not pay an income-tested care fee, part-pensioners won’t pay more than about $15 per day and self-funded retirees have their income-tested care fee capped at around $30 per day. In addition to the basic daily fee, people with assessable income above $27,463.80 per year for singles and $21,294 per year for a member of a couple can pay an income-tested care fee. The income-tested care fee is based on the Centrelink assessment of income, which may be quite different to your actual income or taxable income.

In addition to these caps, there is also a lifetime cap, which applies to both income-tested care fees in home care and the means-tested care fee in residential aged care. Currently, the lifetime cap is around $66,611.

While the means testing arrangements for HCP’s are only based on income, the means-testing for residential aged care is based on a combination of assets and income.

The income test is the same as for home care, that is the same thresholds apply and the income-tested amount is 50c per dollar above the threshold. When it comes to the asset test, the first $49,500 is disregarded for assets and beyond that, there are three different rates that apply.

• $49,500 – $169,079.20             17.5 per cent
• $169,079.20 – 408,237.60       1 per cent
• Above $408,237.60                   2 per cent

A protected person includes your partner, a carer who has been living in the home for at least two years who is eligible for an Australian income support payment, or a close relative who has been living in the home for at least five years who is eligible for an Australian income support payment. When a protected person is living in the home, the home is exempt from aged care means-testing. Generally speaking, your assets for aged care include your investments, personal assets (car, contents etc) and the value of your former home up to a capped amount of $169,079.20 unless a protected person lives there.

Working out your means-tested amount is a matter of adding the income-tested amount and the asset-tested amount together.

People who have a means-tested amount below $57.49 per day are classified as ‘financially disadvantaged’, or what the government calls ‘low means’. These people can have some or all of their accommodation cost funded by the government.

People whose means-tested amount is above the threshold can pay the market price for their accommodation and the amount above $57.49 per day is their means-tested care fee.