As Australians navigate the complexities of the aged care system, understanding the financial implications is crucial – and the Aged Care Means Test plays a pivotal role in determining the costs of many services. Understandably, those seeking in-home care or entering aged care facilities want to ensure they are optimising their financial position and maximising their benefits, so in this article we’ll explore the aged care means test, how the family home is assessed, and how you and your family can potentially mitigate the impact of the test.
What is the Aged Care Means Test?
The Aged Care Means Test is a financial assessment conducted by the Australian Government to ascertain the level of government support an individual is eligible for when entering aged care. It evaluates income and assets, including the family home, to determine the fees that the resident will contribute towards their care. The primary goal of the test is to ensure that the cost of aged care is shared fairly between the Australian government and those who can afford to contribute to their care. It’s a comprehensive assessment that considers various financial aspects to determine an individual’s capacity to pay.
Assessing the Family Home
The family home, often an individual’s most significant asset, is considered in the means test, but with certain caps and conditions:
- Value Cap: The value of the home is capped at a certain amount (indexed periodically) when calculating the resident’s assets. This means that any value above the cap is disregarded in the means test.
- Protected Person: If a spouse, dependent child, or other protected person continues to live in the home, its value is generally exempt from the means test.
- Rental Income: If you decide to rent out the family home while in care, the income may be considered in the means test and can affect pension eligibility.
Understanding how the family home is assessed is crucial for effective aged care financial planning. If the family home is deemed not to be exempt from the means test, its value can affect the amount a resident might be asked to pay as a Refundable Accommodation Deposit (RAD) a lump-sum payment for accommodation in aged care. Residents not paying a RAD might pay a Daily Accommodation Payment (DAP), calculated based on the RAD amount and prevailing interest rates. The assessment of the home can also influence the overall means-tested care fees, which cover daily care costs.
Mitigating the Impact of the Aged Care Means Test
There are a few steps that you and your loved ones can take to potentially reduce the financial impact of the aged care means test, particularly as it relates to the family home. The timing of selling or renting the home can significantly impact the means test and pension eligibility. For instance, selling the home can increase your assessable assets and increase your contribution obligations – yet on the other hand, renting it out may provide income to support your aged care costs, but that income will be assessed.
Financial products such as reverse mortgages, annuities, and income streams may help families meet aged care costs while optimising pension benefits and minimising fees. Dan Clarke, financial adviser and Head of Aged Care at Priority Advisory Group, says:
“because we specialise in aged care, we provide tailored advice, considering personal circumstances and navigating complex rules around the means test and overall aged care funding. Families I speak to are often confused and don’t want to make a misstep when there’s so much st stake.”
Often, professional advice and a comprehensive plan is the key to optimising aged care outcomes and mitigating the impact of the means test.
How can Priority Advisory Group Assist?
Our Aged Care team can help you and your loved ones navigate the complex Australian aged care system, giving you confidence through clarity. We’ll help you understand the financial impact of Aged Care Services and associated fees on things like Centrelink payments, your desired lifestyle, and your legacy aspirations. If you’re in need of support or advice, please reach out to the team on 1300 349 188 or contact us via our website.
The Australian Government has provided additional resources and information regarding the means test here: Income and means assessments | My Aged Care