Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: [email protected]​

Next year, the biggest aged care reforms in almost 30 years will begin. These 'once in a generation' changes will redefine aged care and who pays for it. The fundamental change is that the government will fund clinical care for everyone, regardless of means, but older Australians will pay more towards other services.

Clinical care means those services provided by a nurse or therapist; independence services include help with such things as taking medications, showering and dressing; and everyday living services cover tasks like shopping, gardening and preparing meals.

Image Credit: Shutterstock

Aged Care Guru Rachel Lane tells me that, while many people think of aged care as being in nursing homes, most services are actually delivered at home; of the $5.6 billion reform package, around $4.3 billion will go to home care.

The new Support at Home program is capped at $78,000/year. It will fund all clinical care costs, and you will pay on a sliding scale towards the other services, based on your assets and income.

Case studies

• Jill, a full pensioner with $10,000 of assets, will pay $2,467 a year (the government will pay $37,107).
• Marco, a part-pensioner with a $65,000-a-year income and $200,000 in assets, will pay $11,464 a year (the government will pay $28,110).
• Robin, a self-funded retiree with a $100,000-a-year income and assets of $500,000, will pay $16,615 a year (the government will pay $22,959).

Those moving into aged care will see the first change to their costs.

Image Credit: Shutterstock

On 1 January 2025, the cap on refundable accommodation deposits (RADs) – that is, the maximum 'market price' a home can charge without government approval – for new residents will increase from $550,000 to $750,000.

From 1 July 2025, aged care homes will also charge an exit fee of 2% of your RAD per year, for up to 5 years. So if your RAD is $750,000 and you stay for 5 years, $75,000 will be deducted when you leave.

The reforms don’t change who is eligible for support with aged care accommodation costs: people with assets above $206,039 will need to pay the market price. So if most prices go up to $750,000, there will be a $500,000 gap between what people need to pay and what they can afford. It looks as though the future of aged care will be dominated by daily accommodation payments (DAPs).

When it comes to the cost of ongoing aged care services, the government will pay for clinical care. Everyone will pay the basic daily fee (BDF), set at 85% of the age pension. Beyond this you will pay a hotelling supplement to cover services such as cleaning and laundry, a non-clinical care contribution based on your assets and income, and a higher everyday living fee if you choose to get 'extras'.

There is no change to the means testing of the family home: it is included up to a capped value of $206,039 unless a protected person lives there, in which case is exempt.

A 'no worse off' principle will protect those already receiving aged care, or eligible for a home care package but waiting for it to be delivered. This means that your costs will be the same – or less – after the reforms. If you move from home care to an aged care home after 1 July 2025, the changes to accommodation payments will apply, but you will have the choice of staying on the existing contribution arrangements or moving to the new ones. If you are already living in an aged care home, or move in before 1 July 2025, your contributions will not change while you live there.

While the message has been that 'wealthy Australians will pay more for aged care,' the government estimates that 3 in 10 full pensioners and 3 in 4 part pensioners will pay more, and it’s easy to see why. It seems that most Australians will pay more – in some cases, much more.

About the author: Noel Whittaker, AM, is the author of Wills, death & taxes made simple and numerous other books on personal finance. An international bestselling author, finance and investment expert, radio broadcaster, newspaper columnist and public speaker, Noel Whittaker is one of the world’s foremost authorities on personal finance. Connect via Twitter or email ([email protected]). You can shop his personal finance books here.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Always seek professional advice that takes into account your personal circumstances before making any financial decisions.

 

[MaggieMay1948]

Sounds pretty unaffordable to those on government pensions

 

[BellaB18]

My goodness, stay as well as we can stay home and hopefully we can all keep on managing. I may be on the wrong tram here, but it seems to me it's all about $$$$$ don't know if the care will improve.
I will be interested to read other members opinions maybe l have it all wrong.
Kind regards to all Vicki

 

[mylittletibbies]

So I take it that if you are in a position to put up $750,000 RAD, the aged care facility will not only receive the money generated by investing this amount but also keep $75,000 when you depart, along with the daily accommodation cost.
Wow, better pray we all stay healthy and die peacefully in our sleep, at home.

 

[Anthony Ellul]

I have already posted some comments before but this is basically a system that includes a wealth tax, since $206,000 plus for your home is included in your assessment for aged care and worse still they have managed a death tax( significantly and ironically prior to one’s death) because the people’s estates will have diminished by what has to be used to pay for aged care. So your children/grandchildren are also targeted but in a sneaky way. Typical of Labor Governments but now have been joined by the Liberals who have allowed it through. This is disgraceful.

 

[Anthony Ellul]

Sounds pretty unaffordable to those on government pensions

You are so right. After taking the daily fee the full pensioner has to find an additional $50 + per week for aged care at home it seems. Wow the pensioner is now also a target of this legislation. What is next.

 

[Anthony Ellul]

My goodness, stay as well as we can stay home and hopefully we can all keep on managing. I may be on the wrong tram here, but it seems to me it's all about $$$$$ don't know if the care will improve.
I will be interested to read other members opinions maybe l have it all wrong.
Kind regards to all Vicki

So I take it that if you are in a position to put up $750,000 RAD, the aged care facility will not only receive the money generated by investing this amount but also keep $75,000 when you depart, along with the daily accommodation cost.
Wow, better pray we all stay healthy and die peacefully in our sleep, at home.

Yes that is what the aim of this legislation is but not only will you lose that 2% per annum but the residual will have diminished by compounding inflation. These people live in their ivory tower and cannot envisage what struggles people are going through.

 

[mylittletibbies]

I have already posted some comments before but this is basically a system that includes a wealth tax, since $206,000 plus for your home is included in your assessment for aged care and worse still they have managed a death tax( significantly and ironically prior to one’s death) because the people’s estates will have diminished by what has to be used to pay for aged care. So your children/grandchildren are also targeted but in a sneaky way. Typical of Labor Governments but now have been joined by the Liberals who have allowed it through. This is disgraceful.

Yes, a death tax while you're still alive. Well they've been looking for a way to reintroduce death duties for a while now, but neither side is prepared to do it because it is political suicide.
So instead they come up with this sneaky solution, wrapped in a big red bow,. and think we are all stupid.
We have already payed tax on any money we have accumulated during our life time.
Aged care facilities should not be entitled to a lump sum payment, out of the RAD money. They have had the income generated from this money for the whole time a person is a resident and IMO that lump sum should be returned to the family.

 

[Anthony Ellul]

8

Yes, a death tax while you're still alive. Well they've been looking for a way to reintroduce death duties for a while now, but neither side is prepared to do it because it is political suicide.
So instead they come up with this sneaky solution, wrapped in a big red bow,. and think we are all stupid.
We have already payed tax on any money we have accumulated during our life time.
Aged care facilities should not be entitled to a lump sum payment, out of the RAD money. They have had the income generated from this money for the whole time a person is a resident and IMO that lump sum should be returned to the family.

You could not put it much better. Talk about double taxation.

 

[mylittletibbies]

8

You could not put it much better. Talk about double taxation.

My little peabrain is now working at 100kph to come up with a solution to this situation.
I worked as secretary to the Nursing Unit Manager at a nursing home years ago and I saw what goes on. Cutting corners, disgusting meals, staff working unpaid hours.
One thing I was good at in my life was my job but I was never given enough hours to complete everything I was expected to do.
The same thing with the laundry staff, the place always stunk of urine.
However when the owner of said place was flying in, in his private plane, air freshener sprayed everywhere, everything spick and span, as soon as he left, back in the old routine of cutting corners to stay in his budget. Only interested in profit.
Not all places are as bad as that one I must admit, but the people who own these places don't do it out of love for their fellow human beings,. it's all about profit, as much as possible.
I have not worked hard all my life and squirreled money away for my grandchildren's and children's future, which they are surely going to need, the way this world is going, to give it away to some greedy nursing home owner.

 

[Marilynshiels13]

Not impressed with the changes

 

[GillyH]

Sounds pretty unaffordable to those on government pensions

It is cheaper for everyone to stay living in their own home as long as possible better for your well being as well. Of course not everyone can do that.

 

[Judy ABowser]

I rely on the Centrelink to live. I only hope I pass away quitely in my sleep as I can’t afford to live now. It will be worse when the changes come in..I don’t want to be around to see it happen.

 

[Dynamo]

I have already posted some comments before but this is basically a system that includes a wealth tax, since $206,000 plus for your home is included in your assessment for aged care and worse still they have managed a death tax( significantly and ironically prior to one’s death) because the people’s estates will have diminished by what has to be used to pay for aged care. So your children/grandchildren are also targeted but in a sneaky way. Typical of Labor Governments but now have been joined by the Liberals who have allowed it through. This is disgraceful.

It sure is. We won't be able to leave financial help to our nearest and dearest

 

[GillyH]

Not impressed with the changes

The packages allowance are going up with home help. It will also be means tested more moving forward. the government can't afford it, mind you they can't afford all the bludgers on the dole! Which is where they should be making it harder for these people also.