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SMSF trustees will have to dig deeper to pay for their aged care
A political bipartisan approach to aged care reform has laid the groundwork for a fresh approach to this complex and costly issue that will see both those entering care and those receiving home care pay more for their services.
Although the final package exempted the family home, the Aged Care Act has established the principle that an individual’s contributions will be based on their financial position – with self-funded retirees bearing much of the burden of the new system.
With the Government and the Opposition acutely conscious of the rising cost of aged care in an ageing society – in the next 40 years, the number of Australians aged over 65 is expected to more than double, with those aged over 85 more than tripling – they agreed to a funding formula that will see the wealthiest retirees have to pay up to $13,400 a year extra for residential care.
For those opting to stay at home and receive care – and integral component of the reform package – they will have to reach deeper into their pockets and pay up to 80 per cent of everyday living costs and 50 per cent independence costs such as transport.
However, those in the aged system already will not have to make a larger contribution to the cost of their care under the no-worse-off principle.
It’s estimated the net impact of the changes will be a $930 million spend over the next four years and a saving to the budget of $12.6 billion over the next 11 years.
The reforms respond to a recommendation of the Aged Care Taskforce – it sought advice from older Australians, experts and residential aged care providers – that Australians needed to make a reasonable means-tested contribution to the cost of their care.
Luke Andrews (pictured), senior financial adviser and aged care advice specialist at Partners Wealth Group, says the changes mean it’s going to become more difficult for people to determine their co-contribution payment for home care services, particularly where most services are based around independence and everyday living and not nursing care.
“Self-funded retirees should seek expert advice as to whether they are better off contracting these services privately or through a home care package,” he says.
People considering entering residential care in the next year need to understand how the new cost structure will affect them and whether they should bring their admission forward to take advantage of the current pricing before it changes on July 1.
Andrews tells The Golden Times that because accommodation deposits will no longer be fully refundable, self-funded retirees will need to consider carefully whether to pay an accommodation deposit or the daily room rate.
“This decision will depend on the prevailing maximum permissible interest rate at the time, the returns their funds are generating and any costs or taxes associated with liquidating funds to pay a deposit such as CGT.”
Changing an aged care resident’s financial structure to pay a deposit has the potential to affect their means testing as it will impact two fees in the new model as opposed to one fee in the current system.
An integral part of the reform package is a $4.3 billion Support at Home program that is expected to assist about 1.4 million Australians over the next decade by helping them remain independent in their home and community for longer.
Due to take effect from July 1, 2025, it will accelerate a trend that has seen the number of Australians in home care increase fourfold over the past decade.
Aged Care Minister Anika Wells says the Government has heard the message from older Australians – they want support to stay in the homes and communities they love.
“Support at Home will help around 1.4 million older Australians do just that, with shorter wait times, more levels of support and funding for home modifications. The Government will pay 100 per cent of clinical care services, with people contributing towards their support services such as help with showering, gardening or meals.”
COTA Australia, an advocacy organisation for older people, has welcomed the introduction of the Age Care Act with CEO Patricia Sparrow singling out the Government’s significant focus on and investment in Support at Home as giving greater choice around ageing at home.
“The focus on Support at Home is very welcomed. This $4.3 billion investment is vital to ensuring Australians can age at home if they want to and should reduce the unacceptable time people have to wait for care at home.
‘We need a sustainable aged care system that allows older Australians can access quality care when and where they need it. We need to review the detail of the Aged Care Act in its entirety to make sure that is the case across the board, but the fact that we’ve got to the point where we can investigate that detail is fantastic.”
