Have you ever wondered what residential aged care will cost you or your loved one? While the Australian Government helps you with the cost of your residential aged care, by providing funding to aged care homes, it also expects those who can afford it to contribute to the cost. Aged care homes charge a number of fees and charges, though you may not have to pay all of them.

The Aged Care Information Line 1800 500 853 can assist you if you have trouble understanding how the fees and charges associated with residential aged care work.

First steps

Before you make a final decision about moving into an aged care home, you may wish to check with your own financial advisers and legal representatives.

Centrelink also provides a free financial information service that may be helpful to you. To speak with a Centrelink Financial Information Service Officer, telephone 132 300 (free call).

If you are a veteran, you may also talk to the financial advisers in the Department of Veterans’ Affairs on 133 254 (free call).

What is an accommodation bond?

An accommodation bond is an amount you may be asked to pay if you enter low care or enter an extra service place.

A bond is like an interest free loan to the approved provider and, for a bond charged on or after 1 October 2011, by law must only be used for permitted uses. These permitted uses include: capital expenditure, refunding bonds, refunding debt accrued for capital expenditure and refunds, investment in particular financial products and loans for capital works or investment in particular financial products. An approved provider may operate more than one aged care home and bonds can be used for capital works at any of their aged care homes.

An approved provider is allowed to deduct monthly amounts, called retention amounts, from a bond for up to five years. The Australian Government sets the maximum retention amount. The bond balance (i.e. the bond minus retention amounts and any other allowable deductions) must be refunded to you or your estate within specified timeframes when you leave the aged care home.

How much bond will I pay?

There is no fixed amount for a bond. The amount of the bond is to be agreed between you and the approved provider. Bond sizes can vary widely between residents in an aged care home as well as between homes, even in the same locality. However, you cannot be charged a bond which would leave you with less than the minimum permissible asset value.

Accommodation bond agreements

A bond agreement is a contract between you and the approved provider about the bond and must include particular matters such
as the date or dates that the bond is due to be paid and the interest payable if the bond is paid late. These matters must be agreed to before a bond can be paid. The bond agreement may be set out in the resident agreement or it may be set out in a separate document.

Approved providers must document conditions of the bond agreement within 21 days of the resident entering aged care. Where a resident is unable to enter an agreement due to mental impairment, the agreement must be entered into within 21 days of a guardian being appointed.

Any change in the level of your assets after you have entered the home does not affect the amount of bond you agreed to pay within your bond agreement.

The Australian Government guarantees the repayment of all residents bonds if the approved provider becomes insolvent and is unable to refund bond balances.

What are the payment options?

There are a number of ways to pay a bond, including:

• a lump sum;
• periodic (fortnightly or monthly) payments; or
• a combination of lump sum and periodic payments.

If you agree to pay your bond as a lump sum, you cannot be required to pay that lump sum during the first six months following entry, although you can choose to do so.

If you do not pay your bond in full on the day of entry, interest may be charged on the amount of the bond outstanding, depending on the bond agreement. The interest rate is set at the date of entry, up to the maximum permissible interest rate.

What happens when I leave an aged care home?

If you have paid a bond on entry to low care or an extra service
place and move to another aged care home within 28 days you may:

• with the agreement of the second aged care home, transfer the bond balance to the second aged care home. In this case only the bond balance (the bond less retention and other applicable amounts) will carry over to the second aged care home; or
• have the bond balance fully refunded (the bond less retention and other applicable amounts) from the previous aged care home and (if liable) pay the daily accommodation charge in the second aged care home to receive high care.

You cannot be asked to pay a bond to the second aged care home that is higher than the amount refunded by the first aged care home, unless there is a gap of more than 28 days between leaving the first aged care home and entering the second.

If you move, the balance (if any) of the five year bond retention period will carry over to the second aged care home.

When you leave an aged care home, the bond balance must be refunded within certain timeframes, unless you agree otherwise to secure re-entry to the aged care home. Late payments of bond refunds that are not agreed to for this purpose can be reported to the Aged Care Complaints Scheme on 1800 550 552.

In cases where a resident dies, the approved provider may choose to refund the bond balance without being shown evidence of probate or letters of administration. They do, however, have a right to ask to see this documentation before refunding the bond balance. This ensures that the refund is dealt with in accordance with the resident’s wishes, including as set out in their will. It also protects the approved provider by ensuring that they can identify who is entitled to receive the refund.

Where there is a delay in refunding the bond, approved providers are required to pay interest on the bond balance at the base interest rate for the period from the day after the resident left the service to the date the refund is due. After that, approved providers are required to pay interest at the maximum permissible interest rate up to and including the date that the bond balance is refunded.

The Australian Government sets the base interest rate and the maximum permissible interest rate.

What information am I entitled to?

If an approved provider asks you to pay a bond, they must give you specific information before you enter the home. This includes:

• the amounts of bonds charged by the approved provider;
• payment options;
• retention amounts and periods of when they are charged;
• details about interest payable on late payments, and the right of the approved provider to deduct these from the bond;
• when a bond is not required or is refundable;
• refund arrangements;
• the prudential arrangements for the bond balance; and
• the requirement to be left with at least the minimum permissible asset value.

Within seven days of entering into a bond agreement, approved providers must provide you and/or your representative with:

• a copy of the bond agreement;
• a written guarantee of refund of the bond balance; and
• a written statement explaining what other information is available on request.

Residents, prospective residents or their representatives can ask for information about the approved provider of the aged care home at any time. The information they are entitled to includes, for the previous financial year:

• a summary of the permitted uses for which bonds have been used;
• information about whether the approved provider complied with the requirements for permitted uses of bonds and with the prudential requirements for bonds;
• information about the number of bond balances (if any) that were not refunded in accordance with the timeframes set by the Aged Care Act 1997. For entry contributions (payable before 1997), information about the number (if any) that were not refunded in accordance with the entry contribution agreement;
• a copy of the independent audit opinion on the approved provider’s compliance with the prudential requirements for bonds; and
• the approved provider’s most recent statement of audited accounts.

On request, the approved provider must also provide:

• a copy of your entry in the bond register – if you have already paid a bond in part or in full; and
• from 1 February 2012, a copy of their investment objectives and the asset classes they are investing in – if they are investing bonds in particular kinds of permitted financial products.

Residents, prospective residents or their representatives may request any or all of the above information. The approved provider must provide the information within seven days of the request, and the information must be correct as at the time of the request.

Within four months of the end of their financial year, approved providers must give you and/or your representative:

• a copy of your entry in the bond register; and
• a written statement explaining what other information is available on request.

What is an accommodation charge?

An accommodation charge is a daily amount you may be asked to pay when you enter high care if you have assets in excess of the minimum assets threshold. The accommodation charge is fixed from the date you enter permanent high care until you are discharged for a period greater than 28 days. You cannot be asked to pay the charge more than a month in advance.

The amount you pay as an accommodation charge must be agreed between yourself and the aged care home when you move in. However, the Australian Government sets the maximum figure you can be asked to pay. This is calculated on a sliding scale, depending on the value of your assets. In addition, you cannot be asked to pay an accommodation charge that would leave you with less than a set level of assets at the time you enter care.

The Department of Health and Ageing or the aged care home will advise the maximum amount of accommodation charge that you may be asked to pay, based on the value of your assets.

You have up to 21 days after entering a home to enter into an accommodation charge agreement.

Can I defer payment of my Accommodation Charge?

Yes. You can agree with the aged care provider to defer payment or pay it from your estate. The aged care provider is entitled to charge interest on the unpaid amount at no more than double the lowest pension deeming rate applicable at the time of entering the home.

Do I have to have an assets assessment in order to enter aged care?

It is not compulsory for everyone entering aged care to undergo an assets assessment. If you choose not to have an assets assessment, you can expect to be asked to pay an accommodation bond (to be negotiated between you and the home), or the maximum amount of accommodation charge, as applicable.

The purpose of an assets assessment is to determine whether you are eligible for assistance with your accommodation payment. The Australian Government currently subsidies the accommodation costs of residents, either partially or fully, if their assets are below the upper assets threshold.

Centrelink or DVA undertake assets testing for entry into permanent residential aged care on behalf of the Department of Health and Ageing. Centrelink undertakes all assessments except those for people who receive a means tested pension from DVA. An assets assessment can be undertaken before you enter residential aged care.

How are my assets assessed?

If you choose to have an assets assessment, you will need to complete the form ‘Request for an Assets Assessment’ and submit it to Centrelink or DVA. You can ask your ACAT member for a form or call 1800 200 422.

How are my assets treated if I have a spouse or partner?

If you have a spouse or partner, you are considered to own half of your combined assets, no matter which of you holds title to the assets. You will be asked to provide details of all assets owned by both of you.

How is the family home treated in the assets assessment?

The value of your family home is specifically excluded from your assets assessment if:

• you have a spouse, partner or dependent child still living in the family home; or
• a carer has lived in the family home with you for at least two years and is eligible for an Australian Government income support payment; or
• a close family member has lived in the family home with you for at least five years, and is eligible for an Australian Government income support payment.

The home is excluded from the assets assessment if one of the above situations applies at the date you move into the aged care home, or the date on which Centrelink or DVA make a determination on the value of your assets, whichever date occurs first.

Gifting

Assets gifted away from 10 May 2006 over $10,000 in a single financial year or $30,000 over five financial years will be included in your assets assessment. As a result, you may or may not be eligible for government assistance with your accommodation costs. If in any doubt, call Centrelink on 1800 227 475 or DVA on 13 32 54.

What effect will paying aged care fees have on my pension?

Most pensioners will continue to receive the same amount of pension when they enter an aged care home. Pensioners who are members of a couple may each receive a higher rate of pension, under the Australian Government’s ‘separated due to ill health’ provision, if one or both partners are in aged care.

If you were receiving rent assistance before you moved into care, this will most likely stop after you move into an aged care home. Instead, a supplement will be paid directly to the aged care home from the Department of Health and Ageing.

If you are receiving a Centrelink remote area allowance in addition to your pension, your residential aged care home is entitled to charge you a portion of your allowance.

If you own a home, it will not be counted as an asset for pension purposes for up to two years after you enter the aged care home. Your family home will continue to be excluded from the pension assets test if your spouse or partner continues to live there after you move into an aged care home.

If you are renting your home to tenants, and paying an accommodation charge for high-level care, the value of your home and any income derived from renting it will not affect your rate of pension.

If you pay a lump sum accommodation bond, it will not be counted as an asset for pension purposes. In addition, if you pay any part of an accommodation bond by periodic payments and you are renting out your former home, the value of your home and any rental income you earn will not affect your rate of pension for as long as you are required to make a periodic payment.

Financial Hardship

What if I can’t afford to pay?

There are financial hardship provisions for residents who have genuine difficulty in paying their aged care payments and relevant ongoing expenses. Each case is considered on an individual basis.

On application to the Department residents may apply for:

• financial assistance with their basic daily fees and income tested fees; and/or
• financial assistance with an accommodation bond or accommodation charge.

Assistance is not intended to cover circumstances where a discretionary choice has resulted in financial difficulties. For example:

• where a personal choice is made not to use an asset e.g. investments or savings;
• where money or an asset has been gifted or disposed of;
• where finances or an asset are being earmarked for inheritance purposes; and
• where a person has chosen to accept an extra service place.

If residents are married or partnered, their combined income and assets are considered, irrespective of in whose name these are held.

A person with a spouse or partner is considered to own half-share of the couple’s total income and assets.

Please note the information used in this story is based on material published on the Australian Government’s Department of Health and Ageing web site. However, it is by necessity heavily abbreviated and simplified. Please call the Aged Care Information Line to get more comprehensive information or visit:

http://www.health.gov.au/  and follow the links to aged care.

What next?

If you would like to discuss the issues raised in this Fact Sheet you may like to try:

• checking out our Services Directory to find the local services that may be able to assist you as a working carer
• contacting Carers Australia on 1800 242 636 for information, support, referral and advice about your caring role and services that can assist you. If English is not your first language and you need assistance in talking with the Centre, contact the Translating and Interpreting Service on 131450.
• subscribing to our monthly newsletter, Work 'n' Care, for regular information and support regarding the issues facing working carers.

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