“The Australian Government subsidises a range of aged care services in Australia. Subsidies based on your care needs are paid directly to the home. If you are eligible, you are expected to contribute to the cost of your accommodation and care if you can afford to.”, myagedcare (Australian Government)
Affordability to contribute is based on a combined income & assets test, known more commonly as the means-tested care fee (MTF).
The MTF is at the opposite ends of a see-saw to your age pension payments. When your income and assets are below the limits, you’ll get more age pension and pay less MTF. If your income and assets are above the limits, your age pension will be less or none and your MTF will be more.
Although knowing the limits are useful, to effectively reduce MTF, you Must know the Concessions applicable on certain types of income and assets tested under the age pension rules. In Addition, there are more income and assets Concessions Only Available for Aged Care Residents – and did I mention that although the government has cut-off some 100% exempted assets over the past few years, there’re still other assets with concessions are still available (which I’ll mention a few lower later) Some of these concessions apply once you own eligible assets, no pre-approval is needed.
Aged Care income and assets tests
Aged care income test includes your age pension assessed income plus the age pension amount you get.
Aged care assets test includes your age pension assessed assets plus your family home (which you may have read above) – unless you meet specific conditions for exemption, plus paid Refundable Accommodation Deposit (RAD).
Now that you know most of the rules, without digging into the details, are you more confident on accessing those income and assets with concessions?
Online calculators – There are online calculators available. However, they don’t show if your age pension or aged care means-tested fee is impacted due to assessed income or assets. As such, you’ll be confused if you should be reducing income or assets. Myagedcare fee estimator is good to know fees based on your current holdings but will not show you where and how to access concessions to prune fees & grow pension.
Common mistake – Now that you know the income and assets calculation rules, what’s also important is to also know how much Cash Reserve to set aside for aged care residents. This is because most will continue running a cash flow negative. Drastic reduction of assessed income and assets may cause liquidity problems.
