Entering Into Aged Care With Means Not Disclosed
Written by: Samantha Butcher l Advisory Team
Did you know that Centrelink and the Department of Veteran’s Affairs (DVA) use an aged care means test assessment to determine an aged care resident’s means-tested fee as well as whether their accommodation costs are subsidised by the government?
Things that are considered assessable assets include (but are not limited to):
- Savings accounts and term deposits;
- Managed investments, loans and debentures;
- Listed shares and securities;
- Some income streams;
- Cars;
- Caravans;
- Boats and
- Superannuation.
Did you know that if you choose not to disclose your financial situation to Centrelink or the Department of Veteran’s Affairs (DVA), you will pay a means-tested fee that is equal to the full cost of the care, subject to an annual and lifetime cap?
Before we start getting into the numbers and requirements of aged care, it’s important that when the time comes to look into aged care you seek advice from a specialist financial adviser as not all financial advisers are able to give advice on aged care. Getting specialist advice on aged care can provide guidance in what can often be a very stressful time.
Canny Advisory have financial advisers who specialise in aged care and are able to work out the best way to structure your finances to be able to put you in the best position as the transition occurs.
Setting Your Financial Goals By Understanding What Fees Are Involved With Aged Care?
There are three different kinds of fees that are required to be paid when entering an aged care facility:
- Basic Daily Fee
- Accommodation
- Means Tested Care Fee
The first fee that everyone pays is the basic daily fee, which is set at 85% of the single rate of the age pension.
The second fee is the accommodation component and depending on your circumstances you may be asked to pay:
- Refundable Accommodation Contribution (RAC); or
- Daily Accommodation Payment (DAP) – or a mixture of both.
Alternatively, you may be asked to pay:
- Refundable Accommodation Deposit (RAD); or
- Daily Accommodation Payment (DAP) – or a mixture of both.
Lastly, depending on your level of income and assets, you may be asked to pay a means-tested care fee as well. This has an annual cap of $28,338.71 and a lifetime cap of $68,012.98.
Centrelink does not count the RAC or RAD as an asset and it is not deemed for income purposes. However, the aged care facility will account for it when calculating the costs mentioned above. If you are a couple and one member goes into care while the other member stays in the family home, the house is not considered an asset.
Do You Need Financial Advice for Your Means Test Assessment?
When one of our clients is entering into residential aged care, they may need to complete a form in order for Centrelink/DVA to assess their income as well as their assets. Generally, people who are non-homeowners receiving a means-tested income support payment won’t need to complete a form.
Where a form does need to be completed, the ‘SA486 – Aged Care Calculation of Your Cost Care’ form is dynamic in that it presents different questions that are based on the answers provided.
Centrelink or DVA then use the information provided to calculate their client’s means-tested amount. This amount is then used to determine:
- Whether the person who is entering into aged care will pay an accommodation contribution or an accommodation payment; and
- The amount of means-tested fee payable.
A person’s means-tested amount is the sum of an income-tested amount and an asset-tested amount.
Aged Care Facilities Payments: Accommodation Contribution -VS- Accommodation Payment
If the person’s means tested amount at their date of entry into an aged care facility is less than the maximum accommodation supplement of $59.49 per day, they are considered a ‘low means resident’ and the Government subsidises their accommodation costs. The client may pay an accommodation contribution.
Where a person’s means-tested amount at their date of entry into aged care is at least $59.49 per day, they will be asked to pay an accommodation payment (the advertised price of the facility).
Means Tested Fee
A person’s daily means-tested fee payable for their care is the lesser of:
- The cost of their care, and
- Their means-tested amount minus the maximum accommodation supplement (currently $59.49 per day).
However, a person’s means-tested care fee is also subject to two caps:
- An annual cap (currently $28,792.36)
- A lifetime cap (currently $69,101.75)
Residents will pay their calculated daily means-tested fee per day until the annual/lifetime cap is reached, and will then pay no daily means-tested fee for the remainder of the year.
Cost of Care Explained
A person’s cost of care is determined by the assessment of the person under a toll that is called the Aged Care Funding Instrument (ACFI). The ACFI is 12 questions about aged care needs, divided into three broad areas:
- Activities of daily living
- Behaviour
- Complex health care
Based on the answers, each of these areas is allocated a funding amount determined by whether their funding needs in that area are high, medium, low or nil. Supplements may also apply including for oxygen and enteral feeding.
The highest supplement for someone assessed as high across all three areas is currently $259.26 per day, including additional amounts for oxygen and enteral feeding.
Are There Any Exclusion Limitations If Means Are Not Disclosed?
It is not compulsory for a client to provide details about their assets to Centrelink or to DVA. Where a person chooses not to disclose their means, Centrelink/DVA will give them a ‘means not disclosed’ status.
A person with a means not disclosed status:
- Must pay an accommodation payment rather than an accommodation contribution; and
- Must pay the full daily cost of care (until the annual cap is reached each year, or the lifetime cape is reached).
There may be a range of reasons for a client not wanting to disclose financial information to Centrelink/DVA, including:
- Privacy concerns;
- The time involved in completing the form;
- The complexity of their financial situation; and
- Failing to see any financial benefit to do so.
People with limited income and assets can benefit significantly by disclosing their assets to Centrelink/DVA, as their means-tested fee (based on their means-tested amount less the maximum accommodation supplement) is generally far less than the cost of care.
Conversely, for clients with substantial assets whose means-tested fee would trigger an annual cap each year and who would pay an accommodation payment (assuming Centrelink/DVA had their financial information), there may be less (or no) benefit in disclosing their means.
However, there are two potential consequences of not disclosing their means:
- The person may pay a higher daily fee (full cost of care) from the start of each year until their annual cap or lifetime cap is reached, compared to the calculated amount if they submitted their financial information. The result is that they may reach the annual or lifetime cap sooner potentially affecting their cash flow; or
- Their total means-tested fees in any year will be the same (assuming the annual cap is reached).
It is important to note that for people with assets so substantial that the calculation of their means-tested amount (less maximum accommodation supplement) would be equal to or greater than their cost of care, there is no benefit in disclosing their means.
Speak to The Financial Professions When Deciding if Means Not Disclosed: Impact -VS- No Impact
Means Not Disclosed Leads to Impacts
Let’s put it into an example when a person’s means are not disclosed and leads to uneven cash flow and more fees…
Raymond (single) is entering residential aged care. He requires significant care and his cost of care would be $259.26 per day.
He owns his own home and also has a number of other properties as well as a family trust. After allowing for the payment of his accommodation payment, his estimated means will be:
- Assessable assets of $2 million
- The assessable income of $80,000
However, his family (as Enduring Powers of Attorney) do not want to deal with the time and complexity of providing information about his financial situation to Centrelink.
If they provide no information and Raymond is classified as ‘means not disclosed’, in the first year he would pay a means-tested fee of $259.26 per day (cost of care) for 111 days at which point his annual fee cap of $28,792.36 is reached, then no fee for the remainder of the year.
Impact Over a Full Year
Under either scenario, Raymond’s means-tested care fee over the whole year is capped at $28,792.36. However, by providing his financial information to Centrelink, he will pay a lower daily fee ($95.02 less) for more days (64 days). His cash flow throughout the whole year is therefore relatively more even where Centrelink has assessed his means.
Impact In The Year of Death
If Raymond was to pass away part-way through a year, his means-tested fee for that year may be higher if he is classified as ‘means not disclosed’.
Assuming Raymond dies 175 days or more into the year, the means-tested fee will be the same as the annual fee cap will have been reached in both cases.
However, if Raymond dies prior to 175 days, he will have paid more if he is classified as ‘means not disclosed’. For example, if he passed away 100 days into the first year, he will have paid total means-tested fee (for the year) of:
- $25,926 if means not disclosed
- $16,424 if Centrelink had assessed his means
Means Not Disclosed Has No Impact
Dorothy (single) is entering into residential aged care. She requires significant care and her cost of care would be $259.26 per day.
She owns her own home and owns a portfolio of rural properties, a share portfolio, superannuation and a family trust. After allowing for the payment of her accommodation payment, her estimated means will be:
- Assessable assets of $3 million
- The assessable income of $130,000
Dorothy doesn’t want to bother providing information about her financial situation to Centrelink if there will be no difference in the fees that she pays.
If Dorothy did complete an ‘SA486 – Aged Care Calculation of Your Cost of Care’ form, her means-tested amount would be calculated at $347.36 per day. Dorothy’s means-tested fee is the lesser of:
- Means-tested amount less $59.49: $287.87 per day, and
- Cost of care $259.26 per day
Dorothy will therefore pay $259.26 per day for 111 days at which point her annual fee cap of $28,792.36 is reached. She would then not pay a means-tested fee for the remainder of the year.
As the fee payable by Dorothy is her cost of care, there is no benefit in providing financial information to Centrelink.
If in the future there was a change to Dorothy’s financial situation (e.g. reduction in assessable assets), she may benefit from providing her financial information to Centrelink at that time.
Financial Advisory Services with Canny Advisory for Your Aged Care Needs
Canny Advisory is able to give you specialised advice on aged care.
Where possible, the best time to get financial advice on aged care is as soon as possible. Having the time and not making rushed decisions, where possible, gives you the power to be able to make informed decisions for yourself and your loved ones.
It is important to be able to understand the process and to be able to do some research into the different aged care facilities as well as their specific offerings before making your ultimate choice. Affording the time to do this prior to having to make a decision means that you can make any necessary asset and income restructure before the transition into an aged care facility to ensure the best fee outcome.
We have a team that specialises in aged care and will continually work with you to review your individual circumstances and help you to make the best decisions for you and your loved ones. Get in touch with our team to ensure that you have an expert team beside you, every step of the way.
