Ages care reforms alter provider payment structure.
The Aged Care reforms due to come into effect on 1 July 2014 will require a new approach to aged care provider payments, and advisers can play a key role in ensuring their clients, and their clients’ parents, are structuring their financial affairs in the best way, says Anna Lawton, senior manager, aged care services at Equity Trustees Limited (EQT).
The reforms come with new terminology, and new requirements, Ms Lawton says.
“Accommodation bonds will be replaced with refundable accommodation deposits (RADs) while period payments will be replaced with daily accommodation payments (DAPs)
“The biggest change from a resident’s cost point of view is that RADs will count as an asset while only the first $153,905* of a Principal Residence will be taken into account and included as an asset,” she says.
Ms Lawton provides the example of two aged care residents who face a different financial outcome, despite having essentially the same level of assets.
Resident A has a house worth $500,000 and cash assets of $200,000. Resident B sold the house for $500,000 and so now has cash assets of $700,000.
The additional cash assets acquired through selling the house results in resident B paying a MTF of $30* a day versus $5.50* a day for resident A,” Ms Lawton says.
This is because although Resident A’s home is worth $500,000, only the first $153,905* is included for asset test purposes. Resident B’s full cash value of $700,000 is included for asset test purposes.
