On 12th September, the Australian Government introduced the Aged Care Bill 2024, outlining the most significant reforms in 30 years. Most people think of “aged care” as nursing home care, but the majority of these services are delivered in people’s homes. The reforms will impact both home and residential care. While some fees may increase, aged care will remain heavily subsidised, with costs based on your financial situation to maintain affordability.
If you or a loved one may require care in the near future, it’s advisable to seek guidance to assess whether transitioning before the changes take effect could result in cost savings. Here's a brief overview of the proposed changes:
Residential Care Changes (from 1 January 2025)
Rising room prices: The market cap for Refundable Accommodation Deposits (RADs) will increase from $550,000 to $750,000.
Refundable Accommodation Deposit (RAD) Retention: Currently, if you pay a RAD as a lump sum, it is fully refundable. However, from 1 July 2025, providers will retain 2% per year, up to cap of 10% of the RAD.
Daily Accommodation Payment (DAP): If you choose to pay via daily fees instead of a lump sum, the DAP, which is currently fixed, will be indexed twice yearly at CPI from 1 July 2025. This may impact cash flow as rates increase.
Basic daily fee: This will remain set at 85% of the age pension to cover clinical care from 1 July 2025. A new hotelling supplement, up to $12.55 per day, will help cover daily costs like food, laundry, and utilities. Providers may charge extra for premium services, so it’s essential to understand what’s included and compare costs before choosing a provider.
Increased care contributions: Depending on your finances, you may need to contribute more toward care services, such as entertainment, bathing, and mobility assistance. While the government will continue covering most care costs, your contribution could increase by $10 per day. The lifetime cap will rise from $80,000 to $130,000, or four years in care, whichever occurs first.
Home assessment: No changes are planned regarding how your home is assessed for financial contribution. If a spouse or “protected person” resides in the home, it remains exempt. Otherwise, approximately $208,000 of its value (indexed) will be included in financial assessments.
Home Care Changes
Support at Home program: This new program will merge existing home care options into 10 levels of care packages, better addressing individual needs.
Higher contribution fees: While clinical care will be fully covered up to the package limit, you may need to contribute more for services such as cleaning and gardening.
Means-testing: Home care contributions will now be means-tested, factoring in both assets and income under Centrelink guidelines. Currently, only income is considered.
Impact of Changes
Higher costs will primarily affect self-funded retirees and some part-pensioners, but everyone could see increased expenses. This makes it essential to carefully choose care providers and fully understand accommodation costs. While these changes aim to simplify the system, it’s more important than ever to seek professional advice to understand how fees may evolve with your financial situation.
Planning Ahead
Planning ahead is crucial, and some decisions can feel overwhelming. If you have any questions or need assistance with aged care planning, call us at 02 4325 0884, and we’ll guide you through the process.
Sophie Doyle (AR#000470612) is a Retirement and Aged Care Specialist at Morgans Financial Limited Gosford (Morgans AFSL 235410 / ABN49 010 669 726); with a passion for assisting families to make more informed financial decisions, as they navigate their way through retirement and aged care.
