Jack and Shirley’s Aged Care Assessments

Jack and Shirley are full pensioners and have recently been assessed as requiring residential aged care. They want to remain together, and are looking for a facility that can accept both of them. The Aged Care Assessment Team (ACAT) has provided them with a number of documents to read and complete, including, the “Permanent Residential Aged Care Request for a Combined Asset and Income Assessment” form (SA457.2212)

If Centrelink already have your income details, you only need to tell them about the home you own. You can do this by filling in the Residential Aged Care Property details for Centrelink and DVA customers (SA485.2212).

House $700,000 Exempt
Cash $5,000
Investments $80,000 Including Term Deposit
Personal Effects $10,000 Including Car
Total $795,000

Remember, the formula is:

$.50 per dollar of income above $31,140.20 (Single) (20 March 2023) or $30,568.20 (Illness Separated Couple) (20 March 2023)
+ 17.5% of assets between $57,000 and $193,219.20, (20 March 2023)
+ 1% of assets between $193,219.20 and $465,657.60, (20 March 2023)
+ 2% of assets above $465,657.60. (20 March 2023)

Assessed While Both Are Living at Home

If Jack and Shirley complete the income and asset assessment today, while both are still living at home (or while one is in hospital or respite care), they would each declare that the other is still living in the home and there are assessable assets would be:
Bank accounts + Term deposit + Car + Contents = Assessable assets of $95,000

The Asset assessment would show that both Shirley and Jack have assessable assets of less than the Minimum Permissible Asset Level (MPAL) of $57,000 each. (20 March 2023)

As they are both full pensioners, their income is below the income threshold and so their liability to contribute towards the cost of their aged care accommodation and care would be assessed as $0.

While this may seem attractive, it is important to understand that when one or both enter care their income and assets would be reassessed, and this outcome wouldn't' actually be achieved (Lane & Whittaker, 2016).

Entering Care on Separate Days

If Jack and Shirley entered care on separate days, with Jack entering first and Shirley entering second, Jack’s assessable assets on entry would be considered to be less than $57,000 (because on the day he entered Shirley was still living in the family home as a protected person) and he would be classified as a low means resident. On the day Jack entered care, his daily accommodation contribution would be $0 and he wouldn’t be charged a Means Tested Care Fee (MTCF).

Jack's Assessable Assets

Bank accounts + Term deposit + Car + Contents = Assessable assets of $95,000
$95,000/2 = $47,500 each, - $48,500 = $0 (-$0) each

While it may seem that the best option is the first scenario, where neither Jack nor Shirley need to pay an accommodation payment, this may have significant adverse effects further down the track. It could, for example, limit their ability to access care, negatively impact on their future pension entitlement and restrict their options in terms of the way in which they fund their care (Lane & Whittaker, 2016).

When Shirley entered care, her assessable assets would be:
$350,000 (half the house) capped at $163,219.20 + $47,500 (half the assets outside the house) = $240,719.20 each.

Because Shirleys' assets are assessed as greater than $193,219.20 she would need to pay the Market Price RAD or DAP for her accommodation, and she would also pay a small Means Tested Care Fee of around $1.30 per day.

When Shirley enters care, Jacks' assessable assets are reassessed, this time including his previous home, because Shirley is no longer living there. His assessable assets will now be $240,719.20, the same as Shirley. Jack will still be classified as a Low Means Resident, but the amount he pays as a Daily Accommodation Contribution (DAC) and Means Tested Care Fee would be re-calculated. From the time that Shirley enters care. His daily accommodation contribution will change up to $65.49 per day (20 March 2023) and he will pay a Means Tested Care Fee of $1.30 per day.

Entering Care Together

If Jack and Shirley both entered care on the same day their assessable assets would be $350,000 (Half the House) capped at $193,219.20 + $47,500 (half the assets outside the house) = $240,719.20 each. In this case they would each need to pay the market price Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP) for their accommodation and neither would be eligible to be a low means resident.

Which is better?

In weighing up when to enter care, there are a number of factors to consider. The first and foremost is whether Jack and Shirley will get access to the care of their choice under one financial arrangement or the other. Aged care facilities need to keep a set ratio of low means resident’s and those that pay the market price. Having one person able to meet the criteria may be more attractive than having two market price payers or vice versa depending on where the facility sits with their ratios and which room Jack and Shirley chose. Beyond that, it is a case of looking at how they intend to fund the cost of care, whether the house is going to be kept or sold and the impact on their cash flow and pension entitlement of each scenario (Lane & Whittaker, 2016).

In most cases the amount a low means resident pays is less than the market price, for example the market price RAD may be $550,000 but the maximum amount (if the facility is significantly refurbished or newly built) a low means resident can pay as a lump sum Refundable Accommodation Charge (RAC) is $320,426.94 (the equivalent of $65.49 per day) (20 March 2023) so there is a saving – the greater the difference the greater the saving (Lane & Whittaker, 2016).

Lane, R., & Whittaker, N. (2016). Aged Care Who Cares? In R. L. Whittaker, Aged Care Who Cares? (pp. 106 - 109). Noel Whittaker Holdings Pty. Ltd.

Steve Jenkosky trading as Golden Age Advisory is an Authorised Representative of Synchron AFS License No. 243313.
Unless specifically indicated, the information contained in this 'Case Study' is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.