The start of 2016 brings changes to the cost of Aged Care
From 1st January this year, aged care residents who elect to rent their former home in order to help fund their care costs may find themselves paying additional fees. In essence, by enacting this change, the government wants older Australians to contribute more to the cost of their residential care.
The change was legislated late in 2015. Essentially it removes the income test exemption for rental income from an aged care resident’s former home that was available for residents paying at least part of their accommodation costs through Daily Accommodation Payments (DAP) or Contribution (DAC).
Prior to 1st January, an aged care resident could rent out their home, and not have this income included in the means test that determines how much the resident will have to contribute to their cost of care.
Now, the full amount of the former home’s rental income (less allowable deductions) will be taken into account when calculating the Means Tested Care Fee, regardless of how their accommodation costs are paid. This can reach a maximum of $25,731pa. Income earned over this amount could see the resident’s means-tested fee increase by $0.50 for every $1.00 of net rental income assessed.
For residents who entered care prior to 1st January 2016, rental income from their former home will continue to be exempt so long as they are paying all or part of their accommodation costs by periodic payments. However, existing residents who leave care for 28 days or more and re-enter care after 31st December 2015 will no longer be eligible for the rental income exemption.
Importantly assessable income from property is based on actual rental income received (not deemed income), so if an aged care resident’s former home is not rented, no income would be assessable from the property and the legislative change would not have an impact.
In addition, rental income remains exempt from the test for the Age Pension; however this too is currently under parliamentary review.
Lex Goldsmith | Principal Edge Financial Services | Accredited Aged Care Professional | January 2016
