Understanding Australian Aged Care Fees
To effectively plan, it's essential to understand the fee structure for residential aged care in Australia. Costs are divided into several components:
Accommodation Costs (RAD vs. DAP)
This is the most significant fee related to retaining your home. When you move into an aged care facility, you must pay for your room, which is known as the accommodation cost. This can be paid in one of two ways, or a combination of both:
- Refundable Accommodation Deposit (RAD): A lump sum payment paid upfront. If you pay the RAD in full, your ongoing accommodation cost is zero. This lump sum is fully refundable when you leave the facility.
- Daily Accommodation Payment (DAP): A non-refundable, rental-style payment charged daily. The amount is calculated as an interest payment on the RAD amount you did not pay upfront.
Other Aged Care Fees
- Basic Daily Fee: A standard fee for day-to-day living costs such as meals, laundry, and cleaning. It is set by the Australian government and is 85% of the single basic Age Pension.
- Means-Tested Care Fee: An additional contribution towards the cost of your personal and clinical care, determined by a means assessment of your income and assets.
- Extra Service Fees: Optional fees for a higher standard of accommodation or additional services offered by the facility.
Strategies to Avoid Selling the Family Home
There are several strategic options to consider that can help you avoid selling your home to pay for nursing home care.
Using the DAP to Preserve Your Capital
One of the most direct ways to avoid selling is to choose the DAP option for your accommodation costs. Instead of a large upfront payment, you make regular, non-refundable payments. This allows you to keep your property, which can be rented out to generate income, or kept for family members.
Exploring Borrowing Options
Instead of an outright sale, you can borrow against the value of your property to cover costs.
- Home Equity Access Scheme (HEAS): A government scheme that provides a voluntary, fortnightly loan to supplement your retirement income. It is available to people over Age Pension age who own real estate in Australia and can be a good option for people who have cash flow issues but want to keep their home.
- Reverse Mortgages: You can borrow a portion of your home's equity, with the loan repaid from the sale of the house when you move permanently or pass away. It is crucial to seek expert financial advice before considering this, as there are significant risks and costs involved.
Exempting Your Home from the Assets Test
In some cases, your home can be excluded from the assets test, which can significantly reduce your aged care fees. Your home is exempt if a 'protected person' is living there, including:
- Your partner or dependent child.
- A carer who is eligible for an Australian income support payment and has lived there for at least two years.
- A close relative who is eligible for an Australian income support payment and has lived there for at least five years.
Creating a Granny Flat Interest
A granny flat arrangement is where you transfer assets (usually cash) to a family member in exchange for a lifetime right to accommodation in their property. This can be complex and has specific Centrelink rules around gifting and the 'reasonableness test'. A legally binding agreement is essential to protect your rights.
Accessing Financial Hardship Assistance
If you have limited assets and face genuine financial hardship, the Australian government offers assistance to cover some or all of your aged care fees. To be eligible, you must complete a means assessment, and there are limits on assets and gifting.
Residential vs. Home Care: A Financial Comparison
| Feature | Residential Aged Care (Nursing Home) | Home Care Package (HCP) |
|---|---|---|
| Accommodation Costs | High, potentially requiring a RAD/DAP. Can be a major factor in determining eligibility and costs. | No accommodation cost. You remain in your own home. |
| Means Assessment | Affects the means-tested care fee and accommodation contribution. | Affects the income-tested care fee. Assets not directly assessed for home care fees. |
| Scope of Care | Comprehensive, 24/7 care including personal, clinical, and all daily needs. | Coordinated services based on your package level (Level 1-4). Focus on supporting independence. |
| Financial Planning | Often requires complex financial strategies, asset protection, and legal advice. | Focuses on managing the package budget and any income-tested fees. |
| Asset Impact | Potential risk to your home if not strategically managed. | No impact on home ownership, as care is delivered in your residence. |
The Role of Professional Aged Care Financial Advice
Given the complexities of aged care fees and asset tests, particularly concerning property, seeking professional financial advice is crucial. An aged care financial advisor can help you:
- Determine the best way to structure your assets to minimise fees.
- Explain the potential impacts of different payment options (RAD vs DAP).
- Navigate Centrelink and My Aged Care assessments.
- Advise on borrowing strategies like reverse mortgages or the HEAS.
Early Planning is Key
The best time to plan for aged care is well before the need arises. Early and informed decision-making can make a huge difference in protecting your family's financial security. Researching options, having a candid discussion with your family, and consulting an advisor can help you confidently navigate the aged care system and successfully address the question of how to avoid selling house to pay for nursing home in Australia.
For more information on aged care options and eligibility, you can visit the Australian government's official My Aged Care website My Aged Care.
