Introduction Welcome to all attendees Thanks to Barossa Accounting - - PowerPoint PPT Presentation

Introduction

• Welcome to all attendees
• Thanks to Barossa Accounting & Tax Services,

Tanunda Lutheran Home & Barossa Village Inc

• Amenities
• Outline of Agenda

Commonly used Terminology

• ACAT (Aged Care Assessment Team)
• ACCR (Aged Care Client Record)
• RAC (Refundable Accommodation Charge)
• DAC (Daily Accommodation Charge)
• RAD (Refundable Accommodation Deposit)
• DAP (Daily Accommodation Payment)
• RAD & DAP
• Myaged Care web site
• Department of Health & Ageing web site

An ageing population

• Currently 15% of the Australian population are over 65

years

• Average age entering Retirement Villages – 78 years
• Average age of entering Aged Care facilities – 83 years
• Male – 20% or less to Female – 80% or more ratio in

aged care

• 40% concessional placements
• Costs of being in a facility do vary
• 85% of pension is used to pay for care – Means Tested

The aged care process

Home Home care – occasional services / minor care Respite Day Care Centre Residential Care In home respite Retirement Living Serviced apartments Residential Care – 24 hour care & supervision / Dementia care Hospital Transitional Care Program Occasional services / minor care

Documentation Required

• Aged Care Client Record – ACCR
• Aged Care Assessment Team – ACAT – 24 hour care =

Nursing Home or some care = Home Care

• Asset Declaration declaring Assets and Income from the

Department of Social Services

• Advance Care Directive – care & end of life considerations
• Power of Attorney – financial responsibility
• Have you completed a Will?
• Are all you personal documents in a safe place?
• MediCare Number, Pension Card Number, Private health

Cover Membership Number, Ambulance Cover Number

Home Care – Home Support

• Good News – the full range of support to

assist you to remain independent at home is available right here in the Barossa.

• How to access Government subsidised

support? My Aged Care contact centre: Telephone 1800 200 422 or Website www.myagedcare.gov.au

Home Care – Home Support

• The MyAgedCare referral process will identify if a

Regional Assessment Service assessment is required for entry level support at home. You will be asked if you have a preferred service provider.

• More complex support at home through

coordinated packages of services will involve referral for an Aged Care Assessment. At the assessment meeting you will be given a guide to home care package approved providers.

Home Care – Home Support

• Many older people start receiving support

through the entry-level Commonwealth Home Support Program (previously called ‘HACC’ and also known as a ‘DomCare’ type service).

• Barossa-based approved providers for in-

home services include Barossa Village, Country Home Services and Carers Link (carer respite).

Home Care – Home Support

• For services aimed at increasing social

interaction outside the home (which the Government calls ‘Social Support - Group’), local approved providers include Barossa Village and Tanunda Lutheran Home.

• These groups are based at the Joy Rice Centre

in Nuriootpa (Barossa Village) and at Tanunda Lutheran Home.

Home Care – Home Support

• All Commonwealth Home Support Program

services are funded by the Government to approved providers based on the types of services; planned respite, assistance with housework, personal care, meals and food preparation, transport, shopping, allied health social support are just some of the services provided under this program.

Home Care – Home Support

• Approved providers are expected to charge

people a client contribution for each service

• r each hour of service they receive
• The client contribution charges can vary

widely, as currently there are no guidelines set

Home Care – Home Support

• Barossa Village currently charges $10 for

services based at/from home and $15 for group ‘community lifestyle’ activities including lunch. People can pay privately for these services too.

• Tanunda Lutheran Home charges $5.00 (may

vary due to distance) for transport to their group program and $7.00 for a meal.

Home Care – Home Care Packages

• Government subsidised Home Care Packages
• ffer a flexible and tailored approach to

receiving care and support at home

• Four levels of Home Care Packages:

– Level 1 (basic care needs)

• subsidy of $21.71/day

– Level 2 (low care needs)

• subsidy of $39.50/day

– Level 3 (intermediate care needs) - subsidy of $86.84/day – Level 4 (high care needs)

• subsidy of $132.01/day

Home Care – Home Care Packages

• Extra funding (supplements) are available subject

to eligibility:

• Dementia and Cognition Supplement
• Veteran’s supplement for veterans with service-

related mental health conditions

• Oxygen supplement – ongoing medical need for
• xygen
• Enteral Feeding Supplement – enteral feeding on

an ongoing basis

Home Care – Home Care Packages

• The daily subsidies are calculated for each

person receiving a home care package.

• The Government expects the approved

provider to charge a basic daily fee, up to a maximum of 17.5% of the single basic Age Pension, currently $9.85 / day and adjusted in March and September each year in line with changes to the Aged Pension.

Home Care – Home Care Packages

• Not all approved providers charge the full basic

daily fee rate.

• The basic daily fee is directly added to the subsidy

to provide the total amount of package funds available to use.

• Approved providers will charge the package funds

their costs for managing the package and coordinating care or support decided by you.

Home Care – Home Care Packages

• People starting a home care package from 1

July 2014 may have to pay an income-tested care fee if their yearly income is above the set

• thresholds. The income assessment does not

include the value of their home or any other assets.

• Full pensioners do not pay the income-tested

care fee

Home Care – Home Care Packages

• There are annual caps and lifetime caps for

the income-tested care fee

• Once these caps are reached, you cannot be

asked to pay any more income-tested care fees for the relevant period.

• DHS will keep track of the caps and notify the

you shortly after the cap has been reached.

Home Care – Home Care Packages

• Income Thresholds (annual amount)

– Single person $49,296 – Couple, illness separated, single rate $48,828 – Couple, living together, single rate $37,726

• Daily cap where income less than above

threshold - $14.13/day – maximum payable

• Annual cap where income less than above

threshold - $5,146.30 – maximum payable

Home Care – Home Care Packages

• Income Thresholds (annual amount)

– Single person $49,296 – Couple, illness separated, single rate $48,828 – Couple, living together, single rate $37,726

• Daily cap where income exceeds above

threshold - $28.27/day – maximum payable

Home Care – Home Care Packages

• Annual cap where income exceeds above

threshold - $10,292.41 – maximum payable

• Lifetime cap on income tested care fees in

home care - $61,754.55 – maximum payable

Home Care – Home Care Packages

• The ‘Consumer Directed Care’ approach is

embedded into home care packages

• Your approved provider will work with you to

ensure you have choice and control in how your package funds are spent

• Two people on home care packages living in

the same house can combine the package funds

Home Care – Home Care Packages

• You will receive a client budget on package

commencement and when you make changes to services

• A financial statement is produced each month

so you know what is going on with the package funds and the balance available for the future

Home Care – Home Care Packages

• Currently the home care packages are

allocated to approved providers upon application

• From February 2017 home care packages will

be allocated to the individual person and you can decide which approved provider will manage the package for you and move your package if you are not happy with the service

Home Care - Example

• Mary is 76 when she starts receiving

fortnightly assistance with house cleaning in July 2014. She contributes $10 per fortnight.

• After a fall in her home Mary has an ACAT

assessment which recommends a Level 2 Home Care Package and starts her package in July 2015. She pays $9.85/day basic daily fee.

Respite Care

• Residential respite care is available or people

with an ACAT assessment approving respite

• care. This is usually provided at the same time

as home care package approval.

• Respite is available for up to 63 days per

financial year. Extensions of time in lots of 21 days may be available if assessed as necessary.

Respite Care

• Tanunda Lutheran Home, Barossa Village and

Wheatfields residential facilities all offer a small number of beds allocated for Government subsided respite care.

• Respite care can be booked in advance direct

with the preferred facility.

Respite Care

• The residential daily care fee is payable,

depending on your circumstances.

• A booking fee comprising a portion of the

daily care fee payable in advance may be

• requested. If so, the maximum payable will be

25% of the total daily care fees or one week’s payment of fees, whichever is the lower amount.

Respite Care

• A person with a home care package cannot be

requested to pay the home care package daily care fee while the person is in residential respite care.

Independent Living

• What is the legal arrangement
• Options here in the Barossa Valley
• Providers
• How do I find & Access
• How much do they cost

Various

Residential Care

• Deciding to move into an aged care home is often

a time of stress, high emotion, and uncertainty about the future.

• Residential aged care is for older people who for

a variety of reasons can no longer live at home.

• Staff at aged care homes can help with: day to

day tasks (such as cleaning, cooking, laundry); personal care; and 24-hour nursing care.

Residential Care

• We will be the first to admit – the cost of aged

care can be complex.

• But what are the first steps?
• 1. Organise a free assessment with an Aged Care

Assessment Team (ACAT)

• 2. Find the right aged care home
• 3. Lodge a Combined Asset and Income Assessment
• 4. Seek independent financial advice (optional)

Residential Care

• Finding residential aged care facilities

– If you are getting older and need some help, or if you are caring for someone who does, contact My Aged Care. – This can be as simple as calling the My Aged Care contact centre on 1800 200 422 FREE or reading the website www.myagedcare.gov.au – You may also talk to aged care providers of your choice about the process

Residential Care

• Residential Care in the Barossa

– Tanunda Lutheran Home Inc. (Tanunda)

• 117 bed complex

– Barossa Village Inc. (Nuriootpa)

• 100 bed complex

– Wheatfields Inc. (Freeling)

• 53 bed complex

– Abbeyfield Society Inc. (Williamstown)

• 23 bed complex

Residential Care

• How much does it cost?

– Depending on your financial circumstances, the Australian Government may subsidise a range of aged care services for you. – However, the more you have in assets and/or income, the more you may be asked to contribute towards your accommodation and care. – When comparing aged care facilities, it is important to note that all aged care fees, with the exception of your room, are set by the Australian Government.

Residential Care

Additional Services Fee

• Set by each

facility if extra services are provided. Means Tested Care Fee

• Calculated on

combined income and assets on an

• ngoing basis. Is

subject to an annual and lifetime cap. Accommodation Costs

• Payment will

depend on your income and assets from the means test. Can be either a lump sum or daily fee

• r combination
• f the two.

Basic Daily Care Fee

• Payable by all

residents at a fixed amount. Indexed each March and September by the government.

Up to four layers of costs

Residential Care

• Basic Daily Care Fees

– Amount is prescribed by the Australian Government, at 85% of the single age pension rate – It is paid by all entrants to residential care, whether age pension recipients or self funded retirees – Currently $47.86 per day – Is updated every 6 months when the age pension is indexed – The fee covers livings costs such as meals, power, laundry etc.

Residential Care

• How much will the accommodation payment

be?

– Depends upon the resident’s circumstances at the time of entry

• Could be as little as nothing
• Could be up to the published maximum RAD for the

facility you want to enter

• The amount can be limited by the application of the

means testing rules. These rules are income and asset based

Residential Care

• Accommodation Payments or Contribution

Fully supported residents do not pay either. Their accommodation charges are fully covered by the Australian Government. Partially Supported residents pay an accommodation contribution based on the government’s Means Tested Amount (MTA). This amount may change from time to time in line with changes in your assessed MTA (ie. if your assets or income change) and/or if the facility is classed as significantly refurbished. In any case, the government advises both you and the facility of the amount assessed as payable by you. Unsupported residents will pay an accommodation payment based

• n the maximum room price as advertised by the provider.

Residential Care

• Accommodation Payments or Contribution

(continued)

• You can choose to pay your accommodation costs by:
• a lump-sum style ‘refundable accommodation deposit’ (RAD)
• rental-type payments called a ‘daily accommodation

payment’(DAP), or

• a combination of both.
• You will have 28 days from the day you entered care to decide your

payment method.

• You must pay your accommodation costs by the rental-type

payment method, until you decide on your ongoing payment method.

Residential Care

• Relationship between RAD’s & DAP’s

– Residents can pay their accommodation by RAD or DAP – The prescribed interest rate published and updated 6 monthly by the government defines the relationship between RAD’s & DAP. Currently this rate is 6.22% – For example, the equivalent DAP for a $400,000 RAD is $400,000 x 6.22% = $24,880 p.a./365 Therefore the DAP is $68.16

Residential Care

Refundable Accommodation Deposit (RAD) Guaranteed by the Government Counted for means tested care fee assessment Cannot pay more than published price Not counted for Centrelink/DVA means test (Pension) Refunded to the resident or estate

Residential Care

• The Means Tested Amount (Singles Rates)
• 50% of your income in excess of the “Income

free area” (Currently $25,487.80); PLUS

• 17.5% of your assets in excess of $46,000 up

to $157,987.20 (indexed); PLUS

• 1% of your assets in excess of $157,987.20 up

to $381,961.60 (indexed); PLUS

• 2% of your assets in excess of $381,961.60

Residential Care

• The Means Tested Amount (continued)

– This calculation is used to determine how much (if any) accommodation payment you must pay if you are a concessionally treated entrant – This calculation is used to determine how much (if any) you will need to pay towards your care costs (in addition to your accommodation payments)

Residential Care

• Threshold examples

– If your assessable assets are below $46,000 and your income is below $25,487.80, you will not pay any accommodation or means tested fees. You will only pay the daily care fee. – If your income is below $25,487.80 and your assets are less than $157,987.20 you will need to pay an accommodation amount, limited by the means testing rules (currently up to $53.84/ day)

Residential Care

• Means Tested Fees

– Using the means tested amount formula outlined previously, the entering resident’s means tested amount is calculated; – Deduct the maximum accommodation supplement available from the government (currently $53.84/day); – Any amount remaining is payable as a contribution towards care costs. – These amounts are subject to annual and lifetime caps

Residential Care

Residential Care

• Additional Service Fees

– Where a resident wants specific additional services whilst in care, the care facility can be negotiated with to have the additional services provided, for an agreed price. – There is no subsidy amount or means testing applicable to these arrangements.

Residential Care

• Government Fee Estimator
• The government’s website called ‘myagedcare’ contains a

Residential Care Fee Estimator that will estimate your care fees based on your inputs.

• You will need to provide details of your annual income, your

financial and other assets, any debts that you have, and details about your family home. If you have a partner, you will need to provide details of your combined income, assets and debts

• The Residential Care Fee Estimator and much more information

can be found online at the following website address: http://www.myagedcare.gov.au/fee-estimator/residential- care/form

Afternoon Tea

• Half Hour
• Feel free to chat with any of the presenters
• We are back on at 3pm

Case Study

Bill & Marg are aged 67 & 66. Bill has just retired. Marg stopped her part time work a few years ago. They own their home in the Barossa. They have no debts & own their car & caravan. Their financial assets are $300,000 of shares & cash held personally, plus Bill has $250,000 of super and Marg has $120,000 of super. They are planning their retirement……

Case Study

Asset Situation: Cash & Share Investments: $300,000 Super Savings: $370,000 Home: $350,000 Car & Van: $100,000 Total Assets: $1,120,000

Case Study

Income Situation: Investment income: $300k x 4% $12,000 Age Pension income (assets test) $15,340 Super Pension ($370K x 5%) = $18,500 Total Income $45,840

If they need more cash, they can access their investment capital or Super Pensions. They receive a part age pension reduced by the assets test (based on current rules) They pay no income tax, and receive franking credit refunds on their dividend income

Case Study

Whilst Bill & Marg like their home, they are not emotionally attached to it. They do want to spend much of the next 10 years travelling. They decide to approach a retirement village to look at an independent living unit. Benefits include worry free maintenance, care of their house whilst they are away travelling, being part

• f a community with similar interests.

Case Study

A local retirement village agrees to have them occupy

• ne of their ILU’s, for an entry fee of $350,000. The

retention amount is 30% They fund this by selling their home.

They pay no capital gains tax on the sale of their home (primary residence exemption) The 30% retention amortised over their life expectancy of 22 years is $4,772 per year. They will also pay a general service charge of $100/week They have no obligations for rates, repairs & maintenance, insurance (other than their own contents)

Case Study

They spend much of the next ten years of their retirement travelling, volunteering & helping family with child care for their grandchildren. As the years go by however, the trips get shorter and less frequent. Marg is not confident driving the car with the caravan

• n. Bill’s arthritis is making lengthy driving
• uncomfortable. Eventually they decide to sell the van.

They have spent some of their savings during these early retirement years:

Case Study

Asset Situation: Cash & Share Investments: $140,000 Super Savings: $220,000 ILU refundable amount (70%): $245,000 Car : $35,000 Total Assets: $640,000

Case Study

Income Situation: Investment income: $140k x 4% $5,600 Age Pension income (asset test) $32,422 Super Pension ($220K x 6%) $13,200 Total Income $51,222

If they need more cash, they can access their investment capital or Super Pensions. They receive a part pension reduced by the income test (based on new asset rules) They pay no income tax, and receive franking credit refunds on their dividend income

Case Study

Bill’s mobility continues to deteriorate. Marg helps all she can but finds the heavy work in assisting him

• difficult. They decide to look at getting some help in

the home. Bill has an ACAT assessment and is rated as having level 2 care needs. The cost of his care package is worked out with Bill to provide for his needs. In this example, we will assume his care package costs $40 per day.

How much will he have to pay?

Case Study

To receive the help he needs, Bill will pay the basic home care fee of $9.85 / day (Amount set at 17.5% of the single age pension amount); Plus the lesser of:

• His means tested amount; or
• The capped amount allowed based on his income; or
• The actual care costs

Case Study

The means tested amount is determined by Bill’s Income:

Deemed Income on $360,000: $5,245

(½ the couples income, deeming rates 1.75% & 3.25%)

Age Pension: $16,211

(1/2 the couple’s age pension)

Total Income $21,456 If this amount is less than the “Income free threshold “, his means tested fee will be Nil. If it is over this threshold, the means tested fee is ½ the amount exceeding the threshold.

Case Study

The income free area is currently $19,780.80 (each for a couple) Bill’s Income is $21,456, so his means tested fee is: ($21,456-$19,780.80) / 2 / 364 = $2.30 per day Bill’s annual cap is $5,146.20 per year (or $14.14 per day). If his income were over $37,726, it would be double this amount.

Case Study

To receive the help he needs, Bill will pay the Basic home care fee of $9.85 / day; Plus the lesser of:

• His means tested amount ($2.30 / day); or
• The capped amount allowed based on his income

($14.14 / day); or

• The actual care costs ($40 / day)

Therefore his costs will be $9.85+$2.30 = $12.15/day The balance of the costs are paid by the government.

Case Study

Bill & Marg continue to live in their ILU home and receive home care according to their needs. From time to time, Bill spends a few short stays in respite care to enable Marg to have a break from caring for Bill. How much will Bill pay for respite care?

Case Study

How much will Bill pay for respite care? Respite care is relatively straightforward. Bill has already had his ACAT assessment in order to receive home care, so is able to enter a residential care facility to receive respite care. He pays the daily care fee for each day he is there. This is set at 85% of the single age pension rate, currently $47.86 per day.

Case Study

Bill & Marg continue to live in their ILU home and receive home care and respite care according to their needs until their mid 80’s, when unexpectedly, Marg suddenly passes away. Bill is unable to continue to live in the ILU on his own, even with higher levels of home care. He decides to move into a residential care room at the facility where his ILU is located. His finances at this time are as follows:

Case Study

Asset Situation: Cash & Share Investments: $110,000 Super Savings: $160,000 ILU refundable amount (70%): $245,000 Total Assets: $515,000

Case Study

Income Situation: Investment income: $110K x 4% $4,400 Age Pension income (income test) $20,618 Super Pension ($160K x 9%) $14,400 Total Income $39,418

Case Study

How much will Bill pay to enter residential aged care? There are 4 potential costs:

• Accommodation costs
• Daily Care fees
• Means tested fees
• Extra Service Fees

Case Study

Accommodation costs Bill is leaving his independent living unit, so the agreed amount is refunded to him. This makes his assessable assets: Superannuation: $160,000 Cash & Shares: $110,000 Refunded ILU: $245,000 TOTAL: $515,000

Case Study

The care facility has a suitable room for Bill, that requires a RAD of $500,000 As Bill has $515,000 and must be left with his protected amount of $46,000, the most he can pay as a RAD is $469,000. Bill elects to do this. He will pay the remaining $31,000 as a DAP arrangement. This will be $31,000 x 6.22% / 364 = $5.30 per day.

Case Study

Daily Care Fees Daily care fees (set at 85% of single age pension) are paid by all residential aged care residents. It is not means tested. The amount is currently $47.86 / day

Case Study

Means Tested Fees Entrants to Residential aged care will have their assets and income assessed for means tested fees. The rules are:

Income: ½ the income over the income free area; plus Assets: 17.5% of assets between $46,000 & $157,987; plus 1% of assets between $157,987 & $381,961; plus 2% of assets exceeding $381,961

Case Study

Means Tested Fees Bill’s income is now: Age pension (full): $22,542; plus Deemed amount on $46,000: $805 Total: $23,347 This is less than the income free area of $25,487.80 Therefore Bill has no income based means tested fee

Case Study

Means Tested Fees Bill’s assets are: RAD Paid: $469,000 + Cash: $46,000 = $515,000 His asset based means tested fee is: 17.5% x (157,987.20 – 46,000) = 19,598 + 1% x (381,961.60 – 157,987.20) = 2,240 + 2% x (515,000 – 381,961.60) = 2,661 Total = $24,499 / 364 = $67.30 per day

Case Study

Means Tested Fees Bill’s means tested amount is $67.30 / day The first $53.84 (being the maximum government accommodation supplement) is disregarded because Bill has paid a RAD to enter care. His payable means tested fee is $67.30 – $53.84= $13.46 per day

Case Study

Extra Service Fees Bill does not require any extra services. He does not pay any extra service fees.

Case Study

Add it all up – how much does he pay? RAD upon entry: $469,000; plus DAP amount: $5.30 per day Daily Care Fee: $47.86 per day Means Tested Fees: $13.46 per day Extra Service Fees: $0 Total: $66.62 per day

Case Study

How does Bill fund his $66.62 / day in fees? Age pension: $22,542 Interest on cash $46,000 @ 2% $920 Total Income $23,462 Income per day $64.50 His shortfall of $2.12 / day can be paid out of his cash

• r deducted from his RAD balance.

Case Study

Bill Finally passes away a couple of years after entering residential care. His RAD amount of $469,000 is refunded to his estate (less any care fee shortfalls that may have been deducted during his stay)

Planning - General

• It is not just about money – you should also plan

to meet your other needs as well (Spiritual / Emotional / Relational / Dignity / Legacy…)

• In regards to the money, clearly from what you

have already seen – the more money you have, the more you will pay!

• Remove anxiety about the cost through

education and avoid costly errors

Planning - General

You cannot look at Age care costs in isolation from other things in your life, eg:

– Age pension entitlements – Legacy desires – Family situation – Your wills, POA’s, advanced care directives – Need for security

Planning - General

Start Early!

Planning - Asset Deprivation

• Most Strategies to pay less age care costs and

receive more age pension are centred around reducing assessable assets

• In terms of pure finances, if we knew our date of

death, we could plan an asset deprivation strategy perfectly! Thankfully we don’t…

• Statistically, at age 65, men have life expectancy
• f age 84, women age 87. It’s an average – half

will live longer, half will live shorter

Planning - Asset Deprivation

• Other family members are often interested in age

care costs and pension entitlements, as it will affect estate value.

• Asset deprivation is a balance between improving

your financial outcomes, and the loss of security

• f having more financial means, in the context of

uncertainty around how long your capital needs to last.

• A practical approach is to base a plan on statistics

Planning - Asset Deprivation

• Effectiveness is going to depend upon your

financial circumstances. We will consider in the next few slides:

• Low asset households
• High asset households
• Midrange asset households (ie part age

pensioners)

• Note, everyone pays the daily care fee. Reducing assets is only effective in

reducing accommodation payments and means tested fees

Planning - Asset Deprivation

• Low asset households

– It will be ineffective for low asset retirees, particularly for people with assets so low they already receive full age pension, and are exempt from accommodation payments to enter aged care. – Further asset reduction for them will reduce their cash income, but will not confer any benefit in the form of reduced care costs or increased age pension – Eg. people with no home and <$46,000 of assets

Planning - Asset Deprivation

• Low asset households

– Retirees with assets of less than $157,987.20 in assets will not be asked to pay a RAD. So if not paying a RAD is important to you, keeping below this threshold would achieve that – The value of a home is valued at this amount (or market value if lower) for means testing purposes, so if you have a home and any assets besides, you are in RAD paying territory. The amount of the RAD is not limited by the retirees’ asset amount.

Planning - Asset Deprivation

• High asset households

– It will be ineffective for high wealth households where assets are significantly above thresholds where they become eligible for age pension or reduced means tested fees. Earnings lost on deprived assets can be more than age care cost savings or age pension entitlements secured – Caps on means tested fees are relevant for these individuals, as there are annual and lifetime caps on means tested fees

Planning - Asset Deprivation

• High asset households

– It may be more relevant for these individuals to:

• Research and quantify the costs they will bear;
• Set a budget and an expectation;
• Have a plan for how to fund the age care contingencies;

and

• Rely on their financial asset resources and the care cost

caps to manage the aged care scenario

Planning - Asset Deprivation

• Part Age Pension Households

– These households can benefit financially from depriving assets – Reducing assets will increase age pension – Reducing assets will reduce means tested fees – In the current low investment return environment, you can actually be better off in terms of household cashflow by having less money, than having more in the part age pension space

Planning - Asset Deprivation

• Take a scenario of having $10,000 less dollars:

– Lost earnings at 4% =

• $400

– Add: age pension assets test increase (post 01/01/2017) = $10,000 / 1000 x $3/fn = +$780 – IF you are in age care: Means tested fee effect:

• Assets: $10,000 x 2% (assets over 381,961.60)=

+$200

• Income: $10,000 x 3.25% (deeming rate) /2 =

+$163

• Income: Additional Age Pension $780 / 2 =
• $390

– Overall effect: +$353

Planning – Asset Deprivation

• It is too late to plan for reducing residential

age care costs when it is time to enter

• Any asset deprivation will still be assessed for

5 years after, if outside gifting limits

• Only $157,987.20 of your home value is

counted (each) in your assets assessment. A high value house can shield estate assets from the assets portion of the means testing

Planning - Products

• Complex strategies such as investing in an insurance

bond in a trust can work to reduce your assets and income assessments, but be wary of setup costs, cash flow implications, exit costs for your estate, and poor returns in the meantime

• Annuities have features that can be useful in

providing stable income, and a gradually reducing assessable asset

• Get professional advice if contemplating these ideas

Planning - Lifestyle assets

• Lifestyle assets that produce no income are

particularly detrimental to age care funding.

• Consider pre-empting your will to gift these assets to

estate beneficiaries 5 years + out from your statistical age for being likely to need age care

Planning - Caps

• Be mindful of lifetime caps - $61,754.55 per person

currently

• So if you stayed in your home for a long time requiring

some Home care to assist you, you may pay up to $5,146.20 or $10,292.41 per year depending on your

• income. After several years of doing this, you may

have only a small remaining liability for means tested fees, making aggressive planning to reduce your means tested liability pointless

• There is no asset testing in determining government

subsidies for home care

Planning – Income Tax

• For high wealth retirees, income tax may be a

consideration.

• A retiree couple both qualifying for SAPTO can have

joint income of approximately $52,000, and not pay tax

• Until 2019, age care fees still qualify for the net

medical expenses offset. This can provide opportunity to realise capital gains on investments in a tax free manner.

• Crystallising capital gains tax free whilst the
• pportunity is available can mean passing on assets

with less attached tax liability to the next generation

Planning – General Guides

• Pay as big a RAD as you can rather than a DAP.

– RAD’s are not counted for age pension testing. – DAP interest rate of 6.22% is high

• Primary residence value is capped for means testing

purposes

• Primary residence is exempt if a spouse, dependant

child or eligible carer is living there.

• Divest lifestyle assets that do not earn income

Planning – General Guides

• Have a plan for what you will do when the need

arises, before the need arises. Start early. Be willing to change as events unfold.

• Monitor where your cap amounts are up to, as this

may change your planning.

• Do regular, little adjustments to your situation rather

than huge changes

• Consider getting some help to work out your plan

Information

• The internet is where the information is most
• accessible. Get some help if you need to.
• Government sites:
• www.myagedcare.com.au
• www.dss.gov.au
• Use Google – there are lots of other non government

sites with useful information too.

Wrap Up

• Thanks for coming!
• Any final questions?
• Please take the time to fill out the seminar review

forms

• Thanks to presenters, Barossa Village & Tanunda

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