Cashflow planning is important when moving into aged care, but plans can be thrown into chaos if your first invoice shows much higher fees than expected. This article sheds light on interim fees.
The first statement you receive when you move into residential aged care can be a shock, as fees might be far higher than expected – possibly even hundreds of dollars a day higher. This might not be an error but rather be just a matter of understanding how “interim fees” are applied.
If you are required to pay a means-tested fee as a contribution towards the cost of your care, how much you are asked to pay is determined by Services Australia based on their assessment of your affordability. Essentially, they review your assessable assets and income and conduct a means-test assessment. The problem is that you start paying fees from the day you move in, but it may take 6-8 weeks (or longer) for the assessment to be done and your fee to be advised. In the interim, your care provider will be unsure how much to charge you.
This is where interim fees come in. While waiting for Services Australia to calculate and advise the fee, your care provider can set an “interim means-tested fee” and charge this amount. Each provider decides how they will set this interim fee. They might:
Charge the maximum of $400.08 per day
Set the fee at a lower amount, based on an average paid by their residents, or
Use a calculator to estimate what you might be asked to pay and charge somewhere around that amount.
Whichever option the care provider chooses, if they charge you too much, the excess does come back to you (as a refund or a credit) once Services Australia have advised the results of their assessment.
While the higher-than-expected fee might only be a temporary glitch, it can still cause considerable stress and cashflow problems in the first few months. Three practical tips to help your situation include:
Ask your care provider for their policy so you know what to expect
Fill in your means-test assessment forms as quickly as possible to minimise assessment delays by Services Australia. If you receive a payment from Centrelink or Veterans’ Affairs, check all your details are correct and up-to-date.
Make sure you have left enough money in your bank account to cover these fees.
If you are making the move into residential care (or helping a family member), we can provide independent financial advice to remove the uncertainty and help you choose the best strategy for you. Very often aged care providers will accept the fees that we calculate in our independent financial advice document and use them to set your interim fee – making it a fee that is more affordable and closer to your expected actual fee.
Phone our office on 1300 451 339 to make an appointment to discuss your situation and find out how we can help.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 25 March 2024.
Moving into residential aged care can be a stressful period with complicated rules, family conflicts and rushed timeframes. This can easily lead to mistakes, which can be costly and difficult to rectify. This article highlights three common mistakes and tips to avoid the traps
Rushing your decision
The biggest expense you will face is the cost of your room, which is likely to be quoted as hundreds of thousands of dollars. However, you might choose to pay a daily fee instead of the big lump sum.
When signing contracts, many people feel pressured to make quick decisions which might lock them into arranging a quick sale of the home. We recommend you take time to make an informed decision and understand your options. Your provider must give you 28 days after moving into care to decide how to pay. This gives you time to get advice and be prepared.
Focussing on just day 1
You need to know what fees you will be asked to pay on the first day of your stay in residential care. But this is just your starting point as your fees change over time.
Decisions you make after entry and changes to your circumstances can impact your fees. Make sure you get an understanding of what to expect over the following 2-5 years, with projections showing expected changes in fees, age pension, cash flow and asset values.
Filling-in forms incorrectly
Services Australia needs to review your financial position to calculate your fees. To enable this assessment, you need to complete some forms and update Centrelink (or Veterans’ Affairs) records.
If you don’t fill in the right form, or make mistakes with the information provided, your fees might be incorrectly calculated or cause long delays with the assessment.
Get advice
Even if your situation seems simple, there are so many aspects to consider in working out the best financial strategy. The value of seeking advice from an accredited aged care adviser is peace of mind to ensure you have made the right decisions to generate enough cashflow while protecting the value of your estate.
If you want to talk through your options or find out more information for your situation, call our office on 1300 451 339 to arrange an appointment.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 19 March 2024.
The HEAS (previously known as the Pension Loans Scheme) is a loan offered to eligible individuals by the Government and is paid by Services Australia.
The loan is secured against your family home or other eligible real estate that you nominate and may provide you with access to regular loan instalments to support your cash flow, or lump sum loan amounts.
The maximum and ongoing amounts that you may receive will be based on a number of factors, such as your age, the value of the property you use as security for the loan and the amount of any pension you may be entitled to.
Interest is payable on the loan (currently at the rate of 3.95%) and the loan plus interest must eventually be repaid.
Before you enter into the HEAS, there are a number of important things to consider. These include the long-term implications on your financial situation, the ability to fund future expenses, how a change in your circumstances could impact your debt and the impact on your estate planning arrangements. Below we summarise some of the important facts about the scheme and what you may need to think about before entering into it.
Am I eligible?
You may be eligible if you receive the Age Pension, Disability Support Pension or Carer Payment, or you would be eligible but you don’t qualify because of the income and/or assets test.
Other eligibility rules require that:
you or your partner are Age Pension age (or Department of Veterans’ Affairs service pension age), and
you are not a bankrupt or subject to an insolvency agreement, and
you have adequate real estate to offer as security for the debt, and
you have appropriate and adequate insurance covering the secured property.
The property provided as security for the loan must be Australian real property. It may be the family home, an investment property, vacant land, farmland or a commercial property. The Government will place a statutory charge or caveat on the property which means the property cannot be sold or ownership transferred unless the charge is removed (ie by paying off your debt) or is transferred to another property.
How much can I borrow?
The maximum amount that you can borrow is determined by a formula which is based on your age (or your partner’s age if they are younger than you) and the value of the real estate used as security. Once the borrowing reaches your maximum loan amount, no additional loan payments can be made. However, interest will continue to accrue until it is repaid. This means that the total debt owing in the future may exceed your maximum loan amount.
If you already have a mortgage against the property you’re using as security, or you nominate a particular value of the property to be excluded, this will further reduce the amount you’re able to borrow under the HEAS.
How can I receive the loan amounts?
You will usually receive loan instalments as regular fortnightly payments (which, if you’re eligible for a pension, will be paid with your pension each fortnight). You may also choose to receive up to two advance lump sum amounts each year subject to a limit.
Receiving fortnightly payments
The regular amount you receive will depend on several factors, including:
whether you’re entitled to a pension, and
the amount of pension you’re entitled to
Generally, the maximum amount you can receive each fortnight, including any pension you’re entitled to, is 150% of the full rate of Age Pension[1]. This means:
if you aren’t eligible for a pension payment, you can receive fortnightly HEAS loan instalments of up to 150% of the full rate of Age Pension
if you receive the full rate of pension, the maximum fortnightly loan instalment you can receive is equal to 50% of the full rate of Age Pension
if you receive a part pension, the maximum fortnightly loan you can receive is the difference between the pension you receive and 150% of the maximum rate of Age Pension
You can make changes to your fortnightly loan instalments anytime by notifying Services Australia online via your Centrelink account or completing and submitting the SA497 form to Centrelink.
Receiving lump sums
If you need access to a greater amount, you may be able to elect to receive up to two lump sum amounts in any 26 fortnightly period. The maximum combined total of the lump sums is equal to 50% of the maximum annual rate of Age Pension and this may reduce (including to zero) any fortnightly instalments for a period of time.
Are there any fees or costs?
In addition to interest costs, you will need to pay any costs involved in registering the charge (mortgage) against the property. This may be paid at the time of registration or added to your loan balance. If these costs are added to the loan balance, they will attract interest in the same way as the loan payments. You (or your estate) are also responsible for the subsequent cost of removal of the charge.
Are loan payments taxable?
The fortnightly loan instalments and any advance lump sum loan payments are not taxable; however, Age Pension payments are taxable.
Will the HEAS loan payments impact my social security entitlements or aged care fees?
The fortnightly instalments and lump sum payments are not income for the income test. However, if you don’t spend these amounts, or you use the loan to purchase or invest in an assessable asset, Centrelink needs to be updated, and this may impact your ongoing entitlement. For example, if you deposit the amounts in a financial investment such as a bank account, these amounts are not assessed for the assets test until 90 days after they are received. For the income test, the amount is deemed together with the balance of your bank account and other financial investments.
Is it possible that the debt I owe may be more than the value of my home?
A feature of the HEAS is a ‘no negative equity guarantee’ (NNEG). This means your HEAS debt will not exceed the market value of your loan at the time of repayment and you will not have to repay more than the market value of your property.
However, the NNEG may not apply if:
you put a charge or encumbrance on the secured property after taking the HEAS loan and it prevents the Commonwealth from recovering the debt
you engaged in fraud or misrepresentation regarding your participation in the HEAS
the value of the property reduces due to deliberate damage caused by yourself or a person who occupied the property with your consent, or
the sale of the property was not conducted on a fair and reasonable basis or in good faith.
When must the loan be repaid?
The HEAS loan can voluntarily be repaid partly or fully at any time. The loan plus any legal costs and accrued interest will eventually need to be repaid and, in some cases, a change of circumstances may initiate the requirement for the debt to be repaid in full. It is very important to understand the circumstances that can trigger the need to repay the loan and to understand the potential implications for your circumstances.
Change of circumstances including property sale
If you intend to make any changes to your circumstances, including plans to sell the property, you must notify Services Australia. Services Australia will arrange for the debt to be repaid when your property settles or you may provide another eligible property you own to secure the loan.
What if I pass away?
If you pass away and you have no surviving spouse or if your surviving spouse is not eligible for HEAS in their own right (for example, because they have not reached Age Pension age), Services Australia will initiate collection of the debt from your deceased estate. It is important that your surviving spouse and/or the executor or administrator of your deceased estate is aware that the HEAS debt must be repaid at this time. You and your family must consider how the debt would be repaid in this event and what will happen if the home must be sold to repay the debt, especially if you expect to have family continuing to live in the home.
If you pass away and your surviving spouse is eligible for HEAS, repayment of the loan is not required until your spouse passes away. Services Australia will initiate collection of the loan 14 weeks after your spouse’s death (Bereavement period). Your spouse may also pay the loan partly or fully at any time.
Interest will continue to accrue until the loan is fully paid.
What else should I consider and what are the risks?
Your HEAS loan will reduce the available equity in your property over time. Interest will accrue at a faster rate if no repayments are made. The HEAS loan will be collected if you sell the secured property or from your deceased estate, whichever happens first. This may mean the inheritance you leave to your beneficiaries may substantially reduce. The HEAS loan may also have unintended consequences on the distribution of your deceased estate. It is important that you seek independent legal and financial advice. You should ensure that if you do enter into the HEAS, that your estate planning arrangements are reviewed and updated if necessary. Also, you may wish to speak to your family and other beneficiaries about your intentions.
You must submit supporting documents to help Services Australia confirm the information in your application such as your age, identity, your partner’s details, bank account, tax file number and proof of your Australian residence. You may need to provide visa information and citizenship details.
You will need to provide details relating to the secured property such as loan agreements, contracts and the most recent mortgage statements and other documentation. If you are a couple, both you and your partner must sign the application form. If you are separated from your partner, you must provide separation details.
Appendix: Example calculation of maximum HEAS amount and payments
The maximum loan amount is determined based on age, as well as the value of the real property you use as security. Your age (or your spouse’s age if they are younger) is used to determine the ‘age component amount’. This amount is a dollar figure and is set out by the Department. Speak to an independent financial adviser to find out more.
The maximum amount you can borrow is calculated as:
Age component amount x Value of real assets/$10,000
Where:
Age component amount is a dollar figure which is based on your age last birthday. For members of a couple, the age component amount is based on the age of the younger spouse.
Value of real assets is generally the value of the property provided as security, less your nominated amount and reduced by any other charges over the asset(s). The value of real assets will be rounded down to the nearest $10,000.[2]
For example, if you turned 70 on your last birthday, your age based amount is currently $3,080. If you offer your family home as security and it’s worth $1,000,000 with no debt currently secured against it, your maximum loan amount will be:
$3,080 x ($1,000,000/$10,000) = $308,000.
Your maximum loan amount will be recalculated in another 12 months after your next birthday.
The maximum fortnightly amount of loan instalments you’d be eligible for (as at 20 March 2024[3]) would be:
$558 per fortnight if you’re a single homeowner and you receive the full age pension (ie 150% x maximum Age Pension rate of $1,116, less your Age Pension payment of $1,116)
$1,674 per fortnight if you’re a single self-funded retiree who is a homeowner (ie 150% x maximum Age Pension rate of $1,116 less $0, as you’d not receive any Age Pension)
An amount between $558.15 and $1,674.45[4] per fortnight if you’re a single person entitled to a part Age Pension.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Effective from 20 March 2024
[1] Includes the basic rate of Age Pension, the pension supplement, Energy Supplement and Rent Assistance if applicable.
[2] If value of assets is less than $10,000, the value is nil.
[3] These amounts will change in line with changes to the Age Pension rate, which may occur on 20 March and 20 September each year.
[4] The maximum possible loan instalment $1,674.45 per fortnight, less the minimum pension supplement $43.90 and the energy supplement $14.10.
Second marriages may present additional financial challenges when balancing day-to-day expenses with implications for aged care funding. You may not share finances equally, but Centrelink/DVA will assess your obligations as if you do.
Life is full of ups and downs. You might have been unlucky and lost a spouse, but then been lucky to find love again. A new relationship can bring companionship and support but may also bring financial challenges, especially with funding aged care and estate plans.
Some couples may be willing to share a life but may prefer to keep finances separate so inheritances can pass to their own children and family. If you and your partner enter the relationship with differing levels of savings and assets, as a couple you will need to decide how to split or share resources. You may also need to decide whose home to live in or whether to buy a new home.
These decisions need to balance your life plans and your estate plans. You may wish to consider how to ensure your partner is looked after if something happens to you, while also protecting the estate for your own children. These might be conflicting objectives.
From a Centrelink and aged care view, two people living together in a relationship are assessed as a couple. Assets and income are combined and then split equally – regardless of who owns what or how you want to divide your finances.
What defines a couple
If you receive a Centrelink/Veterans’ Affairs (DVA) benefit and your relationship status changes, you need to notify Centrelink/DVA and update your records.
Whether two people are considered to be a couple depends on five aspects, including:
Financial aspects
Nature of the household and how household chores are shared
Social aspects and how the two people present to family and friends
Any sexual relationship
Commitment to a permanent and ongoing relationship on an intimate level.
No single factor is definitive in determining status as a couple. An assessor may look at the facts of the case and interview the people involved as well as friends and family to determine whether the two people live separate or shared lives.
The impact on aged care
If your or your spouse need to access aged care services, assessment of your financial capacity (and contribution towards the costs) will use the same relationship status rules that apply for Centrelink/DVA.
If you are a couple, fees are based on half of the combined assets and income. This may see a person moving into care needing to pay fees greater than their individual affordability and needing the other spouse to help with the costs. How this help is provided should be decided with independent financial advice to fully understand the implications. For example, if the person staying at home uses some of their assets to pay accommodation costs as a lump sum for a spouse moving into residential care, this money will eventually be returned to the estate of the care recipient. This means the money may find its way into the other family’s hands, rather than back to the spouse who made the payment.
We can provide advice to help you navigate the rules and consider strategies that are as fair as possible to both members of the couple. This may help to minimise family conflicts. Call us on 1300 451 339 to make an appointment.
Samantha Chivers, Client Services Administrator and Aged Care Consultant
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 4 March 2024.
The recently released Intergenerational Report highlights trends and impacts over the next 40 years and highlights the significant impact of an ageing population. A major theme in the recent Intergenerational Report was the impact on Australia’s economy and society of an ageing population, which will lead to a rising demand for aged care over the next 40 years. This reinforces the importance of considering aged care needs ahead of a crisis situation. The care and support sector was singled out as one of the key sectors expected to grow over the next four decades as it expands to accommodate the needs of an increasing number of older Australians. In particular, the 85 plus age group is expected to triple over the next 40 years.
Meeting demand will require ongoing investment and improvements in the delivery of aged care services. But with predictions of budget deficits for the next 40 years, the ability for the Government to fully fund the increasing cost pressures is limited. A greater and increasing share of costs will likely need to be met by the person accessing care services, where they have the financial means to do so. Australians need to plan ahead for their aged care needs. Aged care considerations should form a key component of retirement planning to take into account the costs and related financial decisions.
While longer life expectancies will see Australians spending more years in full health, on the flip side, we are also likely to experience an increased number of years in ill-health. This will in turn accelerate spending in health and aged care as well as demand for services and advice. As shown in the chart below, the average number of years that a person lives in ill-health has been steadily increasing across the last decades and this trend is expected to continue to grow.
Source: Australian Institute of Health & Welfare, Australian Burden of Disease study, 2022.
Most Australians who reach old age will need aged care services. The Australian Government provides the majority of funding, across both residential aged care and home care services, with users contributing a small portion of the costs. Government spending on aged care is projected to grow from 1.1% of GDP to 2.5% in 2062-63 and aged care spending per person will also increase. The composition of government spending across the home care and residential care is shown in the graph below.
Source: Treasury
Without a doubt, Australians need to consider aged care options and strategies not only for their own future needs, but also the needs of older parents or other family members. If you would like to start the discussion and explore your options, contact us today on 1300 451 339 to arrange an appointment.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 15 December 2023.
When your family gathers over the festive season, it might present an opportunity to start planning for future care needs.
Christmas is a time for families and the New Year is for resolutions. This year, combine the two by making a resolution to pay more attention to how your older parents are coping and start family conversations to develop a plan for future care and support.
You may have been busy through the year and not noticed the small things. But how well parents are coping may become more obvious when you have time to catch up with family over the festive season.
You might not want to face that your parents are getting older and may need help. If you are the older person, asking for help does not have to be the start of a slippery slope. Rather, it might be the first step to having greater control over your future independence and reduce some of the daily strain on yourself and other family members.
It might be time for a family meeting
Planning is the key. And planning early gives the best outcomes.
Retirement plans should consider how to manage the frailty risk that might be experienced in the later stages of retirement. Bringing family into the conversation may help to minimise conflicts within your family and help everyone be comfortable with decisions that need to be made.
Families getting together at Christmas, might offer one of the rare opportunities within a busy year to hold a family meeting. For the older parent, this offers the chance to make yourself heard and express your wishes. For the children, it can help to remove uncertainty and share the responsibilities. These discussions are more effective if they are started early, while parents are still able to maintain control and independence.
A well-run family meeting can allow parents, children and other important family members to discuss issues and preferences, express concerns and make decisions that work for the family as a whole.
If thought of this discussion fills you with dread, we can offer support and independent financial advice. We inject a neutral voice and experience into what can be an emotional discussion.
Tips for starting a conversation
Some tips for families to consider over the festive season include:
Be observant for signs that parents may not be coping
Compare observations with other family members
Talk to your parents about their future plans, concerns and living arrangement options
Start researching aged care options (including home care) and understand the costs
Check that enduring power of attorney documents and wills are in place and still relevant – seek legal advice to review and update documents
And, if care is needed now, contact myagedcare.gov.au to arrange an assessment.
Make an appointment to discuss options and actions needed to be taken. Call us on 1300 451 339.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice.
No-one wants to be living with dementia. Keeping an active brain may reduce your risks and promote good cognitive health for longer.
With an increasing number of people living with dementia in Australia and around the world, research activities aim to understand how the brain works and look for ways to reduce or slow the risk of dementia. Across the globe,10 million new cases of dementia are diagnosed each year.
We don’t have a cure for dementia and nor is there any options to guarantee prevention. But research is uncovering ideas on how to slow the progression of dementia and technology is looking at ways of helping people who are living with dementia to maintain independence for longer.
A healthy diet and social activity may help reduce your risks. Taking up a new activity to challenge your brain may also have positive results. New research from Monash University has found that “brain activities” such as crossword puzzles, chess, keeping a journal, using a computer and education classes may be effective at slowing the risk of dementia.
Passive activities and creative hobbies such as knitting, reading and painting may also be effective but the Monash University research found that brain activities produced more effective results.
The research found that people who engaged in these brain activities are around 10% less likely to develop dementia, compared to a 7% reduction for the more passive activities. So while these activities may not prevent you developing dementia but they may slow progression.
Now might be the time to join a chess club or start doing a daily crossword puzzle.
Dementia is a leading trigger for a move into residential aged care. The family home may no longer provide a safe environment for a person living with dementia and care activities may place a significant strain on the spouse or other family members. Activities that reduce the risks of dementia may help to keep you in your own home for longer, but a plan for how to fund care and what options you have available will help to reduce some stress and uncertainty, no matter what your health outcome.
If you want to talk about aged care and your options, call us today on 1300 451 339 to arrange an appointment.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice.
How you choose to pay for your room in aged care is an important decision, and with large dollars involved, it is one that should not be rushed. Know your rights and take time to get advice
When moving into residential care, your first financial challenge is likely to be deciding how to pay for your room – a lump sum or a daily fee. Some people feel pressured to make this choice quickly but we advise taking the time to make a considered decision.
You (and not the aged care provider) have the right to choose which option you want to take. And the legislation gives you 28 days after moving into care to make this choice.
In our experience, problems arise when the aged care provider does not follow the rules, or families don’t understand their rights and make the choice too quickly.
What choices do you have?
The room price is set by the aged care provider, while the government sets the interest rate that converts this lump sum into a daily fee. If you choose to pay a lump sum, the care provider must give you six months to rearrange your assets to pay the fee.
When do you need to make the choice?
No matter what an aged care provider tells you, they should not force you to make the choice before you move into care. In fact, you have the legal right to take up to 28 days after moving into care to make the decision. At the time of entry, when you sign the Resident Agreement, you only need to agree on the room price.
Despite the rules, we see many cases where providers encourage residents to make the choice when accepting the room offer. The provider might have good business reasons for taking this stance but the rules do not allow it.
If paying the lump sum works for you, there may be advantages to accepting this option. But make sure you have taken time and sought independent advice before making a decision.
Can you change your mind?
If you are unsure of the best option, you might choose the daily fee because you retain the option to change your mind and pay a lump sum later. But if you make the choice within the 28 days to pay a lump sum, the provider can hold you to this choice.
Advice can help you to make a fully informed decision. However, not all advice is good advice. Aged care independent financial advice is a specialist area. The rules change constantly, as do the available strategies. You don’t need extra stress wondering if you’ve received quality advice! Furthermore, if you are acting as a Guardian or have Power of Attorney for your parent or loved one, obtaining independent financial advice can show other family members and legal authorities such as SACAT (South Australian Civil and Administrative Tribunal) that you have acted in accordance with your fiduciary responsibilities as a Guardian or Attorney.
If you or a loved one are considering a move into aged care and would like independent financial advice to navigate the various decisions, please contact our office on 1300 451 339.
IMPORTANT INFORMATION: This article has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice.
Understanding the refund rules for RADs may remove some of the stress and worry with a move into residential care.
Room prices in aged care are usually quoted as a lump sum. Often this is a big number, which can cause a lot of worry. But this is also one of the most misunderstood areas of residential aged care. Demystifying the rules may reduce some of the worry.
The lump sum charged for a room in residential care is called a Refundable Accommodation Deposit – RAD for short. While this may look like a lot of money to hand over, it is important to realise that a RAD is not “lost” money. The amount you pay as a RAD refundable when you leave care or pass away.
If you pay a RAD, you will need to give up access to this money while you live in care, but it remains part of your wealth and is part of the inheritance that you can leave to your family.
How much is refundable?
Your full RAD paid will be refundable when you leave care. The amount refunded is only reduced if you have asked (or allowed) the provider to deduct some of your ongoing care fees from your RAD, instead of paying these amounts from your bank account or other income sources.
The rules were different before 1 July 2014, so you may have had experience with a family member who did not get all their money back in previous years. The rules are also different for retirement villages where you may lose a portion of your entry cost as a deferred management fee or refurbishment fee.
Under the current rules for residential aged care, as long as you pay your other fees in full each month, there will be nothing to deduct from the RAD and all of the money paid is eventually refunded.
Example:
Danny moves into residential aged care with a room price of $700,000. He chooses to pay this as a lump sum. All of Danny’s other ongoing care fees are paid along the way from his bank account. When Danny passes away, the full $700,000 is refunded to his estate.
When is the RAD refunded?
The aged care provider needs to refund your RAD when you leave care or pass away.
When you pass away, your executor may need to obtain probate and show a copy to the provider. The provider then has 14 days to pay the refund. If the provider does not require probate, they might have a cheque ready to pay the refund when your family come to collect your personal items.
If you or a loved one are considering a move into aged care and would like independent financial advice to navigate the various decisions, please contact our office on 1300 451 339.
The daily fees you will be asked to pay for residential aged care are based on your financial situation. But more and more providers are charging a fee for additional services, with the ability to set their own fees – so check what you are paying for.
When living in residential aged care you will face three categories of fees:
Accommodation costs – pays for your room and access to available amenities
Daily care fees (basic fee and means-tested fee) – a contribution towards your living and care expenses (eg food, electricity, care staff, cleaning services)
Additional services – extras that may add to your lifestyle or convenience (eg Foxtel, newspapers, meal choices, happy hours, transport services).
We are seeing it become more common for aged care providers to offer a package of additional services for an extra (and sometimes compulsory) daily fee. The provider can set what is included in the packages as well as the prices. This means the range of services and daily price can vary widely.
When deciding where you want to live, make sure you ask the provider for details on additional services, and the prices. Also ask which are compulsory and which are optional.
Check your resident agreement
The Resident Agreement that you will be asked to sign when you accept the offer of a room should detail the cost of your room, the type of room and what additional service fees you have agreed to pay.
For the additional services, read the details in the agreement carefully to understand:
What services you are being provided and whether they are things you want
The fee you will be asked to pay each day, and
Whether you are able to opt-out, and stop paying the fees, if you no longer want to receive the services.
If the provider wants to charge you a fee for a service that you won’t receive the benefit of, this may not be allowed. And sometimes you may be able to negotiate a lower fee or opt out of the services.
Steps to take
Some simple rules may help you to understand your obligations and rights:
Always read your Resident Agreement carefully before signing.
Ask the service provider to explain the additional service fees and help you understand what you are being asked to pay for.
Query fees for services you don’t think you need or want and find out if they are optional and/or allowed under the Aged Care Act.
If you have a dispute with the care provider, you can contact the Aged Care Quality and Safety Commission to help resolve.
One of the key planning aspects is to ensure you can create sufficient cashflow from your financial resources to pay your fees, including additional services. We can help to review your finances, calculate your fees and provide advice on how to structure your assets to meet cashflow and protect the value of your estate.
If you would like to know more about how we can be of assistance, please contact our office on 1300 451 339.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 7 March 2023.
For many people, a retirement village may offer a great retirement living solution, especially when you start to find maintenance on a home more difficult or you want convenient social interactions. You might also be able to access some personal care and home help support.
But as your care needs increase, you might be faced with the decision to move out of the retirement village and into residential aged care. This move will have financial implications and you may need to make decisions around how to structure your finances.
Exiting the retirement village
Retirement village (and land lease community) contracts are commercial arrangements and financial details vary greatly. When you leave (including for a move into residential care) the contract usually terminates and the home is sold to a new resident.
A quick summary of key financial impacts of exit is:
Retirement village (lease/licence arrangement)
Land-lease community
Amount repaid to you
Depending on the contract, you receive a refund of either the amount you paid or the sale price, less departure fees and other charges. This is often significantly less than you paid when you moved in.
You need to sell the home and receive the sale proceeds, less costs of selling.
Departure fees
Deferred management fees and refurbishment costs are generally deducted from your refund.
You may incur selling fees and expenses.
Access to capital gains
It depends on the contract whether you receive any share of capital gains, or the operator keeps all gains.
Depends on the change in market value – you receive gains if the home is sold for more than you paid.
Ongoing fees
Ongoing maintenance may be payable until sold, but for a limited number of days.
You may incur ongoing fees until your home is sold.
Paying to move into residential care
Like any property sale, the refund from the retirement village may not be paid until the unit is sold. The sale process is often out of your control and timing may be protracted. You may have more control in a land lease community, but you still need to find a buyer.
The aged care fees start when you move into care. Financial advice can help you to plan how to use your other savings to fund the costs in the interim.
Depending on the state where you live, legislation may impose rules that help with this transition by requiring village operators (not land lease) to advance some of the sale proceeds as a lump sum or daily fee to help with aged care accommodation cost.
If you would like to know more about how we can be of assistance, please contact our office on 1300 451 339.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 2 March 2023.
Lots of rules and unfamiliar jargon make understanding aged care even more complicated. This article demystifies one of the more common strategies of DAP from RAD.
Understanding aged care can be complicated enough, without needing to decipher all the jargon and acronyms. An example is the “DAP from RAD” strategy, which can be confusing if you don’t understand what all the letters mean.
This strategy is one of the most useful tools we have to make residential aged care affordable, so it is common to hear it used. The main benefit is helping to manage cashflow when paying for your room, by making your money stretch further.
The cost of a residential care room is quoted as a lump sum amount – called a Refundable Accommodation Deposit (RAD). But if you don’t want to pay the lump sum or you don’t have enough money to pay it in full, you can choose to convert all or some into a daily accommodation payment (DAP). This conversion uses an interest rate set by the government – currently 7.06% per annum.
Example:
Henry has been quoted a room price (RAD) of $500,000. He uses $100,000 from his bank account to pay part of this RAD as a lump sum. The remaining $400,000 remains unpaid and he pays $77.37 per day (ie $400,000 x 7.06% / 365 days) as a DAP.
Paying a part RAD and part DAP may solve the problem of insufficient liquid assets. But the next problem to solve is how to create enough cashflow to pay the daily fee (DAP) as well as other ongoing care fees and personal expenses.
This is where the DAP from RAD comes in. Instead of paying the DAP from either cashflow or remaining savings, you can ask the care provider to deduct the DAP from the lump sum RAD that you paid. This is a bit like tapping into another bank account – one that you thought was locked away with no access.
Example:
Henry asks the care provider to deduct the DAP from his RAD. Each month the balance of his RAD account is reduced by the DAP payable. It would take just over three years for the balance to be fully depleted. But at least Harry will be able to plan his finances, knowing that the $100,000 paid will cover his room costs (the DAP) for three years.
Paying some RAD has the benefit of reducing fees and may also help to qualify for a higher age pension as it is an exempt asset when calculating pension entitlements. Paying the DAP out of this RAD then has the benefit of managing cashflow. Getting the balance between a RAD and a DAP is the key to a successful strategy, and this is where independent financial advice can help.
If you would like to know more about how we can be of assistance, please contact our office on 1300 451 339.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 1 February 2023.
Think you can’t afford aged care? Advice on your options can help to understand what is affordable and how to best structure your finances.
When you move into residential aged care, the room price might be quoted as a lump sum, but you will have the choice to pay for your room as a lump sum or a daily fee or a combination.
In the same way that you can choose to buy or rent a home, so can you effectively choose to “buy” or “rent” your room in aged care. This choice can help with affordability if you don’t have enough assets to pay the full lump sum or don’t want to sell your assets. But there are a number of important things to consider.
If you pay a lump sum (called a refundable accommodation deposit – RAD) this is not lost money. The balance will be refunded to you or your estate when you leave, with repayment guaranteed by the Federal Government.
While you live in the aged care service, you are giving up access to your money and do not earn interest, but you will reduce the fees that you might otherwise have paid for renting the room. As interest rates increase, so may the benefits of paying the RAD. As a bonus, you might also qualify for additional age pension because the RAD is exempt for Centrelink and Veterans’ Affairs assets testing.
The decision whether to pay the lump sum or the daily fee is not an easy one and requires full analysis of your finances. You need to analyse the benefits and make sure you retain enough liquidity to meet your other ongoing expenses. Your estate plans and family situation may also impact which choice is better.
When making your choice, it is important to look beyond just the impacts when you enter care, but also what might change over time and what happens to your estate. Make your choice easier with independent financial advice.
If you want to see how we can help, contact our office today on 1300 451 339.
You may be eligible to purchase your first home with as little as a 5% deposit via the First Home Guarantee Scheme.
How does it work?
You usually need to save a deposit of 20% if you want to borrow to buy a home without needing to pay lenders mortgage insurance (LMI). Under the First Home Guarantee Scheme (formerly the First Home Loan Deposit Scheme), the Government will provide a limited loan guarantee of up to 15% of the home value. This may enable you to buy your first home with a deposit of only 5% and no LMI will be payable.
What are the key points?
You’ll need to earn less than the income limit and meet other eligibility conditions
The purchase price will be capped, depending on the property’s location.
You need to move into the home as your main residence within certain timeframes
Who may be eligible?
To be eligible for the First Home Guarantee Scheme, you must:
be an Australian citizen aged 18 years or older
earn a taxable income of less than $125,000 pa (for individuals) or $200,000 pa (for couples combined), based on the last financial year
not have owned a residential, investment or business property before
intend to be an owner-occupier of the purchased property, and
be purchasing a home (both newly built and established properties qualify under this scheme).
If you’re a couple, you must be legally married or in a de facto relationship and both of you will need to meet the eligibility criteria.
For more information about the types of properties that may be eligible and important timeframes, see www.nhfic.gov.au
What types of homes can I buy?
Under the scheme, you’re able to purchase an eligible property which includes:
an existing freestanding house, townhouse or apartment
a house and land package
land and a separate contract to construct a home, or
off-the-plan townhouse or apartment.
Certain requirements apply depending on the type of property and contract you’re entering into.
What are the property price caps?
Caps apply to the purchase price to ensure participation is spread fairly across the country. The capital city price caps will apply to large regional centres with a population over 250,000, namely the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong. The caps for the financial year 2022/2023 are as follows:
State/territory
Capital city and regional centres
Rest of state
SA
$600 000
$450 000
NSW
$900 000
$750 000
VIC
$800 000
$650 000
QLD
$700 000
$550 000
WA
$600 000
$450 000
TAS
$600 000
$450 000
ACT
$750 000
–
NT
$600 000
–
What’s the downside?
While the First Home Guarantee Scheme may help you buy your first home sooner, you need to keep in mind that a smaller deposit means a bigger loan. And a bigger loan means bigger loan repayments, as well as higher total interest payments over the life of the loan. It may be the case that the additional interest payable outweighs the LMI savings. To find out whether the First Home Guarantee Scheme is right for you, you may want to obtain independent financial advice.
Also, if you move out of your home for an extended period of time and rent your home out, the loan may no longer be guaranteed by the Government. You may need to pay additional fees and charges, as well as LMI, depending on factors such as the value of your home and your outstanding debt at that point.
Which lenders are participating and how do I apply?
Applications can be made directly via one of the approved lenders or their authorised representative (such as a mortgage broker). The Government has appointed specific lenders to the panel of mortgage lenders able to offer guarantees under the scheme.
What lending rules apply?
You’ll need to meet your lender’s normal credit criteria to ensure you can service a loan of up to 95% and provide evidence you’ve saved the 5% deposit. Loans must be principal and interest (not interest only) and terms can be up to 30 years.
What other assistance programs are available?
The First Home Guarantee scheme complements (but doesn’t directly interact with) other Government assistance programs. These include the:
First Home Super Saver Scheme, where you could save for the deposit on your first home in the concessionally taxed superannuation system
First Home Owner Grant, which offsets the effect of Goods and Services Tax on buying or building a home, and
State and Territory based stamp duty concessions.
What next?
To find out more about the First Home Guarantee and ways to fund the purchase of your first home, we recommend you seek independent financial advice. You can also find out more at www.nhfic.gov.au
Costs to send your child to a private school are a significant expense for families, so ways to lower that cost are always appreciated. Whether you should pay in advance or only as the amounts become due usually falls down to two factors: the size of the discount and the …
We found it a pleasure dealing with Jacie Taylor. After dealing with other advisers we found it pleasing to deal with an independent advisor with focus solely on providing good client advice rather than future commissions. Would recommend to family and friends.
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Marcus and Jenny Goddard25 Sep 2020
We are approaching retirement and contacted Jacie to better understand the options and considerations for our financial planning. Jacie took the time to understand our situation, what we were seeking to achieve and what that meant for us financially. Jacie then prompted us with things to consider and recommended resources. Even though we had done a lot of investigation of financial and retirement planning ourselves and attended seminars, etc, Jacie was able to identify several beneficial options we had not considered previously and explained other retirement and financial options/regulations that we had not understood well. We were exceptionally pleased with the service that Jacie provided and highly recommend Periapt to others.
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Kathleen04 Nov 2023
Jacie Taylor is brilliant and inspiring. She is the only ‘Not for Profit’ financial advisor in the country. That tells you all you need to know about her honesty and ethics. She is a trailblazer. Jacie works out of Adelaide but I just used Zoom for my consult. She is impressively well credentialed. I was unsure about whether or not I even needed an advisor, because I have a good level of financial literacy, but wow, was it worth it. She answered questions I did not know I had and her advice will add a significant amount to our retirement income. I am also very relaxed about it all now. I know she is right. I am a Mathematician and so my skills in money matters are somewhat honed, but there was so much information I simply did not have. A zoom consult that answered all my questions and more, and gave me the confidence to move forward, cost less than $400. That’s incredible. I could have opted for the Statement of Advice, which would have made more money for her firm, but she advised me against it. Even the name is cool. Periapt means a charm or an amulet. https://www.periapt.com.au/about-us/
I want Jacie’s business to grow and employ dozens of advisors like her. The winner here is anyone who sits and listens to her. Jacie, you are an inspiration to girls in STEM everywhere.
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Rebecca Smith18 Mar 2020
We were very keen to have genuinely independant advice for financial planning. Working with Jacie was a pleasure, she was very thorough, simplified concepts for us, and set us a plan that is achievable, tailored to our situation and meets our purpose. Very highly recommended.
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Wayne06 Feb 2019
Jacie was absolutely brilliant from the 1st time we made contact right through to the end where she patiently delivered and made sure we fully understood our statement of advice.
Due to being fully independent Jacie seeks the products that best suit your needs, not the product that pays the biggest commission like other financial advisers I've seen in the past.
Well done Jacie, I'll be sure to recommend you to family and friends seeking a friendly and genuinely independent financial advisor.
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Susan R23 Feb 2022
I went to see Jacie at Periapt on the advice from family Jacie has listened to my concerns worked through everything even when I sent her some curve balls during this time her understanding of the industry was incredible and very professional she explained everything in detail spending more than enough time helping me I couldn't be happier with the advice and guidance Jacie gave A1 Independent Financial Advisor would highly recommend to family and friends Thank you Jacie Cheers Susan
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A Google User23 Jul 2020
Jacie clearly cares about your journey, which she demonstrates by setting enough time aside to get to know you in your first session. Her professionalism, intelligence and thoughtful advice reassures you that you are in the right hands. Jacie was very supportive of our financial education by ensuring that we understood relevant products to our situation. This has enabled us to make informed decisions around our finances. She showed her ethics by carefully providing advice and letting us know where she could not give more information for various reasons. If she could not give the answer, she pointed you in the right direction of where you could access the information you were seeking. I highly recommend Jacie if you are looking for advice and guidance from an independent financial advisor.
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A Google User05 Apr 2020
Jacie was awesome, explained everything at my speed and was highly flexible with phone meetings as I live interstate. Great job Jacie - thanks again
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A Google User16 Apr 2019
I went to see Jacie recently and followed her excellent advice to change to another fund. She listened to my concerns and expectations and came up with a brilliant plan. I couldn’t be happier with the guidance and am delighted with the service she gave me.
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Sue Lamberts30 Jun 2021
On meeting Jacie I immediately felt at ease due to her warm and friendly manner, as well as the relaxed, inviting atmosphere of her rooms. Jacie spent time making sure she knew exactly what I wanted, and came up with the perfect plan for me; and not only patiently explained it in terms that were easy to understand, but provided all the written information I needed, plus copies of all the documents I needed to access to put her plan into action. Knowing she is an independent adviser gave me the confidence that I would recieve the best advice I could get. Jacie put me totally at ease about my retirement, when previously I had been very anxious about it. Jacie is a delightful person with amazing knowledge, and I have recommended her to many friends. Thanks Jacie. I'll be eternally grateful.
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k v05 Apr 2020
Jacie was awesome, explained everything at my speed and was highly flexible with phone meetings as I live interstate. Great job Jacie - thanks again
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Nadia Lill Rose23 Jul 2020
Jacie clearly cares about your journey, which she demonstrates by setting enough time aside to get to know you in your first session. Her professionalism, intelligence and thoughtful advice reassures you that you are in the right hands. Jacie was very supportive of our financial education by ensuring that we understood relevant products to our situation. This has enabled us to make informed decisions around our finances. She showed her ethics by carefully providing advice and letting us know where she could not give more information for various reasons. If she could not give the answer, she pointed you in the right direction of where you could access the information you were seeking. I highly recommend Jacie if you are looking for advice and guidance from an independent financial advisor.
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A Google User18 Mar 2020
We were very keen to have genuinely independant advice for financial planning. Working with Jacie was a pleasure, she was very thorough, simplified concepts for us, and set us a plan that is achievable, tailored to our situation and meets our purpose. Very highly recommended.
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Chris Taylor10 Jun 2018
Very happy with the estate planning services - thanks very much
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Helen Rowan31 Jul 2023
I am extremely happy to have followed Jacie’s advice at Periapt Advisory. I only wish I had done this a lot sooner.
Jacie has always been very prompt in responding to my queries. I felt that she was genuinely interested in my needs and her obvious expertise has been very reassuring.
The Statement of Advice provided by Jacie was surprisingly easy to follow and made a lot of sense.
My new fund has already made impressive gains in a very short period.
I am so impressed with Jacie and Periapt Advisory and would highly recommend Jacie to others.
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Helen Rowan01 Aug 2023
Periapt Advisory and Jacie Taylor have provided me with the knowledge and expertise I needed to make better informed decisions moving forward.
I also want to give a huge shout out to Marco, who has gone above and beyond to respond so quickly and informatively whenever I had a query or concern. Thanks so much Marco for validating my queries and reassuring me that I was on track. Marco, you have been an amazing help, again, thank you very much.
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Marijke Genet16 Apr 2019
I went to see Jacie recently and followed her excellent advice to change to another fund. She listened to my concerns and expectations and came up with a brilliant plan. I couldn’t be happier with the guidance and am delighted with the service she gave me.
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Emma12 May 2021
My partner and I were extremely pleased with Jacie and her process. She ensures you understand what she is saying before, during and after her recommendations. We really felt like she listened to our requirements and tailored a solutions especially for us, and felt secure that as an independent, the advice wasn't bias. Jacie is very knowledgeable, but also lovely and personable, and she made our financial planning less daunting, so thank you Periapt!
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Paul Short04 Oct 2018
Highly recommend Periapt Advisory for honest totally independant advice. Not driven by sales targets or pushing financial products, like other advisors I have seen in the past.
Advice tailored to suit your personal situation.
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Polly Waffle18 Mar 2020
We really valued the completely independant advice that Jacie gave us in relation to financial planning. She worked only on our behalf and the end result was a plan that was very easy to read, comprehensive and could be implemented step by step. I would recommend Jacie to friends and family looking for independant financial advice
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Cameron Ritchie09 Mar 2021
My consultation with Jacie was truly valuable. Jacie was so personable and really got to know who I was and what drives me, and then shared a great breadth of options that I could start investigating myself. She also showed me some great options I hadn’t thought of myself. I feel empowered to forge my own journey, and will definitely seek Jacie’s advice in future if I need. Thank you Jacie!
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Sharon28 Aug 2020
Jacie quite simply exceeded our expectations and we refer her to any of our friends or colleagues who need financial advice.
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Sarah & Brendan28 Aug 2020
We came to Periapt Advisory with quite specific needs and they were completely satisfied. Jacie was very thorough, guiding us through the process of implementing her advice which saved us thousands of dollars. We will be returning for her advice.
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A Google User06 Feb 2019
Jacie was absolutely brilliant from the 1st time we made contact right through to the end where she patiently delivered and made sure we fully understood our statement of advice.
Due to being fully independent Jacie seeks the products that best suit your needs, not the product that pays the biggest commission like other financial advisers I've seen in the past.
Well done Jacie, I'll be sure to recommend you to family and friends seeking a friendly and genuinely independent financial advisor.
read moreread less
Wayne Cocks06 Feb 2019
Jacie was absolutely brilliant from the 1st time we made contact right through to the end where she patiently delivered and made sure we fully understood our statement of advice.
Due to being fully independent Jacie seeks the products that best suit your needs, not the product that pays the biggest commission like other financial advisers I've seen in the past.
Well done Jacie, I'll be sure to recommend you to family and friends seeking a friendly and genuinely independent financial advisor.
read moreread less
Nadia23 Jul 2020
Jacie clearly cares about your journey, which she demonstrates by setting enough time aside to get to know you in your first session. Her professionalism, intelligence and thoughtful advice reassures you that you are in the right hands. Jacie was very supportive of our financial education by ensuring that we understood relevant products to our situation. This has enabled us to make informed decisions around our finances. She showed her ethics by carefully providing advice and letting us know where she could not give more information for various reasons. If she could not give the answer, she pointed you in the right direction of where you could access the information you were seeking. I highly recommend Jacie if you are looking for advice and guidance from an independent financial advisor.
