Understanding the cost of aged care

By Cutcher & Neale - February 10, 2021

The costs associated with residential aged care can be complex and difficult to understand. Navigating through these options, particularly if the need is urgent, can be a very stressful process for those going into care as well as their families.

 That is why discussing aged care needs with an experienced advisor is the key to making informed decisions.

The contribution to the cost of aged care can be divided into three broad categories:

  1. Accommodation payments which pay for the room and amenities.
  2. Daily care fees which pay for daily living expenses and nursing care.
  3. Additional service fees which pay for additional packaged services and lifestyle choices.

Accommodation Payments

This is the contribution towards the cost of the room and other amenities in the aged care facility.

This is quoted as a lump sum which is called a Refundable Accommodation Deposit (RAD) as well as the equivalent Daily Accommodation Payment (DAP). Residents have the option to pay the lump sum or the daily payment or a combination of both.

Daily Care Fees

The Basic Daily Fee is payable by all residents and is set as 85% of the single age pension. This is the contribution towards the cost of care including meals, cleaning, laundry, electricity and nursing care.

The government will also assess an individual or a member of a couple’s assets and income to calculate an amount known as the ‘means-tested amount’. If assets and income are above a certain level, then a Means Tested Fee will also be payable.

Additional Service Fees

Aged Care facilities are also able to provide additional services such as choice of meals, hairdressing, newspapers and so on, for an additional fee. These may be optional or compulsory depending on the facility.

Once a suitable residential aged care facility is selected the next step is to work out the applicable fees and then how these are to be funded. This can be a complex process with many interdependent variables to take into account.

How to find some help

Making an informed decision about aged care is incredibly important. Making the wrong decision can have far-reaching consequences for the whole family. When Aged Care decisions go badly, the stress can lead to family conflicts.

The first place to start is reviewing your current financial position. The Cutcher & Neale Aged Care team can then model various scenarios and forecast cash flow and net asset positions considering initial and ongoing Aged Care fees.

These scenarios illustrate the consequences of key decisions such as what to do with the family home, how to fund initial and ongoing fees and what effect each has on government entitlements such as the Age Pension.

Aged care is a complex and constantly changing area. Getting good quality advice at the right time is key. You don’t need extra stress wondering if you’ve made the right decision.

If you or a loved one are considering a move to a residential aged care facility contact our aged care team to discuss.        


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