1. Aged Care Advice Workshop
Rachel Lane, Principal, Aged Care Gurus

2. Today’s Session
Aged Care 101: Accommodation Payments and Means Testing
Impact of the changes that occurred on 1 January 2016
Financial planning considerations post these changes
Proposed changes to the treatment of the home from 1 January 2017
Changes to the assets test for pension entitlements from 1 January 2017
Financial planning strategies you can use to safeguard your clients' pensions
Where to next?

3. Aged Care In Australia - TODAY
Last year over 1 Million people received care
949,931 care in their own home
224,222 permanent residential aged care
46,851 residential respite

4. Aged Care In Australia - 2050
Around 3.5 million people will receive care
2.8 million care in their own home
700,000 permanent residential care

5. Aged Care Fees and Charges
Basic Daily Fee
RAC/DAC
RAD/DAP
Means Tested Care Fee

6. One Formula does it all!
50c per dollar of income above $25,792p.a (single) $25,324p.a (couple) plus 17.5% of assets between $46,500 - $159,631 1% of assets between $159,631 - $385,894 2% of assets above $385,894

7. One Formula does it all!
Less than $54.39p.d = Low Means Resident Calculated amount is maximum Daily Accommodation Contribution (DAC) More than $54.39p.d = Market Price Resident Amount above $54.39p.d is Means Tested Care Fee

8. Budget 2015
Budget 2015

9. The Changes in a Nutshell
Residents who entered care AFTER 1 January 2016 will have the rent from their former home included in the Aged Care Means Test
The rent will continue to be exempt from the calculation of DVA/Centrelink Pension, where the resident is:
Paying towards the cost of accommodation by Daily Accommodation Contribution (DAC) or Daily Accommodation Payment (DAP) AND
Renting the former home

10. More change … MYEFO

11. What the changes have meant
Some residents are struggling for cash flow
Low RAD or low rent
Deducting DAP from RAD
Compound interest debt
Reverse Mortgage
Debt doesn’t always offset RAD
Children paying the RAD
AAT Case – Whitby vs Dept Secretary
Sell the House

12. Case Study – Mary Mary is 83 House $850,000, rent $500p.w
Cash $120,000
Personal Effects $20,000
Facility Market Price $400,000 RAD or $63.12 DAP
Estimated expenses of house $4,000p.a
Mary is going to pay $50,000 from her cash towards her RAD

13. Case Study – Mary If Mary moved pre 1/1/16 Basic Daily Fee $48.44
Daily Accommodation Payment (DAP)
$58.88*
Means Tested Care Fee
$3.85
Out of Pocket Expenses
$10
Total
$121.17p.d/$44,227p.a
Age Pension
$877pfn/$22,805p.a
Rent
$26,000p.a
Less expenses (rates, insurance, agent fees etc)
$4,000p.a
$1,400p.a
$46,205p.a
Cash Flow
$1,978p.a

14. Case Study – Mary If Mary moved post 1/1/16 (now) Basic Daily Fee
$48.44
Daily Accommodation Payment (DAP)
$55.23* (1/10/ /12/2016)
Means Tested Care Fee
$30.32
Out of Pocket Expenses
$10
Total
$143.99p.d/$52,556p.a
Age Pension
$877pfn/$22,805p.a
Rent
$26,000p.a
Less expenses (rates, insurance, agent fees etc)
$4,000p.a
$1,400p.a
$46,205p.a
Cash Flow
-$6,351p.a

15. Case Study – Mary If Mary moved post 1/1/17 Basic Daily Fee $48.44
Daily Accommodation Payment (DAP)
$55.23*
Means Tested Care Fee
$17.08*
Out of Pocket Expenses
$10
Total
$130.75p.d/$47,724p.a
Age Pension
$506pfn/$13,156p.a*
Rent
$500p.w/$26,000p.a
Less expenses (rates, insurance, agent fees etc)
$4,000p.a
$1,400p.a
$36,556p.a
Cash Flow
-$11,168p.a

16. Pension Changes – 1 Jan 2017

17. In a Nutshell - Singles Single Homeowner NOW 2017 Single Non-Homeowner
Asset Test Threshold
$209,000
$250,000
$360,500
$450,000
Asset Test Cut Off
$793,750
$542,5000
$945,250
$742,500

18. In a Nutshell - Couples Couple Homeowner NOW 2017 Couple Non-Homeowner
Asset Test Threshold
$296,500
$375,000
$448,000
$575,000
Asset Test Cut Off
$1,178,500
$816,000
$1,330,000
$1,016,000

19. Watch out for the income test!
Winners
People with assets over the threshold now but under after 1 January 2017
Betty is a single homeowner with $248,000 of assets, her entitlement now is $819pfn it will be $877pfn* post reform.
Watch out for the income test!
If Betty’s assets were $240,000 in investments and $8,000 personal her pension would only increase to around $823pfn*

20. Winner, Winner Chicken Dinner
If Betty:
Keeps $150,000 in cash
Invests $90,000 in Austock BCT
$8,000 personal assets
Age Pension $823pfn $877pfn
Increase $1,404p.a or 1.56% +Bond Earnings

21. Not yet a winner
Shirley is a non-homeowner $440,000 cash $8,000 personal assets Age Pension Now $698pfn Age Pension Post 1 Jan $698pfn

22. Winner
Shirley is a non-homeowner $150,000 cash $290,000 Austock BCT $8,000 personal assets Age Pension Post 1 Jan $698 $877pfn Increase $4,654p.a or 1.6% + bond earnings

23. Losers Fred and Shirley have $600,000 in investments
and $50,000 in personal assets.
Pension now $792pfn (combined) + Int $15,000
= $35,592p.a
Pension after $497pfn* (combined) + Int $15,000
= $27,922p.a
Their investments need to produce an extra $7,670p.a

24. Case Study - Jack Jack sold his home to pay a $500,000 RAD
$450,000 cash
$20,000 personal assets
Cost of Care
Basic Daily Fee $48.44 p.d
Means Tested Care Fee $44.92p.d.
Out of Pockets $10p.d
= $37,726p.a
Pension $17,993p.a

25. Case Study - Jack If Jack keeps $150,000 cash
Invests $300,000 Austock BCT
$20,000 personal assets
Cost of Care
Basic Daily Fee $48.44 p.d
Means Tested Care Fee $38.31p.d red $2,413p.a
Out of Pockets $10p.d
= $35,313p.a
Pension $21,245p.a increase $3,252p.a
Benefit $5,665p.a or 1.9% plus Bond Earnings

26. Everyone pays Basic Daily Fee $9.97p.d
Home Care packages
Everyone pays Basic Daily Fee $9.97p.d
Relationship
Income Threshold
Income Tested Care Fee
Capped at
Single
$25,792p.a
@ 50 c per dollar
Full pensioners $0
Part pensioners
$5,208p.a
Self-funded retirees
$10,416p.a
Couple
$20,025p.a
Couple Ill Sep
$25,324p.a

27. Changes to Home Care Packages
HCP assigned to consumer rather than provider
Approval at specific level 1,2,3 or 4 not banded 1,2 or 3,4
My Aged Care will manage wait list and prioritisation
HCP is portable nationally
Unspent funds transfer to new provider
Subsidies are paid to nominated provider
Changes to criteria for being approved provider
Existing providers of RAC or flexi will have simplified process

28. Case Study June
June is 82, single pensioner receiving a Home Care Package House $800,000 Bank $40,000 Term Deposits $200,000 Personal Assets $10,000 June currently receives $816pfn pension (asset test) Pays $1.64p.d Income Tested Care Fee Post reform her pension will be $823pfn*

29. Case Study June
If June keeps $140,000 in investments and invests $100,000 in an Austock BCT Her pension will be $877pfn* an increase of $54pfn/$1,404p.a. Her HCP Income Tested Care Fee will be $0 A reduction of $599p.a 1.43% + bond earnings

30. Case Study Bill Bill 85, single pensioner receives a Home Care Package
House $1.2M
Cash $300,000
Term Deposits $400,000
Personal Assets $20,000
Defined Benefit Super $15,000
Bill’s pension now is $110pfn, post reform $0
Income Tested Care Fee $18p.d

31. Case Study Bill
If Bill kept $300,000 in investments and put $400,000 in an Austock BCT His pension would be $0 post 1 Jan His Income Tested Care Fee would be $0 - a saving of $6,409p.a But how does Bill meet his cash flow needs?

32. Case Study Bill Bill needs $45,000 per year to live comfortably
If he creates a $25,000p.a “income stream” from his bond (assume 3% return)
Year
Assessable Income
Non Assessable 1
$738
$24,262 2
$1,454
$23,546 3
$2,149
$22,851 4
$2,824
$22,176 5
$3,478
$21,522
In 5 years time Bill’s bond is still worth $332,000

33. Austock Distribution Team Distribution Managers
Where to Next?
Austock Distribution Team
Head of Distribution & IFAs
Richard Atkinson
National Sales Manager
Tony Gobbo
Distribution Managers 
NSW & ACT
Jeff Rodgers
Joanna Bator
QLD & NT
Niall Nugent
VIC & TAS 
Angela Laughlin  
Melanie Fairbairn
WA & SA
Bob Scherini
Workshops
PD Days
Support Services
Books