- By Jay Burke/Delta Smith
(Fine Answers podcast – Aged Care Ep #149)
If you’ve been feeling a bit of “future-stress” regarding aged care, you aren’t alone. On November 1st, Australia ushered in a New Aged Care Act, marking one of the most significant shifts in the system in decades.
The goal? Greater transparency. The reality? A more complex financial landscape for families to navigate. Whether you are looking at support for yourself or helping an aging parent, the “wait and see” approach is quickly becoming a thing of the past. Here are the key takeaways from our recent discussion on how these changes impact your long-term planning.
The Cost of Care is Changing
The new legislation shifts more responsibility onto the individual. While Australia’s safety net remains robust, it is strictly means-tested. Your income and assets dictate your co-contribution, making it vital to understand your cash flow long before a move is necessary.
One of the biggest shifts involves the Refundable Accommodation Deposit (RAD). Previously, this lump sum was fully refundable. Under the new rules, facilities can now retain a portion of that deposit—up to 2% per year for five years (source: Dept of Health, Disability and Ageing). Additionally, if you opt for daily payments instead of a lump sum, those interest rates are now subject to indexation twice a year. This means the “price tag” of care is no longer static; it’s a moving target.
Proactive Planning vs. Crisis Management
We often see families reach out only after a “trigger event”—a fall, a sudden hospitalisation, or a rapid decline in health. In these moments, decisions are forced by urgency rather than preference.
The new “single assessment system” aims to streamline entry, but the paperwork and eligibility hurdles remain high. By starting the conversation early, you allow for “considered decisions.” You can model how your superannuation, investments, and the age pension will interact with various care scenarios, ensuring there are no “cash flow surprises” when the time comes to transition.
The Family Home and the “Protected Person”
A common point of anxiety is what happens to the family home. It’s important to understand that the rules differ significantly based on your circumstances. For couples, if one partner remains in the home while the other enters care, the home is generally not assessed as an asset. However, for a single person, the home is treated differently unless a “protected person” (like a long-term carer or an eligible relative) lives there. Understanding these definitions is a crucial step in protecting your estate’s value.
The Critical Role of Estate Planning
Aged care isn’t just about finances; it’s about authority. We cannot stress this enough: do not wait to establish your Power of Attorney. Once a loved one loses the capacity to make decisions—whether due to an accident or the progression of dementia—it becomes exponentially more difficult (and legally complex) to get these documents in place. Being proactive ensures that your wishes are respected and that your family has the legal standing to advocate for you.
Conclusion
The recurring theme of the New Aged Care Act is individual responsibility. As our population ages, the government is looking to individuals to fund a larger portion of their lifestyle and clinical care.
Navigating these waters alone can be overwhelming, both emotionally and financially. Our role is to act as your “second brain,” helping you model potential outcomes and ensuring your estate and lifestyle are protected. The best time to talk about aged care isn’t when the ambulance is in the driveway—it’s now, while you have the clarity and time to choose your path.
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, AMP and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.
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