Article Summary: 

Navigating the financial aspects of aged care can be overwhelming. With reforms taking effect from 1 July 2025, understanding costs, entitlements, and planning strategies is more crucial than ever. This guide addresses the top 15 financial questions Australians are asking, providing clarity and peace of mind during this significant life transition.

1. Do I have to sell Mum and Dad’s house to pay for aged care? 

Not necessarily. The family home is exempt from the assets test for up to two years if a protected person (e.g., a spouse or dependent child) continues to live there. After this period, the home may be counted as an asset, affecting aged care fees and pension entitlements. Important to keep in mind from an aged care assessment the house has a capped value $206,663.20 (as at 20 March 2025). Additionally the sale of the house could have negative implications on the ongoing aged care costs. It’s essential to seek financial advice to explore options like renting the property or structuring payments to avoid unnecessary asset liquidation. 

2. What are the different types of aged care fees? 

Aged care fees typically include: 

  • Basic Daily Fee: Covers daily living costs, set at 85% of the single basic Age Pension. 
  • Means-Tested Care Fee: An additional contribution based on income and assets. 
  • Accommodation Payment: Can be a Refundable Accommodation Contribution (RAC), Daily Accommodation Payment (DAP), or a combination. 
  • Extra Service Fees: For additional services or higher standards of accommodation.  

Please note: this cost structure is set to change come July 1, 2025 

3. How is the Means-Tested Care Fee calculated? 

Services Australia assesses your income and assets to determine this fee. Factors include: 

  • Income from pensions, investments, and other sources. 
  • Assets such as property (excluding the family home under certain conditions), savings, and investments. 

The assessment ensures those who can afford to contribute more do so, while government subsidies assist those with fewer resources.  

4. Can I rent out the family home to help cover costs? 

Yes, renting the home can provide income to cover aged care fees. However, rental income is counted in the income test, potentially affecting pension entitlements and increasing the Means-Tested Care Fee. In some cases, expenses relating to the home if rented can be used to offset the income. It’s advisable to consult a financial advisor to assess the implications. 

5. How does entering aged care affect the Age Pension? 

Entering aged care can impact pension payments. The value of assets and income, including rental income from the family home, is reassessed. Depending on the outcome, pension payments may decrease or remain unchanged. Regular reviews ensure entitlements reflect current circumstances.  

6. What is the difference between RAC and DAP? 

  • RAC (Refundable Accommodation Contribution): A one-time lump sum payment made by certain residents towards their costs of aged care. The amount of RAC payable by an aged care resident is determined by their level of financial means at any given time. 
  • DAP (Daily Accommodation Payment): An ongoing daily payment based on the RAD amount and current interest rates. 
    Residents can choose to pay via RAD, DAP, or a combination, depending on financial circumstances.  

For more information around accommodation payments and contributions for residential aged care visit health.gov.au. 

7. Are there government subsidies available for aged care? 

Yes, the Australian Government provides subsidies for the cost of care to reduce the financial burden on individuals (there is a list of approved aged care providers). Eligibility and subsidy amounts are determined through income and assets assessments.  

8. What financial information is required for aged care assessments? 

You’ll need to provide details about: 

  • Income sources (pensions, investments, etc.). 
  • Assets (property, savings, shares, superannuation). 
  • Liabilities (debts, loans). 
  • Details of any entities (company/trusts). 
    This information helps determine eligibility for subsidies and the amount of fees payable.  

9. Can I use superannuation to pay for aged care? 

Yes, superannuation funds can be accessed to cover aged care costs. However, withdrawing large sums may have tax implications and affect pension entitlements. It’s crucial to seek advice to structure withdrawals effectively. 

10. What happens if I can’t afford aged care fees? 

If you’re unable to pay, you may be eligible for financial hardship assistance. This support considers your financial situation and ensures access to necessary care services.  

11. How do I apply for financial hardship assistance? 

Applications are made through Services Australia. You’ll need to provide comprehensive financial information to support your claim. Approval is subject to meeting specific criteria.  

12. What is the process for a financial assessment? 

After initiating contact with My Aged Care, you’ll be referred for an assessment by the Aged Care Assessment Team (ACAT). Following this, Services Australia conducts a financial assessment to determine fees and subsidies applicable to your situation.  

13. Can family members contribute to aged care costs? 

Yes, family members can assist financially. However, significant contributions may be considered gifts, potentially affecting the resident’s asset assessment and pension entitlements. It’s advisable to document contributions and seek financial advice as any changes may lead to estate implications. 

14. Are there tax implications when selling assets to fund aged care? 

Selling assets like property or shares may trigger capital gains tax (CGT). The impact depends on factors such as the type of asset, ownership duration, and exemptions available. Consulting a tax professional is recommended to understand obligations. 

15. Where can I get professional financial advice for aged care planning? 

Engaging with a financial advisor experienced in aged care can provide tailored strategies to manage costs, protect assets, and maximise entitlements. Cosca’s Personal Wealth advisers specialise in guiding families through these complex decisions. 

Do you have more questions? We can help you! 

Understanding the financial landscape of aged care is vital for making informed decisions. With the upcoming reforms, staying informed and seeking professional advice ensures that you or your loved ones receive the necessary care without undue financial strain. Cosca’s Personal Wealth advisers are here to support you through every step of this journey. 

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