If you're moving into an aged care facility you'll be asked to complete a combined income and asset assessment. This is used to ascertain how much, if any, funding the government will provide to the facility for your accommodation and care.
What most people don't realise is that this assessment is not compulsory, and can be futile. Whether taking the time to fill it out is a good idea is going to depend on your financial situation and the value of the care you receive.
Let's start with your financial situation.
The residential aged care means test is a fairly complicated formula that uses an asset test and income test. Note, if you're a member of a couple, assets and income are counted as 50/50 regardless of who owns them.
The income test calculates 50c in every dollar of income above $26,328 a year for a single person or $25,860 a year for a member of a couple. The asset test adds 17.5 per cent of assets in the $47,500-$162,815 range, plus 1 per cent of assets in the $162,815-$393,446 range, plus 2 per cent of assets above $393,446. You add the results of both tests together to calculate your contribution over a year, then divide by 364 to figure out the daily rate.
Or you could try the government calculator at myagedcare.gov.au/estimate-fees-for-aged-care-services.
People with a calculated amount below $55.44 a day are considered financially disadvantaged, or "low means"; they have some or all of their accommodation cost subsidised by the government.
Most people have a calculated amount above $55.44 a day, meaning that they need to pay the market price for their accommodation. The amount above $55.44 a day is their contribution to their care, which is known as the means-tested care fee.
For example, Betty has recently sold her house and paid a refundable accommodation deposit of $750,000. This leaves her with personal assets of $30,000, income of $30,000 a year and investments of $1,250,000. Her calculated amount is about $211.51 a day.
Now let's look at the value of the care you will receive.
The daily funding the facility receive depends on your care needs, which are classified as nil, low, medium or high in three categories: behaviour, activities of daily living and complex healthcare. The facility can also receive supplements for special care needs such as oxygen and enteral feeding.
Put simply, the value of your care is the amount the facility would receive from the government if you paid nothing.
Why does it matter? Because you can't pay more for your care than the government would ??? it's like an invisible cap. So even if your financial means created a means-tested care fee of $200/day, if the value of your care was $100/day your means-tested care fee would be limited to $100/day.
Whether you disclose your means or not, you are still entitled to the annual cap of $26,567 and the lifetime limit of $63,760 (which includes any income-tested contributions for a home care package).
Let's look again at Betty's example.
Betty is a self-funded retiree, with a calculated means-tested care fee of $156 a day ($211.51-$55.44). If her cost of care is $105 a day, this is the "invisible cap" and the amount she can be asked to pay, whether she discloses her assets and income or not. Betty would reach her annual cap of $26,567 in 254 days, at which time she would stop paying a means-tested care fee for the year.
In fact, a means-tested care fee of anything over $73 a day would mean that Betty reaches the annual cap.
Now time becomes important. How long will you receive care for? Whether your means-tested care fee is $73 a day or $203 a day you still won't pay more than $26,567 a year in total, it's just a question of how quickly.
Paying less than you expected is always a pleasant surprise; paying less and avoiding arduous paperwork is even better. Make sure you know the cost either way.
Rachel Lane is the principal of Aged Care Gurus and has co-authored a number of books including Aged Care, Who Cares? This is a new fortnightly column on retirement living. Email: firstname.lastname@example.org
The story Applying for aged care? Pause before you disclose finances first appeared on The Sydney Morning Herald.