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Assessing the former home when moving to permanent residential care

Decisions regarding the family home can be complex. There are strict rules as to how the former home will be assessed when a person moves to permanent residential care. These rules are different depending if the assessment is in relation to their aged care status and means tested care fees or their Centrelink/DVA pension entitlements.

In this article, we look at these rules as they apply to a resident entering care from 1 January 2017 and consider their impact to the resident’s aged care costs and pension entitlements.

We’ll also be running a webinar on this topic on Thursday 25 June at 1pm.

Aged Care Status and Aged Care Fee Assessment

For a single person, their former home is usually assessed under the asset test up to the capped rate unless the net market value of the home is lower. The current capped rate is $171,535.20 (as at 1 June 2020). For couples, 50% of the home is generally assessed as an asset, with the capped rate applying individually to each member of the couple.

The exception to this rule is when a protected person is living in the home, in which case the asset assessment value is nil. The exception only applies whilever the protected person remains living in the home and continues to qualify as a protected person. There are no time limits on this exemption.

The aged care rules define a Protected Person to be a:

  1. Partner or dependent child
  2. Carer, who’s eligible to get an Australian Government Income Support Payment and has lived in the person’s home with them for the past 2 years, or
  3. Close relative, who’s eligible to get an Australian Government Income Support Payment and has lived in the person’s home with them for the past 5 years.

If a single person owns a home with no protected person living in it on the day of permanent entry, their Aged Care Status will be assessed as a market/RAD payer so long as the home had a net market value which was greater than or equal to the capped rate.

We often find when a protected person is living in the home on the day of entry, the resident is assessed as a Low Means/Concessional resident at the time of entry. However, if the protected person leaves the former home or they no longer qualify for an income support payment, the value of the former home will increase up to the capped rate. This results in the Resident’s Daily Accommodation Contribution (DAC) increasing up to the facility’s Maximum Accommodation Supplement and they may be required to also pay a Means Tested Care Fee.

If the home is rented, the net rental income is assessed under the income test for the aged care status and aged care fee assessment unless the rental income simply covers the outgoings.

Centrelink and DVA pension entitlement

The former home will generally be exempt from the Centrelink/DVA Assets test for two years from the date of entry to permanent residential care. On the second anniversary of the resident’s entry to care, their former home will be assessed at the then net market value. Their Centrelink/DVA homeowner status changes & this may result in their pension entitlement being significantly reduced or cancelled.

The main exception to this rule is if a partner remains living in the home. In this situation, the two-year exemption commences on the day the partner ceases living there.

Interestingly, if a dependent child, a carer or close relative who qualifies as a ‘protected person’ under the aged care rules continue living in the home, the home will remain an exempt asset for the aged care fee assessment but not for their Centrelink/DVA pension entitlements.

Again, if the home is rented, the net rental income is assessed under the income test for the Centrelink/DAV Income test unless the rental income simply covers the outgoings.

 

What’s next? Join our webinar

We’ll be sharing some real-life examples to highlight the impact of the Aged Care assessment process of the former home on the resident’s aged care status and care fees as well as their pension entitlements.

There will be plenty of time to answer all of your questions too so join us:

Thursday, 25 June 2020

1:00pm – 1:45pm AEST

From the last webinar …

Read the detailed answers to the quiz as well as answers to the most common questions from attendees during our last webinar on the topic of Accommodation Payments – options in times of uncertainty.