Financial advisers who have clients thinking about moving into aged care must act quickly to avoid new fees and stricter income treatment, warns Richard Atkinson, Austock Life’s head of IFA product and relationships.
While changes to Australia’s aged care legislation were announced by the government in March last year, a grandfathering provision means those going into aged care accommodation have until 30 June to do so under the old rules.
Planners who have clients who want to go into aged care in the near future would be wise to suggest entry into care is brought forward to before 1 July, as it will cost more under the new regime, Atkinson says.
This includes having the admittance date and all financial arrangements, such as income friendly investment structures, in place before that date.
Atkinson says a considerably harsher means test for aged care – starting 1 July, the family home valued up to $144,500 is included in the assets of retirees – means more people will probably keep the family home when making aged care arrangements after the new rules come into effect.
“It’s important that anyone contemplating entering aged care any time soon fully understand what impact new rules will have on the both the cost of care, and their age pension, plus any other financial implications.”
While there are another three and a half months before the new rules apply, people need to make sure they receive the right advice before they act, Atkinson says.
“Getting the wrong advice could have the same negative outcome as waiting too long – [such as] thousands of dollars in additional costs and lost pension payments.”
However, there are ways of structuring financial assets to maximise pension and minimise income tested fees, he says.
One strategy is to place financial assets into an insurance bond as the sole asset of a sole purpose or bare trust.
“This works because trusts must be assessed – by Centrelink and the DVA – for income purely on a taxable income and not a ‘deemed income’ basis,” says Atkinson.
This restructuring can be done at low cost without ongoing expense or reporting, he says.
From 1 July, all aged care facilities will be entitled to charge bonds. Accommodation bonds will be changed to refundable accommodation deposits, and periodic payments and accommodation charges will be replaced by daily accommodation payments.