Aged care services can come at a steep price. It is no wonder many older Australians or their children consider selling or renting out their family homes to pay for care when planning to move into trustworthy aged care facilities in Australia.
The property value plays a key role in the income and assets assessment conducted by authorised government bodies, such as the ACAT. This formal assessment determines if you need to pay the means-tested care fee and accommodation fee, how much you need to pay, and until when.
In Australia, you will be asked to pay a bit more if it is determined that you are financially capable of doing so. What one can afford is determined by the individual’s assessed income and assets. So, if you are getting aged care Hampton or palliative care Townsville has to offer, for example, your home is counted as an asset, except under the following circumstances:
- Your spouse or children (dependent) use the family home as their residence
- You have a carer living in the family home for at least two years who are eligible under the Australian Government income support payment.
- You have a relative living in the family home for at least five years who are eligible under the Australian Government income support payment.
- Your home’s value is capped at $166,707.20. If the fair market value (FMV) of your home exceeds $166,707.20, it will be listed as an asset at this amount. If the FMV is lower than the cap, the entire FMV amount is included in your assessment.
If you are entering an aged care residence, like Arcare residential care, as a couple, you are considered co-owners of your combined assets and income. The home value cap applies to each of you.
Most who are shopping for trustworthy aged care facilities in Australia consider selling their family homes to pay for the lump-sum amount (Refundable Accommodation Deposit or RAD).
But there is an option to pay in smaller instalments, otherwise known as the Daily Accommodation Payment or DAP. Because of this option, some decide to convert their family home into a rental and use the income to pay for the DAP. Check Arcare for more details.
Note that any income from renting out your property is counted as an income during your assessment.
However, your rental income is excluded from your assessment if these three conditions are met:
- You entered the facility before January 1, 2016
- You paid your accommodation payment in installments
- You applied your rental income to defray a portion of or the total of your accommodation payment
The government removed the exemption beginning January 1, 2016, to align residents who paid in installments with those who paid in lump-sum. The caps, annual and lifetime, are in place to protect residents from paying more than they have to.
Selling and converting your family home into a rental are common measures used to finance your or a loved one’s needs to live in a residential aged care facility. Each option has its own pros and cons, so make sure you get a good sense of which is most compatible with your current financial state.
Check out your options for residential living in trustworthy aged care facilities in Australia at arcare.com.au.