When entering a residential aged care facility, residents have the choice of paying some or all of their costs for accommodation as a lump sum. This option is available for residents paying either a:
1. refundable accommodation deposit (RAD) or
2. refundable accommodation contribution (RAC)
However, residential aged care facilities are subject to a ‘minimum permissible asset requirement’ which limits the amount the facility can accept as a lump sum payment for accommodation.
What is the minimum permissible asset requirement?
Aged care facilities must ensure that a resident is left with a minimum amount of assets after paying a lump sum payment for accommodation. This amount was $47,500 at the 1st July 2017. This takes effect where the resident:
– pays or commits to paying some or all of their accommodation costs by lump sum within 28 days of entering aged care, and
– provides sufficient information about their assets to the aged care service provider
As it is a requirement that aged care residents choose within 28 days of entering care whether they will pay their accommodation costs as a lump sum, daily payments or combination, the first requirement is generally met.
However, the second requirement is more complicated. They are required to provide sufficient information about their assets via a means test assessment with The Department of Human Services (Centrelink) or the Department of Veterans’ Affairs. The letter will stipulate the “net asset total” which will be used for the minimum permissible asset rule.
How are minimum permissible assets calculated?
When determining a residents assets for the minimum permissible asset calculation, the definition of assets used to determine the resident’s means tested amount is used, with one exception.
Where the resident’s former home is included in assessable assets, the full market value is included. This differs from the calculation for means tested amount purpose where the capped value is included (a maximum of $162,087.20 at 1st July 2017).
Minimum Asset requirement and couples
When applying the minimum asset requirement to a member of a couple, 50% of the combined assets of the couple are measured against the $47,500 threshold.
This assessment can result in the client wanting to pay a higher lump sum payment, but being prevented from doing so as only half of the couple’s assets are included in the assessment.
What if a family member pays the lump sum?
The minimum permissible asset requirement applies regardless of whether the resident or a family member pays the lump sum amount for accommodation.
Where a family member is paying the lump sum, the minimum permissible asset requirement may restrict the amount they are able to pay.
In this case the family member may wish to consider making an additional payment made after the 28 day period as it is not subject to the minimum permissible asset rule.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.