How to Plan for Aged Care in 3 Simple Steps

Having helped many people transition into aged care, including clients as well as family, I can tell you first hand it can be quite an overwhelming thing to deal with. Not only are you trying to cope emotionally with it all, you also have to deal with all the running around, the paperwork and the financial side of things.

So if you have a loved one in need of specialist aged care, this article will give you a practical step by step guide on the issues to look out for.

Step 1 – Get Assessed

The first step in accessing aged care is to undertake a free ACAT assessment. This involves a member of an Aged Care Assessment Team (ACAT) assessing whether a person has a need for any form of aged care and what level of care they need. If your loved one is in hospital, this assessment can usually take place whilst they are in hospital.

Step 2 – Understand the financial side of things

When it comes to the financial side of aged care, here are just some of the important issues to consider:

  • What are the costs of aged care?
  • What will be the effect on government payments (such as age pension)?
  • How will you fund the costs of aged care?
  • Should you retain or sell the family home?

How much you pay for aged care depends on your financial situation. However, there are strong protections in place to make sure that care is affordable for everyone.

There are two main types of fee that are payable by a resident in an aged care facility. The first is for accommodation and the second is for care (note: Some facilities will impose a third kind of fee, for extra services such as recreational activities). 

Accommodation Fees

Some people will have their accommodation costs met in full or in part by the Australian Government, while others will need to pay the accommodation price agreed with the aged care home. The Department of Human Services will advise you which applies to you based on an assessment of your income and assets.

If you do have to pay the accommodation payment, these are typically paid in some combination of two ways – as a lump sum up-front amount, or as a daily interest payment on the unpaid lump sum amount. The payments are as follows:

a. Refundable Accommodation Deposit (RAD)

This is a lump-sum payment made by a resident upon entry into an aged care facility.

A refundable accommodation deposit works like an interest-free loan to an aged care home. The balance of the deposit (less any amounts the resident might have agreed to have deducted), is refunded when the resident leaves the aged care home.

b. Daily Accommodation Payment (DAP)

Essentially, the DAP is an interest payment on any unpaid RAD. The interest rate is set by the government and can be viewed here.

The amount payable is calculated on a per day basis (hence the name), although it is typically payable on a monthly or quarterly basis.

As an example, let’s say a resident entering a facility needs to pay a Refundable Accommodation Deposit of $550,000. The resident has three choices:

One is to pay $550,000 as a RAD. There will be no more to pay for accommodation (daily care fees are still payable).

The second is to pay no RAD but instead pay a DAP. If the DAP interest rate is 6%, then instead of paying the $500,000 Bond upfront, you would pay a DAP of $33,000 a year (or $90.41 per day).

The third choice is to pay as a combination of the above two choices (i.e. part up front and part interest). Staying with the $550,000 RAD as an example, a person could choose to pay $300,000 as a RAD upfront, and then pay interest on the remaining $250,000.

Daily Care Fees

On top of the accommodation payment explained above, you also have to pay daily care fee. How much you pay in Daily Care fees will depend on your financial situation as the system is means tested (meaning the more you have the more you pay).

These fees are set by the government and you have to complete a Centrelink form that is 28 pages and has 146 questions long.  So as you can imagine, the rules for working out your daily care fees are quite complicated.

Furthermore, when transitioning into aged care, any entitlements to the Age Pension are also re-assessed, and again these rules are quite complicated.

The Family Home

The family home is a special case in retirement and aged care planning with the family possibly having to face the decision of whether to keep it or sell it.

Keeping the home will trigger different Aged Care Fees and different pension entitlements when compared to selling the home. So its important to know your numbers before you decide what to do so you’re not caught out with a nasty surprise. (note: for more info on how to get these comparison calculations keep reading below).

You also have to weigh up the personal effects of keeping versus selling (such as maintaining the home, dealing with tenants etc), especially in cases where there are multiple people affected by any decision.

Age Pension entitlements

Age pension entitlements is also a special case in aged care planning. Again, entitlements to age pension will be different depending on what the family decides to do. Such as which facility you choose, how much bond you pay, how you pay the bond, whether you keep or sell the family home etc. So again, its important to know your numbers.

Step 3 – Choose an Aged Care Home

Once you have an idea of the finances involved you can then start to look for an actual Aged Care Home. People will usually look for a place that is close to the family home or close to primary family members.

A great place to do a search for the different homes is on the My Aged Care website ( where you can search for different homes in the areas you want and the website will even list the maximum accommodation bonds for most homes out there.

Getting Some Help

As you can imagine by now, Aged Care Planning can be quite complicated and overwhelming.

I know from personal experience having helped both my dad and many clients transition to aged care, how difficult a time it can be.

It’s hard enough dealing with the emotional side of things let alone the financial system when it comes to aged care.

So that’s why we have created our Aged Care Guidance Program.

We can help you with:

  • Working out what the costs of aged care would be under different scenarios.
  • Strategies to minimise costs and maximise pension entitlements
  • Negotiating bonds with aged care facility (hint: Sometimes it’s actually better to negotiate the bond up because it provides better pension entitlements and cashflow). If you can get to an agreement, companies like the sharkyandstephen will be willing to help
  • Working out the best way to pay the bond
  • Completing Centrelink forms and dealing with Centrelink on your behalf. Our clients tell us this is this is the best part because dealing with Centrelink can be very difficult!
  • Working out an appropriate investment strategy, and more.

To get started, all you need to do is book a free initial aged care consultation with one of our highly qualified advisers, so we can get to know your situation and formulate a plan tailored to your loved ones needs.

To book your free initial Aged Care Consultation, click here.

About Invest for Living

At Invest for Living our aim is to help people make better financial decisions and ultimately live a happier life. We aren't controlled by any big institutions so our goal is not to try and sell you a product. Instead we pride ourselves on providing financial advice that makes sense and is easy to understand. It's not always the sexiest approach but in our 30 plus years of experience, financial strategies that have stood the test of time always work out best.
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