For most of our clients who are moving into residential aged care, retaining their Centrelink benefits and associated health cards is a high priority. In addition, often, a move into residential aged care is the catalyst for aged Australians to access aged pension. Often, because of our analysis, clients found they were eligible for the aged pension, even though they didn’t think they qualified and hadn’t applied for it.
The Australian aged pension is administered by Centrelink and paid to people who have reached pension age (65, but set to rise over the next few years) and cannot fully support themselves. The pension is subject to an income and assets test, asking pensioners to provide information on assets and income to establish the funds to which they are entitled. Depending on their assets and income, a person could receive a full pension, a partial pension, or no pension. The current maximum age pension a person can receive is $873.90 per fortnight. Centrelink updates the payment rates in March and September each year.
To prevent people from simply ‘giving away’ their assets to qualify for the aged pension, the government introduced ‘gifting’ rules. These rules prevent people from giving away more than $10,000 of their assets in any one year and only $30,000 in any five-year period. Using trusts as a way of hiding one’s assets has also been restricted, so assets held in trusts or private companies, and income from these assets, are asses-sable in the hands of the donor.
The Department of Veteran Affairs (DVA) also administers a range of pensions on behalf of the government for ex-military personnel. Some of these are means tested (e.g., DVA Service pension) and others are not (e.g., DVA War Widows or Widowers Pension.)
Older Australians can also qualify for assistance from the government through either the commonwealth seniors health card or through the pensioner concession card. The DVA also issues separate health cards to veterans, their war widows, widowers, and dependants to ensure they have access to health and other care services.
The commonwealth seniors health card provides access to cheaper prescription medicines, Australian government funded medical services, and other government concessions. It provides discounts on Pharmaceutical Benefits Scheme (PBS) prescription medicines. To qualify for a commonwealth seniors health card, a person must be old enough for a pension (i.e., 65 at the day of writing this), but not qualify for a payment from Centrelink or the DVA, and meet the standards of an income test.
The pensioner concession card provides its holder with access to Australian Government health concessions and assistance, meeting the cost of living, by reducing the cost of certain goods and services. Older Australians can get a pensioner concession card if they receive any Centrelink payments, including the Age Pension. A pensioner concession card entitles the holder to discounted medicines and a range of concessions.
When establishing the value of assets for the aged pension, some assets are included, and others are exempt. Asses-sable assets may include financial investments, superannuation, business assets, investments in real estate (other than the primary residence), motor vehicles, boats and caravans, surrender value of life insurances, and household contents. Assets that are not asses-sable for the aged pension include the primary residence (as long as it is on less than 2 hectares of land), superannuation monies held in accumulation phase, prepaid funerals, and accommodation deposits paid to residential aged care facilities.
When a person enters residential aged care they no longer continue to live in their primary residence and as a consequence their may be changes to the way it is assessed for the age pension. As a general rule when calculating how much a person has in assets, the value of their former home is included, unless a protected person continues to live there. If a protected person lives in the property, the value of the property is exempt, when calculating their asset value. For aged pension, a protected person is defined as the spouse or dependent child (under age 16 or under age 25 and in full-time study, for whom the home-owner is a legal guardian).
If there is no protected person and a senior keeps the family home, the house will automatically be exempt under the assets test for two years from the date they enter care. So, the resident is the homeowner for up to two years or until the home is sold. During this time, the home is an exempt asset. At the end of this period, the person is reassessed as a non-homeowner, and the home will become a fully asses-sable asset. Any rent received is asses-sable income.
If a protected person continues to live in the property, then the value of the property is exempt for calculating their asset value, regardless of how many years pass. In simple terms, this means the family home is exempt for Centrelink as long as the protected person continues to live in it. For couples, the home is exempt if one member of the couple continues to live in it. The situation changes when the remaining spouse passes away or leaves the home. The assess ability of the house is treated the same way as if a non-protected person were in the property, meaning it would be exempt for a two-year period, starting from the date the last member of the couple leaves the home.
Residents can exercise further discretion and achieve additional benefits by structuring the way they pay lump sum entry fees. This special exemption allows owners, who have no protected person living in the property, to obtain favourable treatment in the way the property is assessed. If a resident pays part of the entry fee as a periodic payment (DAP), the primary residence and the rental income from the property is exempt from assessment for calculation of the aged pension. This can make a difference in the income of the resident, without compromising their age pension.
One other thing to remember is any amount paid as RAD is a non-asses-sable asset as far as the aged pension is concerned. This is the direct opposite of how the RAD is treated in establishing the Means-Tested Care Fee. The resident is, therefore, faced with a dilemma. By paying RAD, the resident may reduce their asses-sable assets for the aged pension (increasing their benefit), whilst simultaneously increasing their asses-sable assets for the costs of care. It is in subtle and complex situations, like this, your aged care financial adviser can help you establish the exact dollar values in each situation.