The second round of changes set out in the federal government’s Living Longer Living Better aged care reform package will commence on 1 July 2014.

The reforms aim to provide more choice, easier access and better care. However, there are concerns that many retirees will end up paying more for their admission to and ongoing care in aged care facilities, due to the changes in the way daily care fees will be means tested.  

The changes commencing on 1 July 2014 include:

  • income testing arrangements for home care packages;
  • changed means testing in residential aged care;
  • new accommodation payments for residential aged care; and
  • the removal of the distinction between high and low care.

Accommodation Bonds will be replaced by Refundable Accommodation Deposits (RAD) and the income-tested daily care fee will be replaced by a Daily Accommodation Payment (DAP). The DAP will be based on assessable income and assets, which is a significant change from the current income only means testing.

A person entering residential aged care will have a choice to pay their accommodation costs as a RAD, a DAP or a combination of both. Aged care providers will be able to set the prices they charge for different types of rooms and must advertise those prices. Some rooms may cost more than other rooms in the same facility and the provider must publish a description of the key features of each room type. The maximum RAD that a provider can charge will be $550,000.00 (or its equivalent as a DAP of up to $99.72 per day, or a combination of both).

The changes aim to address the issue of asset-rich, income-poor residents paying for all of their accommodation and nothing for care, and the income-rich, asset-poor residents paying for their care but not for accommodation.

There will be annual and lifetime caps for the means tested care fees. The annual limit is $25,000.00 and the lifetime cap is $60,000.00. These caps are indexed. However, the annual and lifetime caps do not apply to basic daily fees or accommodation payments.

Residents already in aged care can continue with their current arrangements unless they leave care and re-enter after a period of 28 days, or if they change facilities and decide to re-enter under the new scheme. A new resident will have up to 28 days from the time they enter care to choose how to pay for their accommodation and care. People who may be entering care or who have family members entering care should seek advice so they are aware of the impact of the changes.

For more information contact:

Daniela Pavlovic
Senior Associate
Harwood Andrews
T: 03 5225 5227