How Aged Care Fees Work

Jun 17, 2022

After all, why is aged care so expensive and how does it work?

Going into aged care or having to move someone to an aged care facility is not an easy process, and nor is it cheap. Most people do not understand why the care fees are so high and how it works. In the next paragraphs, we will try to explain how aged care fees work in a simple and straighforward way.

The Four Fees Of Aged Care:

Permanent residential aged care (i.e. not respite) actually may involve up to four types of fees for a resident

  1. Basic daily fee – everyone pays this
  2. Means tested care fee – some people may pay this
  3. Accommodation payment – most people pay this
  4. Extra Services Fees – an optional fee

1- Basic Daily Fee

As the name suggests, basic daily fees are responsible for the day-to-day living costs for care residents. They involve cleaning, meals, energy and other basic life aspects. The maximum amount of daily fee is $50.16. Every care resident must pay for this fee – and the amount is variable.

This amount is set by the Government. It is set by reference to the Aged Pension (85% of the pension).

As we said – everyone has to pay this fee. No ifs, no buts.

2- Means tested care fee

The amount for the means tested care depends on the outcome from the Assets & Income Assessment. The general idea is that people of greater means will be asked to pay more towards the cost of their aged care.

Generally, if a resident’s assets are above $165,271, or their assessable annual income is above $26,660, means tested care fee will apply.

The Means Tested Care Fee is worked out on a sliding scale – the more assets and income someone has, the higher the Means Tested Care Fee.

When applicable, the Means Tested Care Fee is capped at an annual amount of $26,694. A lifetime cap of $64,715 also applies.  

The former primary residence may count as an asset, if a family member or carer is not, or has not, been living at the house. If the former house is included, its value is capped at $165,271.

The main take away is: families need to get professional independent financial advice prior to placing into aged care to understand if the Means Tested Care Fee may apply, and in what circumstances it may not apply.

3- Accommodation payment

In case of assessed assets of a value between $48,500-$165,271 on the Assets & Income Assessment, a partial accommodation payment (called an accommodation contribution) will be required from the person moving into care. If it is above $165,271, he/she will be required to make a full accommodation payment.

Accommodation payment can be accomplished in a few different ways:

Different Fees

4- Extra / Additional Service Fees

Aged care providers may charge an additional fee for services like TV, hairdressing, special therapies, apcalis 20mg additional food or wine with meals, etc.

Confusingly, this type of fee is called different things by different providers. And they may have different ‘tiers’ or types of fees for different types of additional services.

A resident must specifically agree to be charged this fee, and the amount will be agreed between the resident and the aged care provider. This amount is charged monthly.

Make sure you and your family are fully aware what, if any, additional services fees may apply and what those fees relate to.

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Article Tags
Aged Care Basics | Finances