Financial planning for aged care

As in most developed countries, Australia’s population is ageing as a result of increasing life expectancy and sustained low fertility. This has resulted in a larger proportion of those aged 65 and over in the population and proportionally fewer children (under 15).

Between 1996 and 2016, the proportion of people aged 65 and over increased from 12.0% to 15.3%. At the same time, the proportion of people aged 85 and over almost doubled, from 1.1% of the total population in 1996 to 2.0% in 20161.

The fact that Australians are living longer means that more of us are likely to need aged care services at some stage. In fact, the number of people in aged care has increased by 31% since 20062.

Year     Number of Australians accessing aged care services
2006:  189,000
2011:    223,000
2016:   249,000

Sooner or later, many of us will need to help a relative who can no longer live independently in their own home to consider their options when it comes to alternative living arrangements. Importantly, this will include their financial preparedness.

In addition to the emotional challenges involved in considering aged care, the complexities of the necessary financial arrangements can be quite overwhelming. It’s essential to be prepared and we recommend you seek our advice at ADX Wealth. We can help you and your family members to approach this sensitive area logically and objectively.

A good place to start is with 3 questions that address 3 key issues…

1. Aged care options

A range of aged care assistance is available in Australia3. It is important to carefully consider the needs and preferences of each individual in light of the type and level of care that is available to them.

  1. Commonwealth Home Support Programme (CHSP) provides basic assistance (including personal care, transport, and help with food and meals). This enables people to maintain some independence and live in their homes and communities for longer.
  2. Home Care Packages Programme (Home Care) offers care at four levels to enable people to live at home for as long as possible, with care provision increasing at each level and including clinical support.
  3. Residential aged care provides a range of care options and accommodation on a permanent or respite basis for people who are unable to continue living independently in their own homes.
  4. In addition to CHSP, Home Care and residential aged care, flexible care programs offer assistance in specific circumstances. For example, Transition Care provides support for people returning home after spending time in hospital.

Health professionals and social workers can help you or a family member with a needs assessment after which they can make recommendations.

2. The likely costs of aged care

The costs of aged care will naturally depend on the type and level of assistance required. Residential care is partly funded by the Government although there may still be significant costs for residents, depending on your assets and income.

Residents of aged care facilities pay a Refundable Accommodation Deposit (RAD), set by each aged care facility according to the quality, location and features of the accommodation. A Daily Accommodation Payment (DAP) must also be paid. In addition, a means test that measures assets and income will determine the Government’s contribution to a person’s accommodation. Finally, the costs of any additional services must be taken into account.

The reality of the costs of aged care can be confronting and, once again, I urge you to seek our advice. At ADX Wealth we can advise you on strategies such as appropriate structuring of your assets that aims to make your aged care costs both affordable and efficient.

For example, you may wish to consider efficient investment strategies that take into account your tax position, pension and means, with the objective of helping you pay your residential care costs. Depending on your particular circumstances, appropriate strategies may include funeral bonds or annuity options. Another strategy may be to set up a trust and transferring and investing monies in the name of the trust into an insurance bond in order to improve your entitlements and reduce care fees. 

3. The family home

For many people, the family home will be the major asset when it comes time for an individual or a couple to move into aged care. It may seem inevitable that the home will need to be sold to fund the costs of aged care, but this is an area where you require experienced professional advice to consider your particular situation.

For example, if you are moving into aged care and your spouse is staying at home, the value of the home is not assessable for entry fee purposes and this will reduce the fee contribution required by the aged care facility. If the home is left vacant, however, then it is assessable. The question here is whether it is better to sell the home or to retain it and rent it out. There is no one-size-fits-all answer and a careful analysis of your other assets and income is required.

We can help by advising you on where your home may fit in an overall plan for reducing your aged care fees and making the most of your assets and income.

For more information about financial planning for the aged care for a family member or for yourself, please contact your ADX accountant or Tony Bates of ADX Wealth on (02) 8115 9262 or by emailing

[1], accessed 2 Nov 2017.

[2], accessed 2 Nov 2017.

[3], accessed 2 Nov 2017.

Tony Bates is a Financial Advisor for ADX Wealth and licensed under AFSL 500640.

The information (including taxation) contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. ADX Accountants Pty Ltd and ADX Wealth Pty Ltd strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.