CPD QUARTERLY
• Introduce a Government backed home equity release scheme to provide liquidity to individuals who are ‘asset rich’ but ‘income poor’.
and accommodation would be easier to compare and would improve choice, as well as encourage competition and innovation amongst providers.
• Introduce the Australian Age Pensioners Savings Account scheme.
The reforms would pave the way for a ‘user pays’ system where care recipients can choose the services they need rather than receive a package of high or low care services. This would mean aged care costs would vary from one person to another depending on services that they choose.
The reforms’ impacts on financial planning advice? If implemented, the proposed reforms would have a significant impact in the way financial planners provide advice in structuring a care recipient’s finances. Current strategies that maximise Centrelink and cash flow may no longer be used, as some concessions would no longer be available. Some subsidies may decrease and more co-contributions may have to be paid.
The fee system may also provide potential savings, as care recipients would only choose and pay for services they need. This would be more efficient and fair.
Accommodation costs On the upside, the proposed changes could potentially maintain high standards of care across the system and be more efficient addressing a care recipient’s specific needs.
The proposed fee system The proposed fee system would be based on need for care, not on the capacity to pay for aged care costs. Service costs would be identified separately and would provide more transparency because providers would be required to publish separately the availability and quality of services offered and corresponding fees. Fees, services
Accommodation cost and living costs are fairly predictable and should be the responsibility of the person, according to the report, although Government support to those who do not have the resources through public housing, rental assistance, and income support should continue. The ‘user pays’ system means a care recipient would no longer be classified as a low or high care resident and may pay accommodation costs as a bond or a charge or a combination of both. Extra services can also be purchased as needed.
It is proposed that the maximum accommodation charge for a ‘non-extra service’ bed that meets approved standards be increased from the current $30.55 per day (1 July 2011) because the rate does not reflect, and is insufficient to cover, actual accommodation costs. As a result, there have been fewer investments in new nonextra service beds and beds are in short supply in some areas. The report indicated an amount of $50 per day, although the Government would rely on advice from the proposed Australian Aged Care Commission. Unsupported residents may expect to pay periodic accommodation charges that may not necessarily be the maximum accommodation charge. In addition, residents may pay extra amounts if they choose to live in better quality accommodation and use extra facilities. Fees may differ reflecting varying costs according to location. For a number of clients, the maximum accommodation bond amount to be paid would be the equivalent of the published periodic accommodation charge. Calculation for the equivalent bond was not provided in the report. Paying a larger bond would no longer make sense because the bond would no longer be Centrelink exempt and no interest would be paid. Continued on p36
CONSTANTLY STRIVING FOR SIMPLE AND EFFICIENT SMSF ACTUARIAL One working day turnaround on Account Based Pension Certificates - flat rate $160 + GST. ABP Certificates can be obtained directly within BGL Simple Fund at the same price.
Call Andy O’Meagher on 1800 230 737 or visit act2.com.au for further information financial planning | SEPTEMBER 2011 | 35