Category: finances
Financial reforms under the new Aged Care Act
The new Aged Care Act 2024 is expected to commence from 1 July 2025. This article attempts to explain the changes that are likely to happen in relation to residential care focusing on consumer contributions and means testing.
The intention of this major revision of the existing Aged Care Act is to:
- improve the lives of older people accessing aged care services in their homes, community settings and residential aged care homes;
- encourage aged care providers to deliver high-quality care.
The proposed rights-based law:
- addresses approximately 60 Royal Commission into Aged Care Quality and Safety recommendations;
- incorporates feedback from several public consultations about proposed aged care reforms;
- responds to the Aged Care Taskforce about sustainably funding aged care into the future.
However, for most people, the most important, and not finalised, changes will relate to the expected cost of receiving care – whether that is at home or when resident in an aged care facility. The proposed changes appear to focus on the resident’s financial disclosure responsibilities and an onerous assessment process that are likely to result in a very large increase in the cost of receiving aged care services. At this stage (February 2025) the details have not yet been finalised and it is likely that more changes will be made.
Means testing reforms
The reforms consist of:
- means testing the hotelling supplement which is currently paid in full by government;
- abolishing the current means tested care fee and associated annual and lifetime caps;
- introducing a new means tested contribution to non-clinical care, including a new daily cap on payments and a new lifetime cap;
- mandatory reporting to keep residents’ means assessments current.
The no worse-off principle
- A no worse-off principle will apply to everyone in residential aged care on 30 June 2025.
- Existing residents retain their existing contribution arrangements for the entirety of their stay in residential care.
What will stay the same
The government will continue to fund the majority of aged care. All residents will continue to pay a Basic Daily Fee. The way different types of income and assets are assessed in the residential aged care means assessment will not change. Current financial hardship assistance arrangements will continue.
What will change
Means testing – Current means tested care fee will be abolished • Introduction of Hotelling Contribution • introduction of Non-Clinical Care Contribution • Mandatory reporting • accommodation costs • Grandparenting of fee arrangements.
Changes to means testing – A resident’s means tested amount is based on their assessable income and assets. It will continue to be the sum of their income tested amount and asset tested amount. Income and asset taper rates are changing.
Hotelling Supplement contribution – Starting 1 July 2025, the Hotelling Supplement will be means tested for new residents. Residents who can afford to pay their full accommodation costs will contribute to daily living costs such as food, cleaning, laundry and utilities.
The means test will require a contribution from residents with:
- assets over $238,000, or
- income over $95,400, or a combination of both.
The contribution will be up to the maximum Hotelling Supplement of $12.55 per day (20 September 2024 rates). The government will pay providers the difference.
Non-Clinical Care Contribution – The Government will fully fund all clinical care costs in residential aged care. For new residents from 1 July 2025, the new means-tested Non-Clinical Care Contribution (NCCC) will replace the Means Tested Care Fee. This contribution will be for non-clinical care costs such as bathing, mobility assistance and lifestyle activities. It will only apply to residents who can afford to pay the full Hotelling Supplement contribution.
The non-clinical care means test will require a contribution of 7.8% of assets over $502,981 or 50% of income over $131,279 or a combination of the two up to a daily limit of $101.16. It is paid until the resident has contributed $130,000 or been in residential aged care for 4 years, whichever occurs first. The government will pay the difference.
Mandatory reporting – Providers will regularly report individual refundable deposit balances. Residents will be required to report changes to their personal and financial circumstances. Residents can elect to be classified ‘means not disclosed’ and consequently won’t be asked to report financial circumstances, will not be eligible for government support with accommodation costs or Non-Clinical Care Contribution. They can later elect to complete a means assessment but this cannot be back-dated to their entry to care.
Grandparenting for current residents -The current fee arrangements will continue for residents already in care before 1 July 2025. This includes the: pre 1 July 2014 cohort and the post 1 July 2014 cohort. Individuals will be able to ‘opt out’ of their grandparented fee arrangements at any time.
Tune in to this series of podcasts – Planning for the Unexpected
Join me and my co-host Amanda Armstrong as we take you through this series of six podcasts which can help you to be better prepared for those unexpected life events.
Podcasts can be found on YouTube.
This series is presented on behalf of the Older Women’s Network.
Death is of course, inevitable, but often it is unexpected. Most of us would rather not think too much about it. But planning for the unexpected can be liberating. It allows you to enjoy life because you have removed a future burden for yourself and your loved ones.
This new series from OWN presented by family lawyer Alice Mantel will take you through what you need to organise before you die, from writing a will, family conversations and decluttering. It can be a baffling area, and easy to put in the too hard basket for now. This practical and reassuring series will break down the steps and give you tips to approach planning for the unexpected in a positive and proactive way.
Preparing for the unexpected – Wills, Power of Attorney, Enduring Guardianships and more – Episode 1.
The gentle art of decluttering – Episode 2
https://www.youtube.com/watch?v=C9TkNtu2WMA&pp=ygUacGxhbm5pbmcgZm9yIHRoZSB1bmV4cGVjdGU%3D
How is your financial health – Episode 3
Suddenly single – Episode 4
https://youtu.be/trNaxaNIjJA
Caring for elderly parents – Episode 5
Planning for the Unexpected: Finding Your Forever Home (or Downsizing made easy) – Episode 6
What is the cost of dying?
Like everything else, the cost of dying is increasing as much as the rising cost of living. A study commissioned by Australian Seniors and CoreData in August 2023, The Cost of Death Report 2.0 found that estimated funeral costs have increased by more than 20% for burials and cremations since 2019. In 2023, the average burial costs $11,039, compared to $9,055 in 2019. Similarly, the average cremation now costs $8,045, compared to $6,334 in 2019.
The study revealed that we are paying up to $18,652 for a basic burial funeral, and up to $5,953 for a basic cremation funeral. This is due to the rising costs of funeral services – including embalming, viewing, transportation, and professional fees – along with the cost of coffins and burial plots to name a few.
A third of the responders who recently helped pay for a funeral experienced some form of financial hardship. Two-thirds of those who experienced financial hardship said that it took months to financially recover.
Saying goodbye to those we hold dear should be a time of love and unity. Regrettably, this is not always the case. It’s no secret that funerals can exact a heavy financial toll, but they can also create tension between family and friends. Unfortunately, more than a third of responders encountered arguments with loved ones over funeral finances, adding weight to an already heavy situation.
Further, the study suggests that a trend is emerging where families are pressuring us to spend more on funerals than initially planned, a trend which has more than doubled since 2019.
Consequently, it seems our funeral preferences are changing. Many of us are now opting for simpler services (26%), being more cost-conscious (24%), and choosing cremations or cheaper alternatives to traditional burials (22%). Some of us are even getting creative and considering a DIY funeral (9%).
Tradition is taking a back seat as we focus less on mourning and more on celebrating life. In fact, most (83%) of us now prefer the celebratory approach. We want a funeral that reflects us – who we are and what makes us, us. An example of this are our changing music preferences, moving away from conventional funeral songs. Instead, iconic artists like Elvis Presley, Queen, Frank Sinatra, and Elton John emerged as the most common choices.
On the other hand, many of us are yet to discuss our wishes with loved ones. In fact, only 1 in 2 (53%) of us have made our families aware of our funeral preferences. For those of us who are yet to have this conversation, it’s important that we communicate our funeral wishes to our nearest and dearest to ensure we receive the farewell we desire.
Australian Seniors: The Cost of Death 2.0 Report, November 2023, https://www.seniors.com.au/documents/australian-seniors-series-cost-of-death-report-2023-whitepaper.pdf
Retirees face increased cost of living driven by global factors, but superannuation is buffering the impact, says ASFA
As skyrocketing inflation pressurises household budgets worldwide, the Association of Superannuation Funds of Australia (ASFA) says Australian retirees stand in stark contrast to their overseas counterparts who do not have the safety net provided by compulsory superannuation.
ASFA Deputy CEO, Glen McCrea says despite the current pressure on household budgets, Australian retirees are in a stronger retirement position than their global peers because of Australia’s robust superannuation system and retirement pillar settings.
“In contrast, the age pension remains affordable for the government in Australia where, in aggregate, retirees on average have larger private retirement savings balances than in most countries in the world. This helps cover costs during tougher times, providing a brighter outlook for Australian retirees than is the case for their international counterparts,” said Mr McCrea.
While the major categories of expenditure including food, transport and energy have all increased over the past quarter, analysis of those increases reveals that the causes lie mainly outside Australia.
The ASFA Retirement Standard September Quarter 2022 figures have risen in lockstep with quarterly inflation. Couples aged around 65 living a comfortable retirement now need to spend $68,014 per year and singles $48,266, both up by 1.9 per cent on the previous quarter. The ASFA Comfortable budget assumes one major trip overseas every seven years.
Over the year to September 2022, the amount needed for a single person to fund a comfortable retirement has risen by 6.7 per cent and for a couple by 6.6 per cent, slightly lower than the current CPI of 7.3 per cent.
Strong price rises were recorded across all food and non-food grocery products in the September quarter. These increases reflected a range of price pressures including supply chain disruptions, weather-related events, such as flooding, and increased transport and input costs.
In the 12 months to the September quarter fruit and vegetables prices rose 16.2% and dairy products increased 12.1%. Dairy and related products rose 6.8% due to higher milk prices.
Over the year to the September quarter, imported inflation saw oils and fats up 19.3%, coffee up 10.7% and gas 16.6% and automotive fuel 18.0%. These prices are set to remain high while geopolitical concerns persist.
Increased demand, high fuel prices and capacity constraints saw domestic travel and accommodation up 10.8% over the year and international travel and accommodation up 25.3%.
Meals out and take away foods rose 2.9% due to rising input costs and ongoing supply and labour shortages. Alcohol rose 1.4% due to the increase in the bi-annual excise tax for alcohol on 1 August.
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (September quarter 2022, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
| Housing – ongoing only | $109.24 | $122.66 | $128.37 | $133.94 |
| Energy | $35.05 | $47.08 | $44.41 | $55.07 |
| Food | $104.04 | $192.89 | $134.52 | $233.80 |
| Clothing | $20.86 | $39.64 | $27.86 | $51.88 |
| Household goods and services | $37.12 | $43.51 | $82.45 | $101.52 |
| Health | $53.33 | $103.11 | $109.02 | $204.32 |
| Transport | $103.93 | $110.70 | $169.82 | $183.93 |
| Leisure | $104.30 | $163.73 | $205.69 | $309.20 |
| Communications | $17.99 | $20.27 | $22.50 | $29.29 |
| Total per week | $585.86 | $843.57 | $924.64 | $1,302.95 |
| Total per year | $30,582 | $44,034 | $48,266 | $68,014 |
Table 2: Budgets for various households and living standards for those aged around 85 (September quarter 2022, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
| Housing – ongoing only | $109.24 | $122.66 | $128.37 | $133.94 |
| Energy | $35.05 | $47.08 | $44.41 | $55.07 |
| Food | $104.04 | $192.89 | $134.52 | $233.80 |
| Clothing | $20.86 | $39.64 | $27.86 | $51.88 |
| Household goods and services | $54.05 | $77.78 | $160.70 | $192.51 |
| Health | $93.02 | $129.74 | $153.58 | $241.95 |
| Transport | $41.68 | $52.09 | $46.88 | $57.30 |
| Leisure | $67.46 | $96.70 | $140.39 | $196.53 |
| Communications | $17.99 | $20.27 | $22.50 | $29.29 |
| Total per week | $543.65 | $778.84 | $859.21 | $1,192.28 |
| Total per year | $28,379 | $40,656 | $44,851 | $62,237 |
More information
Costs and summary figures can be accessed via the ASFA website, https://www.superannuation.asn.au/media/media-releases/2022/media-release-17-november-2022
FIRST NATIONAL STUDY FINDS MORE ELDER ABUSE
In the year prior to the first national survey conducted into elder abuse, one in six older Australians reported they had experienced abuse most often committed by family members.
The National Elder Abuse Prevalence Study (NEAPS) survey, carried out between February and May 2020, showed that the most common subtype was psychological abuse (12%), followed by neglect (3%), financial abuse (2%), physical abuse (2%) and sexual abuse (1%). Some of the 7,000 participants aged over 65 years reported several types of abuse occurring, usually psychological abuse and neglect.
Types of elder abuse
Nearly one in five elder abuse perpetrators are children (18%), or their partners or grandchildren and about one in 10 elder abuse perpetrators are intimate partners. Children (most often, sons) are most likely to perpetrate financial abuse as well as friends and service providers.
Children are also the largest group of perpetrators of psychological and physical abuse while friends, acquaintances and spouses were most likely to perpetrate sexual abuse.
Children and intimate partners are both significant perpetrator groups (24-25% for each) of neglect. Professional carers (14%) and service providers (13%) are bigger perpetrator groups for neglect than for other abuse subtypes.
Psychological abuse is not always recognized by either victims or perpetrators. It includes insulting, belittling or threatening behaviour towards a person. Family and friends are the best protection for a person experiencing abuse rather than the person who is unlikely to directly confront the perpetrator.
Factors that increase risk of abuse
While women were slightly more likely to be the subject of abuse than men, other factors increased the risk of experiencing abuse, namely, being poorer, being single, separated or divorced and living in rented housing or owning a house with a debt against it. Having poor physical or psychological health also increased the risk of experiencing abuse.
The study did not include people living in aged care or suffering cognitive decline which could increase the identified prevalence of elder abuse in the community.
The federal government has announced additional funding to build on the National Plan to Respond to the Abuse of Older People. This announcement follows on from recommendations made by the Aged Care Quality and Safety Commission to increase funding to home care packages and create new training places for aged care staff.
AIFS, National Elder Abuse Prevalence Study, https://aifs.gov.au/publications/national-elder-abuse-prevalence-study
Australia’s health by socio-economic status
However you describe it, being poor, disadvantaged, or living in a low socioeconomic area is more likely to make you more susceptible to preventable chronic diseases such as heart disease, arthritis and diabetes.
Australia’s Health Tracker by Socioeconomic Status 2021 reports on the health status of Australians based on their socioeconomic standard which the study has found has a major impact on people’s health. Families and individuals with limited resources not only have more chronic disease, they are at greater risk of dying prematurely as a result of chronic health conditions. People living with mental ill-health are less likely to participate in employment, which in itself, is associated with an improvement in general mental health levels.
The ten million people living in the 40% of communities with lower and lowest socioeconomic status have much higher rates of preventable cardiovascular diseases, cancer, diabetes or chronic respiratory diseases than others in the population. These communities also have the highest rates of suicide throughout the nation.
Risk factors that are likely to contribute to this higher rate of illness and premature death include:
• Physical inactivity
• Lifetime alcohol consumption
• Daily tobacco use
• Unemployment as a result of mental health issues.
These health disparities within the Australian population are persistent despite considerable policy reform and efforts to improve services in recent decades. The targets for a healthier Australia were developed by the Australian Health Policy Collaboration, a national network of leading health experts and organisations. The Collaboration has worked with the support of the Mitchell Institute, Victoria University since 2014 to influence public and policy awareness and action to reduce high rates of preventable chronic disease in the Australian population.
The report sets health targets for medical conditions such as:
• Obesity – Obesity is a risk factor for cardiovascular disease, high blood pressure, type 2 diabetes, asthma, back pain and some cancers.
• High cholesterol – High levels of low-density lipoprotein cholesterol are a risk factor for heart disease. National data from 2011-12 is the most recent available data and indicated that close to one-third of all socioeconomic groups were estimated to have high cholesterol levels.
• High blood pressure – Rates of reported high blood pressure are relatively consistent across socioeconomic groups. High blood pressure is often caused by poor diet, physical inactivity, obesity and excessive alcohol consumption. It is a risk factor for chronic conditions including stroke, heart diseases, and chronic kidney disease
• Diabetes – Hospitalisations and deaths related to diabetes are, respectively, 2 and 2.3 times as high in the lowest socioeconomic communities compared to the highest.
Australia’s Health Tracker by Socioeconomic Status 2021 report, The Mitchell Institute at Victoria University. Australia’s Health Tracker by Socioeconomic Status 2021 report
Retirement village exit rules changed
New legislation means that NSW retirement village contracts will now include a timeframe that ensures timely payments for a former resident’s exit entitlements.
These changes apply only to registered interest holders with a long-term registered lease that gives them at least 50% of any capital gain.
They do not apply to:
• registered interest holders who own a lot in a strata or community scheme village or own shares in a company title or trust village that gives them their resident right; or
• unregistered interest holders.
New retirement village laws started in January 2021. The changes reflect complaints made about how exit entitlements were previously managed and provide a timeframe for former residents to receive their exit entitlements. Summarised, the changes:
• enable residents to receive exit entitlement money before their unit sells (if the sale has been ‘unreasonably delayed’);
• provide an option for residents to fund their move into aged care by accessing part of their estimated exit entitlement money;
• ensure residents no longer have to pay ongoing charges for general services for more than 42 days after they leave the retirement village (commences on 1 July 2021 onwards).
New legislation has been introduced which affects existing and all new retirement village contracts. Previously registered interest holders had to wait until a new resident either moved into or leased their old unit before they were able to receive their share of the sale proceeds (the “exit entitlements”). This could mean that if the village operator delayed the sale of a unit after the resident left, the former might not receive their exit entitlements for anywhere between two and five years.
Under the new legislation, a registered interest holder can apply to the Secretary of the Department of Finance, Services and Innovation for an exit entitlement order directing the village operator to pay the exit entitlements to the former resident even though the unit has not sold. The order can require payment after six months for Sydney metropolitan, Wollongong and Blue Mountains residences and within one year anywhere else in NSW. This order will only be made if the village operator has “unreasonably delayed” the sale considering the time taken to refurbish the unit and whether the operator as selling agent has performed all their duties within reasonable time.
Such an application can only be made by a former resident but not their estate. If the order is made, the exit entitlement must be paid with 30 days of the order.
If the registered interest holder moves out of the retirement village into a residential aged care facility and has not received their exit entitlement, the resident may ask that the operator make one or more daily accommodation payments to the facility on behalf of the resident within 28 days of the resident’s request. As more than 60% of residents move directly into aged care, their move can be delayed if they do not have access to funds to pay the daily accommodation payments to the facility and the unit does not sell quickly. These amendments are intended to make the transfer easier for residents and family members.
For more detail, see Fair Trading website, https://www.fairtrading.nsw.gov.au/about-fair-trading/legislation-and-publications/changes-to-legislation/changes-to-retirement-village-laws
Super in the time of pandemic
Is our retirement system good enough? Superannuation should enable all people to have an adequate standard of living when retired, according to the Retirement Income Review into the Australian retirement system. The system should not just provide a means for wealthy people to become wealthier, with the help of generous tax concessions.
The Review found that two groups have high levels of financial stress compared to people below age 65: those renting in retirement and those who are involuntarily retired before age pension eligibility age. Retirees who rent in the private rental market are likely to live in poverty and those early retirees living on JobSeeker payments are the worst affected. Even with the age pension and additional rental assistance, these retirees experienced higher levels of financial stress and poverty than the rest of the population.
Following 426 submissions and meetings with 100 stakeholders, Treasury has released the Review’s Final Report which makes findings on how the superannuation system interacts with the age pension, the aged care system and the tax concessions that benefit high wealth individuals.
The COVID-19 pandemic has been incredibly disruptive to the livelihoods of individuals and to businesses on a global scale. Less obviously, most people’s retirement savings also have decreased significantly over the past year. Retirees who rely on their super to top up age pension payments remain concerned that their super investments have been affected by market volatility, leading them to worry that their loss in savings will have long-term effects.
Retirement savings and owning your own home are the most important ways to ensure that people have a buffer in retirement. High rates of home ownership in Australia reduces housing costs in retirement and boosts living standards. Additionally, their home is an asset that they can sell to provide a deposit for aged care or for additional funds if necessary.
While the age pension helps to offset inequities in retirement, its “bare bones” level of income does not provide enough to provide for those without other income. In particular, it does little to improve the situation of disadvantaged groups such as women, Aboriginal and Torres Strait Islander people and those with disabilities who have not been able to accumulate sufficient retirement savings in their working life.
One of Treasury’s first observations was that the current retirement system is complex and poorly understood by many people, both before and during retirement. Then more complications arise when it interacts with the aged care and tax system.
The Report suggested some changes to the retirement system to improve its fairness such as:
• removing the $450 per month income threshold before the superannuation guarantee can be paid;
• paying superannuation while on employer paid parental leave, and
• ensuring that all employees are paid the benefits to which they are entitled.
Australian superannuation funds hold $2.9 trillion of assets invested in local and overseas financial markets. As a result of the Covid-19 pandemic shutdowns of businesses and associated job losses, superannuation proved a welcome financial resource for many who had lost their employment. Over 4 million applicants were able to access their super under the Early Release scheme to supplement their wages or JobSeeker allowances. In total $37.4 billion was paid out in the June 2020 quarter to applicants, a 77.7% increase from the March 2020 quarter.
Many commentators were concerned that low to middle income earners who accessed their super early would be severely disadvantaged in being able to accumulate sufficient funds for their retirement as well as making them more likely to be reliant on the age pension. The debate about allowing people to access their super to fund a deposit for a house has not been resolved with arguments on both sides. In my opinion, too many people have drawn on their super in ways that provided only a temporary benefit now, while suffering a substantial long-term loss to their level of super when they retire.
I look forward to the government’s response – will they improve the system for the most disadvantaged people in the retirement system? Much more needs to be done.
Treasury, 20/11/20, Retirement Income Review – Final Report, https://treasury.gov.au/publication/p2020-100554
Author talk at Dennis Johnson Library Stanhope Gardens
Come along to join in the retirement conversation on
At the Dennis Johnson Library, Cnr Stanhope Parkway & Sentry Drive, Stanhope Gardens, NSW 2768
Women experience retirement differently to men. Women generally live longer, have less money and volunteer more than their male counterparts. A practicing lawyer for over 30 years, Alice Mantel encourages making better decisions, giving advice on topics such as:
Inspiring women to make the most of their retirement opportunities, Every Woman’s Guide to Retirement encourages an active, connected lifestyle, staying healthy, lifelong learning, de-cluttering, and even online dating to make the most of this time.