Aged care funding and super

The Aged Care Taskforce report was finally released in mid-March. It answered some difficult questions and raised a whole lot more. The goal of the taskforce was to consider how aged care services might be funded more equitably and sustainably. Shortly before the release of the report, Prime Minister Anthony Albanese ruled out levies or taxes on the general population and changes to thresholds on the family home.

Most Australians hope to age at home. The taskforce needed to consider how to fund this fairly, while raising money to meet both increased demand and higher expectations of those who will experience residential aged care. This inevitably leads to a move towards more of a ‘user-pays’ system. Currently the portion of costs paid by those accessing care is (on average) 25% of ongoing residential care costs and 6% of home care costs. 

For home care, as recently summarised for Retirement Essentials by Aged Care expert Louise Biti, the different aspects of care (accommodation, daily expenses, cost of care and extras) will be supported by government, but everyday living expenses will require a higher level of self-funding. 

When it comes to residential care, the cost of accommodation and daily care expenses (including food, electricity and laundry etc) will be considered a personal expense and only those residents with low financial capacity will continue to be supported.

How much will this cost?

Will you be able to afford this care?

These are the obvious questions which follow the release of the taskforce report, but there are no definitive answers at this stage as the government has yet to adopt a policy position. There are, however, aspects of money management that you can undertake immediately so that you are in the best possible position should you ever need either in-home or residential aged care.

Is your super up for grabs?

Not yet. Yes, there is a clear intention for consumers to be charged more for living and some care expenses. There is, however, no clear statement that this will come from your super savings. Nor is there a defined percentage of costs or flat amount that will be sought. It’s early days in this discussion and the release of the report allows all interested parties to comment and lobby for what they believe is the ideal outcome for all Australians. That said, it is always  important to check all ramifications of making contributions to your super. Often commentary about ‘carry forward’ contributions, ‘downsizer’ contributions and the like suggests that this is the best and only way to use extra funds. Super remains a low or no-tax environment for many retirees, but it’s not necessarily the only option on the table for your future retirement income needs.

Understanding more about how super works and when extra contributions are helpful is a great way to ensure your super is topped up to the extent that works best for your own particular needs.

What do you need to do right now?

Louise talks about the ‘carpark’ conversation – the one that distressed families have in the hospital carpark when a relative has had a life-changing fall. Such conversations are to be avoided at all costs. Her advice is that you cover-off on the essentials well beforehand. That is now for many of us. Here are three ways to get this planning started:

  1. Think about your own independence and sense of choice. This is usually based upon reasonable health and enough income to cover your needs. What is your current income and how far ahead can you maintain this level of retirement ‘salary’? Is there any extra for rainy day, or unexpected care needs?
  1. Understand what is available in terms of home support in your area. What portion of this does the government currently cover, and what are the out-of-pocket expenses? Find out about the ball park costs for residential care that is close to your community and affordable. (You can read more about this in our recent article).
  1. Do the maths on your life expectancy (you can use our handy calculator here). Now project how well your assets and savings will be able to fund your desired income over this time (factoring in the Age Pension as appropriate). This provides you with a helpful projection of current capability. How would this look if you needed more in-home support? Or if you needed to move to a residential home? Would you need to finance two forms of accommodation, one for a partner at home, and one in a special residence? How does that work?

These calculations are easily completed in a guided discussion with one of Retirement Essentials financial advisers. As noted above, they are best done while you are healthy and active, as there is time to make decisions which may stand you in better stead further down the track.

There’s a famous saying by Roman slave-philosopher, Publius Syrus, who declared that a river is easiest to cross at its source. It’s ancient Latin for ‘get on with it’. There’s no better time than now to think about your future needs. No one is indestructible, so some forward thinking and planning can lay the foundations for a happier later life.

Have you thought about your own aged care?

Do you believe it’s fair that those with more savings will pay more for their care needs?

If you haven’t thought about this, is there a reason why you don’t feel it’s necessarily important? Louise Biti’s full summary of the Aged Care Taskforce Report can be found here.