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If you’re a self-funded retiree, should you go through the rigmarole of Centrelink forms to access home care help or should you pay as you go for home care without any Government subsidy? Financial adviser Justin Cilmi looks at both options to help you decide.

To access a Home Care Package, Centrelink requires you to complete a financial assessment to determine your financial contribution towards the Government subsidised cost of care.

Where people are of a significant financial means, they are likely to reach the maximum point of financial contribution towards those costs. Given the administrative burden Centrelink forms can provide, some people may choose to forego any government subsidies on Home Care or residential care help and instead opt to pay directly to providers for their services. Apart from the paperwork and out of pocket costs, what else should you weigh up when you’re making the decision?

Means-tested care fees and the lifetime cap

To receive a Government subsidised Home Care Package, there is a basic fee that everyone pays, currently $10.32 per day ($3,766.80 per year). Additionally, there is a means-tested fee, which takes into account your income sources. The maximum fee is currently $10,785.85 per year, where a person’s income is greater than $51,563.20 (as at 20 March 2018).

Where people are faced with paying the maximum means-tested fee, there may be an inclination to simply go directly to a home care provider for services. However, there may be a greater, longer-term benefit to commencing the Centrelink process earlier.

The longer-term benefit is that the amount paid as a means-tested fee has a lifetime cap, currently $64,715.36.  The means-tested amount paid to receive a home care package, as well as means-tested fees in residential aged care, all add to the lifetime cap.

When the lifetime cap matters

So consider the example of Julie, who has qualified for a home care package. Based on Julie’s income sources, she would be liable to pay the maximum means-tested fee equating to $10,785.85 per year plus the basic fee of $3,766.80 – totalling $14,552.65. under this scenario, Julie would have no further out-of-pocket expenses, as the Home Care package funding would cover the cost for her needs.

Based on Julie’s care needs, her total cost to have services provided would cost her (coincidentally) $14,552.65 per year if she paid direct to the same home care provider, receiving no Government support.

Let’s assume Julie decided to complete the Centrelink assessment rather than go direct. If Julie did this for 5 years, she would have paid a total means-tested fee of $53,929.25, which contributes towards the current lifetime cap of $64,715.36. If Julie were to subsequently go into Residential Aged Care, there would be only $10,786.11 remaining to be paid of the lifetime cap. Assuming Julie was required to pay the maximum means tested amount for residential care (currently $26,964.71) when in residential aged care, Julie would reach the lifetime cap within 4 months in care. After that time, her aged care costs would reduce to the Basic Daily Care Fee plus any extra services fee charged by the facility.

Contrast the above to if Julie did not have Government support, therefore was not paying any means-tested amount while receiving home care, but then started paying the means tested amount when entering into Residential Aged Care. She would not have any amount contributing towards the lifetime cap, therefore would pay the maximum means-tested fee of $26,964.71 per year and would take 2.4 years to reach the lifetime cap.

Under this scenario, Julie has paid the lifetime cap of $64,715.36 + 5 years of home care services totalling $72,763.25.

In summary, whilst there is extra work to complete income and assets assessments for Centrelink, there could be significant long-term financial benefits from doing so at an earlier stage.

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Justin Cilmi
Justin joined the financial planning industry in 2001 and is committed to providing practical and effective solutions for his clients. As a financial adviser, Justin has provided advice to clients across a wide range of areas, including wealth creation, wealth protection and personal insurance, redundancy, retirement and Centrelink and Aged Care planning. Justin’s qualifications include a  Bachelor of Commerce (Majoring in Finance and Economics), a Graduate Certificate in Applied Finance, an Advanced Diploma of Financial Planning and holds a specialist accreditation in Self Managed Superannuation Funds. Justin is also a member of the Financial Planning Association of Australia, holding a Financial Planner AFP® accreditation.