Selling Your Home in Australia to Cover the Costs of Aged Care

Moving into an Aged Care Home can be an emotionally challenging experience. Along with the practical considerations, one of the first questions that arises is whether you need to sell your family home to cover the costs of aged care. In this article, we will explore the different options for paying for aged care and how selling your home can impact your pension. Please note that everyone’s situation is unique, and it is recommended to seek financial advice tailored to your circumstances.

Paying for Your Accommodation: The Difference Between the RAD and DAP

When considering an Aged Care Home, you may come across the acronyms RAD and DAP. These refer to the Refundable Accommodation Deposit (RAD) and the Daily Accommodation Payment (DAP).

1. Refundable Accommodation Deposit (RAD)

The RAD is an upfront payment that covers the cost of your accommodation in an Aged Care Home. It is comparable to buying a house, as it represents the full payment for your property/accommodation. The RAD will be refunded to you when you leave the home. The cost of the RAD is set by the Aged Care Home and varies based on factors such as size, location, and amenities. The price range for a RAD can be anywhere from $200,000 to $1.2 million.

2. Daily Accommodation Payment (DAP)

The DAP, on the other hand, is similar to paying rent. It is a daily payment that covers the cost of your accommodation. The amount of the DAP is calculated based on the RAD for the room plus the maximum permissible interest rate (MPIR), divided by 365 to get a daily rate. For example, if the room cost is $400,000 and the MPIR is 8.15% (as of October 2023), the DAP would be $178.63 per day.

3. Combination of RAD and DAP

You also have the option to pay a combination of the RAD and DAP. For instance, if the room cost is $400,000, you could choose to pay $200,000 as a RAD and the remaining amount as a DAP.

You Have a Choice!

Upon moving into an Aged Care Home, you have 28 days to decide whether you want to pay as an upfront amount (RAD), as a rental payment (DAP), or a combination of both. If you choose to pay as a lump sum, you have 6 months to make the payment. However, for most people, paying a lump sum amount means selling their family home.

Other Aged Care Costs

Apart from accommodation costs, there are other fees associated with Aged Care Homes. Everyone entering an Aged Care Home must pay a Basic Daily Fee, which is currently $60.86 as of September 2023. Additionally, those who can afford it, determined by a means test, may need to pay a Means Tested Care Fee. The amount of the Means Tested Care Fee is determined by the results of your means test. Some Aged Care Homes may also charge additional fees for special amenities or extras.

Top Tips

Here are some tips to consider when selling your home to cover the costs of aged care in Australia:

1. Understand the Impact on Your Pension

Selling your home to pay for aged care can affect your pension. For example, if you sell your home for $1 million and $600,000 of that goes towards your RAD, the remaining $400,000 will be counted in your assets test and may affect your pension.

2. Seek Financial Advice

Deciding to sell the family home and navigate the financial aspects of aged care can be overwhelming. It is wise to seek guidance from a financial advisor who can provide expert advice tailored to your situation. An impartial third-party can help steer the decision-making process and alleviate any conflicting opinions or emotions.

3. Explore Other Options

Selling the family home is not the only option available to cover the costs of aged care. Consider alternatives such as rental-style payments (DAP) or a reverse mortgage. Exploring all available options will help you make an informed decision that suits your needs and financial circumstances.

We’re Here to Help!

If you are searching for Nursing Homes that meet the needs of your loved one, reach out to one of our expert Aged Care Service Advisers at https://downunderrealty.com. We are here to provide guidance and support during this important transition.