Aged care – Securing the future of aged care for Australians – simplified income-tested care fees

A new, simpler and fairer income test for aged care residents will apply from 20 March 2008. The new rules will benefit self-funded retirees.

Page last updated: 08 May 2007

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Why is this important?

  • The current income test for residential aged care residents is not as fair as it could be. Currently, self-funded retirees pay higher income-tested fees because nearly all of their income is counted under the income test.
  • However, pension income is currently not counted under this test. This is unfair and it disadvantages self-funded retirees compared to part-pensioners.
  • The new income test treats all people in the same way and all assessable income the same, irrespective of whether it is a pension or private income.

Who will benefit?

  • Self-funded retirees will benefit as the new income test is fairer for them.
  • In the first year, about 45 per cent of self-funded retirees will pay less under the new arrangements than they did before.
  • The new income test will apply to new and existing residents from 20 March 2008.
  • Fees for existing residents will not be increased as a result of this measure, but they may be reduced.

What funding is the Government committing to the initiative?

  • The Government has committed new funding of $89.8 million over five years.

What have we done in the past?

  • Income-testing of aged care residents started in March 1998.
  • In May 2000, the Government introduced the Simpler Income Testing measure, which streamlined administrative arrangements. The measure included the introduction of quarterly reviews of the income-tested fees paid by residents and a daily minimum fee of $1.00.
  • The Australian Government announced in the 2004-05 Budget that it would provide an additional $2.2 billion over five years for aged care. Since then the Government has announced the provision of a further $1.6 billion over five years as part of the new aged care funding package called Securing the Future of Aged Care for Australians.

When will the initiative conclude?

  • This is an ongoing measure.

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