It’s easy to think the change to deeming rates on September 20 will only affect pensioners. The reality is that deeming affects everyone receiving aged care – whether you are getting a Home Care Package or living in an aged care home.
In fact, the biggest impact is likely to fall on self-funded retirees because they typically have more financial assets.
Self-funded retirees will also be impacted by the changes.Credit: Rob Homer
When it comes to Home Care Packages, everyone can pay a basic daily fee of about $12 a day. Beyond that, there is an income-tested care fee which full pensioners don’t pay because the threshold is set at the pension level. But part pensioners can pay up to $6862 a year, and self-funded retirees up to $13,724 a year.
What comes as a surprise to many self-funded retirees is the income test is not based on your taxable income, or even what your investments actually earn, but on Centrelink’s deeming rules.
From September 20, the deeming rates will increase by half a percentage point on both the lower and upper thresholds. Currently, singles are deemed to earn 0.25 per cent on the first $64,200 of financial assets, and couples on the first $106,200.
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That rate will rise to 0.75 per cent. Assets above those thresholds are currently deemed to earn 2.25 per cent, and from September that will increase to 2.75 per cent.
Take John, a self-funded retiree receiving a Home Care Package. He has $3 million in investments. Under the current deeming rates, he is considered to earn $66,216 a year and pays $20 a day – almost $7300 a year – as an income-tested care fee. From September, his deemed income will rise to $81,216 a year, an increase of $15,000, pushing him onto the maximum fee of $37.70 a day.
The means test used to calculate contributions to the costs of aged care homes uses a combination of your assets and your income. Just like in home care, deeming is applied to your investments when calculating your income. That means many part pensioners and self-funded retirees will see their contributions rise.