Understanding the Means Tested Care Fee for Aged Care: A Guide for Families

What is the Centrelink Means Test?

The initial financial assessment for aged care, known as a means tested care fee assessment, is a comprehensive evaluation conducted by Centrelink (Services Australia). It determines how much a resident will contribute toward their aged care costs and can also establish eligibility for government subsidies and pensions.

Anyone seeking government support for aged care costs needs to undergo this assessment. However, families can choose not to complete it and pay a default rate instead, which might be beneficial in certain financial situations.

Why does it exist?

The Australian government covers anywhere from 80% to 100% of nursing home costs for residents entering care, with the residents themselves contributing the remaining portion based on their means. The means tested care fee ensures that the system remains fair and accessible—with those who can afford to pay more for their care doing so, while protecting those with limited financial resources.

The government pays up to over $400 per day to every facility for every bed that is occupied. Then, depending on the resident's means, the government asks them to contribute part of what they're paying on their behalf, but not the full amount. Speaking to a specialised aged care advisor can help you understand how much your family member will need to contribute and what government entitlements they may receive.

How Does the Centrelink Means Test Work?

The Centrelink aged care assessment evaluates both the resident's income and assets to determine their means tested care fee.

Key components of the means test include:

1. Assets assessment: Examines total assessable assets, including property, investments, and savings
   
2. Income assessment: Reviews income from all sources, including pensions, investments, and rental income
   
3. Home ownership status: Special considerations may apply to the family home.
   
4. Relationship status: The results may vary for single people compared to couples

There are both annual and lifetime caps on means tested care fees, which limit how much a resident can be asked to pay regardless of their wealth.

These caps will be changing under the new aged care act, with the lifetime cap increasing from around $82,000 to $130,000 from July 1, 2025.

To find out more about means tested care fees and how the changes may impact your family, contact an expert from Clarity Aged Care Advisors, your trusted Melbourne aged care advisors.

Aged Care Income Assessment: What You Need to Know

The income assessment portion of the financial evaluation looks at all sources of income to determine the means tested care fee. This part of the aged care financial assessment is particularly important as it affects ongoing aged care costs.

Income sources typically assessed include:

• Investment income, including interest and dividends
• Rental income from properties
• Income from businesses or trusts
• Deemed income from financial assets
• Australian government pensions and overseas pensions

The impact of assets & income on aged care fees is structured to be progressive—those with higher assets & incomes contribute more, while those with less may qualify for additional support.

Eligibility Criteria for Aged Care

To access government-subsidised aged care services, the resident must first meet certain eligibility requirements:

1. Clinical Eligibility

Before any financial considerations, it's crucial to obtain an Aged Care Assessment Service (ACAS) assessment, also known as ACAT in some states. This Centrelink aged care assessment serves as the senior's "passport" into the aged care system and determines the level of care needs.

This is a clinical assessment in which the government produces a report that tells prospective aged care facilities the level of care required and allows the person to be entered into the government system to get their government support and entitlements.

2. Financial Eligibility

The level of government support operates on a sliding scale rather than strict cutoffs:

• Full fee paying resident: For those deemed to be high means
• Partially supported resident: For those with moderate assets and income
• Fully supported resident: For those with substantial financial restrictions

If your relative's assets are below a certain threshold (particularly if they don't own a home and receive a pension), they may qualify as a "low means resident." This status can significantly reduce accommodation costs, with the government covering up to 100% of fees.

Even with low means status, the person still has access to the same quality of care as other residents, though they may have less choice in room selection.

How to Prepare for the Initial Financial Assessment

It's important to note that in some cases, the Centrelink assessment isn't always necessary. Part of our job is to determine if there's any benefit to completing the documentation. If your family member is above certain thresholds, won't receive a pension and will pay the annual & lifetime caps no matter what, you may be able to avoid the Centrelink documentation, which you're entitled to do.

Essential Documentation

If a means tested care fee assessment is necessary, the documentation requirements can be extensive:

• A primary form approximately 40 pages long
• Additional forms for other entities or trusts
• Additional property documentation (about 15 pages per property)
• Supporting financial documents and statements

If the resident is already receiving Centrelink benefits, the process may be streamlined since much of their information is already in the system and may only need to be updated.

Timeline and Process

The financial assessment follows this general timeline:

1. You have several weeks after your relative enters care to begin the process
2. Form completion typically takes about 1 week
3. Centrelink's review process usually takes 6-8 weeks
4. Interim arrangements can be made while waiting for assessment results

Understanding Your Fee Advice Letter

When you receive the fee advice letter from Centrelink, it's important to interpret it correctly. These letters can be overwhelming, but they don't always tell the full story. The letters may show fees of over $400 per day but often don't highlight the annual and lifetime caps that protect the resident from excessive nursing home costs. Seeking professional aged care advice can ensure you don’t pay more than necessary and understand all entitlements clearly—particularly how the means tested care fee affects your situation.

Planning Your Next Steps

Understanding the Centrelink Means Tested Fee is just one part of the costs of aged care. To ensure you make informed decisions about your loved one’s care:

1. Obtain an ACAS/ACAT assessment first
2. Research suitable facilities with appropriate care levels
3. Consult with a specialised aged care advisor to review all available payment options and their long-term implications

Remember that personal circumstances and government regulations can change. Regular updates to Centrelink about financial situations can help ensure means tested care fees remain appropriate as circumstances evolve.

For a broader understanding of aged care costs in Australia, including payment options and government subsidies, contact an advisor at Clarity Aged Care advisors.

Our experienced Melbourne aged care advisors can help simplify this complex journey. Contact us today to learn more about how we can assist you in making informed decisions for your loved one’s aged care needs.

Note: Figures are accurate as of the publication date