When a person is looking to enter residential care, they need to determine how much they will be asked to pay for care. This is where the means-tested amount (MTA) is important as it is a measure of affordability.
The MTA is based on a person’s income and assets to determine whether they can afford the published accommodation payment (as daily rate which can then be converted to lump sum) as well as the amount of ongoing care fees.
The MTA is calculated by Services Australia (SA). People who receive a means-tested payment from Centrelink or Veterans’ Affairs (DVA) will have their MTA calculated based on records held on file for pension purposes. If these people own a home, they will need to complete the Residential Aged Care Property details for Centrelink and DVA customers (SA485) form. Non-homeowners do not need to complete any further forms.
Self-funded people, or those who only receive a non-means tested payment need to provide financial details to Services Australia by completing the Residential Aged Care Calculation of your cost of care form (SA457).
The timing of lodging any forms and how the forms are completed needs to be done carefully to avoid problems, especially for couples. It is important that people who receive a means-tested payment ensure all details held by Centrelink or DVA are up to date and have been updated in last 2 years.
The forms can be accessed at the following links:
- Residential Aged Care Calculation of your cost of care form (SA457)
- Residential Aged Care Property details for Centrelink and DVA customers form (SA485)
Means-tested amount (MTA)
The formula below is used by Services Australia to calculate a person’s MTA. It is really two separate formulae (one to calculate income amount and one to calculate asset amount) combined into an overall formula.
Note: thresholds current as at 19 September 2020
- Calculate annual assessable income – Use Centrelink income test rules, plus Centrelink and/or DVA pensions received (less the minimum pension supplement, the energy supplement and for DVA war widows the GST supplement). The income amount is then calculated as 50% of this assessable income over an income-free threshold. The threshold is currently $27,840.80 pa for a single person or $27,320.80 pa each for a member of a couple.
- Calculate assessable assets – Like Centrelink asset test rules, but the former home has a capped value of $171,535.20 (unless a protected person still lives there in which case it is exempt) and amounts paid as an accommodation bond or RAD are included. Asset amount is calculated using the progressive rate formula (as shown in diagram above) applied to the assessable assets (or half combined assets for a member of a couple).
- Add income amount to asset amount and divide by 364 to calculate the MTA. The 364 is deliberately used here as 26 fortnights times 7 days equals 364 days in year. This avoids rounding differences.
If the MTA is more than the maximum accommodation supplement (MAS – currently $58.19) the person is not a low- means resident and will need to pay the market rates published by the service provider unless the provider is willing to accept a lower amount. Please click here to learn more about low-means assessments.
Means-tested care fee (MTF)
Once a person has moved into residential care, they need to pay part of the ongoing cost of their care (in addition to the cost of their accommodation). Everyone pays the basic daily care fee and those people with higher financial capacity may also pay a means-tested care fee (MTF).
If the person’s MTA is higher than the MAS (currently $58.19) they will pay a MTF. The MTF is calculated as: MTA less the MAS ($58.19)
For example, assume Services Australia has calculated that Bob has an MTA of $80. He does not qualify as a low-means resident so he must fully fund his own accommodation. His MTF is calculated as:
MTF = MTA less the MAS
= $80 – $58.19
= $21.81
Bob will be charged a means-tested care fee of $21.81 per day. This is in addition to the $52.25 basic daily care fee and his accommodation cost as either a RAD or a DAP.
The MTF caps
The MTF is paid at the amount calculated unless it is reduced due to one of three caps:
- Daily cap – cost of care. After a person moves into care, the staff will complete an Aged Care Funding Instrument (ACFI) assessment. This is done seven days after entry. The assessment basically measures the resources needed to care for the person and is matched against a schedule of fees (the government care subsidies). For a person at the highest level of care the maximum daily cost is up to $256.44 per day, with supplements for oxygen and enteral feeding included. If the person’s MTF is calculated at an amount higher than their cost of care, the fee will be reduced down to this daily cost.
- Annual cap – $28,087.41 (indexed). An annual cap applies for the total of means-tested fees paid in any review year. The review year is a 12-month period starting on the day the person entered permanent residential care (or if they started receiving home care on or after 1 July 2014, from that date). Once the person has paid means-tested fees equal to the annual cap at the time (currently $28,087.41) the MTF reduces to zero for the rest of that year.
- Lifetime cap – $67,409.85 (indexed). The amounts paid as income-tested fees for home care (that first commenced on or after 1 July 2014) and means-tested fees in residential care are kept as a running tally. Once the lifetime cap that applies at the time has been reached (currently $67,409.85) the MTF reduces to zero for the remainder of the person’s lifetime.