Frequently asked questions about providing aged care advice | Accurium

The need for aged care advice is increasing with Australia’s ageing population providing more opportunities for professionals to expand their service offer into this market. Recent reforms by the Government have increased the complexity of the aged care system making aged care advice more important to ensure the right outcomes are achieved.

The requirement for aged care can be an emotional experience, where complex decisions must be made within a short timeframe. It is important to understand the value proposition of aged care advice which is to achieve personal objectives and improve financial outcomes. 

On the back of our recent webinar ‘Aged care advice opportunities’ which can be accessed here we received a number of questions from clients about providing advice. Some of the common questions are answered below…

What are the licencing requirements for an accountant to provide aged care advice?

Whilst there is a range of advice that can be provided outside of the AFSL regime, it is important that you are comfortable with where your limits lie when it comes to providing aged care advice.  We suggest you speak with your accounting professional body for guidance regarding what advice is allowable and what might cause a potential liability.

We did find CPA Australia’s Guidance note – advising on aged care useful. This sets out some guidance on what advice you can provide if you are not licenced, for example the guide says:

The Corporations Act 2001 does not specifically capture advice regarding aged care accommodation as financial product advice. Therefore not all aged care advice will require you to be licensed under an AFS licence, provided the advice:

  • is restricted to information and advice about fees and services in aged care
  • is restricted to factual information about any financial products or strategies, and
  • does not lead to any specific or implied recommendations to purchase, sell or retain a financial product.

Provided you have the knowledge and skills, you can advise a client on the process to be assessed for entry to aged care and calculate the fees that would be payable. Factual information can also be provided about the impact of investments on these fees without being licensed. However, you cannot recommend strategies to rearrange such investments unless you are appropriately licensed.

What is my role when advising a client who is entering aged care?

The role of the advisor is to provide advice to achieve the personal and/or financial objectives of a client who requires aged care. The advice provided depends on their business model and when they are seeing the client in the aged care process.

The financial planner’s business model can be to provide advice on every aspect of residential aged care or it can be to provide advice on only a component of residential aged care. The components of residential aged care advice can include investments after the client has moved in, placement into an aged care facility and decisions regarding the former home after they have moved out.

In addition to providing advice to the client, the role of the financial planner often extends to family mediation. This is particularly important where the client may have lost mental capacity and is unable to make their own decisions.

What are some of the personal issues that need to be addressed by a client who requires aged care?

Most clients are not prepared for entry to aged care because it is typically not considered until there is an immediate requirement. It is difficult to plan for entry to aged care because it cannot be predicted and often is the result of an unexpected incident which significantly changes the client’s situation.

The complexity of aged care combined with the emotions of requiring care can lead to irrational behaviour from family members which can result in the client receiving inappropriate care. Some of the emotions experienced include grief for the impending loss of a family member, fear of making the wrong decisions, guilt for not looking after family themselves and anger from having to shoulder the burden.

Family members may also be in conflict with different preferences for aged care, negative perceptions of aged care or be suspicious of other member’s motives. It can be beneficial to hold family meetings so everyone has the same information, understands the objectives, discusses the issues and resolves any differences.

What are the payment options for accommodation in residential aged care?

Accommodation can be paid as a lump sum or as a daily payment or as a combination of lump sum and daily payment. Where the client pays for their accommodation as a combination, they can have the daily payment deducted from the lump sum. This will over time reduce the amount of lump sum refunded to the client’s estate in the event of their death. The client doesn’t have to decide on the payment method until 28 days after they have moved into the aged care facility.

Where the client has sold their former home, they may use the proceeds from the sale to pay for their accommodation as a lump sum. Where the client has kept their former home and has no liquid assets, they may consider a reverse mortgage secured against their home to pay for their accommodation as a lump sum. In the event of the client’s death in a reverse mortgage situation, the lump sum accommodation payment can be refunded to the loan provider and any outstanding debt repaid out of the proceeds from the sale of the former home. Where the client has no former home and no other liquid assets they may be classified as low-means and the Government will subsidise all or part of their accommodation payment.

What are the ongoing care fees in residential aged care?

Ongoing care fees include the basic daily care fee, means-tested care fee and extra services fee which are generally paid monthly to the aged care facility. The basic daily care fee is capped at 85% of the single basic rate of Age Pension and is indexed half yearly. The means-tested care fee is determined by the client’s means and is reassessed quarterly. The extra services fee is determined by the extra services chosen by the client.

Where the client has liquid assets, they may consider purchasing products which provide regular income to pay for their ongoing care fees. Challenger CarePlus is a combined lifetime annuity and life insurance policy which provides guaranteed income to pay for ongoing care fees and a guaranteed sum insured payable to the client’s beneficiaries or estate in the event of their death. Where the client has no liquid assets and they have paid for their accommodation as a lump sum, they can have the ongoing care fees deducted from the lump sum. This will over time reduce the amount of lump sum refunded to the client’s estate in the event of their death.

If you would like more information about aged care advice please visit the Aged care under Adviser services. 

Information on this page is for licensed financial planners. It is not intended for retail clients or unlicensed intermediaries. The aged care and product content on this page (including links to other documents and tools) is provided by, and is attributable to, Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670.

The information in this document is provided by Accurium Pty Limited ABN 13 009 492 219 (Accurium). It is factual information only and is not intended to be financial product advice, tax advice or legal advice and should not be relied upon as such. The information is general in nature and may omit detail that could be significant to your particular circumstances.  While all care has been taken to ensure the information is correct at the time of publishing, superannuation and tax legislation can change from time to time and Accurium is not liable for any loss arising from reliance on this information, including reliance on information that is no longer current. Tax is only one consideration when making a financial decision. We recommend that you seek appropriate professional advice before making any financial decisions.