Aged care laws mean Tom can pay part of the accommodation payment as a lump sum but the maximum amount is determined by their assets and in Tom's case this is $178,500. The remaining $271,500 must be paid in instalments with an interest rate of 6.01 per cent per year, which is set by the government. Tom could also choose to pay a lower lump sum and higher instalments. Choosing to pay the maximum lump sum may help maximise Tom's Age Pension.
Paying only by instalments means that there is an interest charge applied to the amount outstanding. The current interest rate charged is 6.01 per cent per year, which is set by the government. Jen and Tom may receive a lower Age Pension because they didn’t use their assets to pay a lump sum accommodation payment. The other consideration is whether they could generate a higher return than 6.01 per cent by investing their assets.
This is a tough choice with each option having its own advantages and disadvantages. Paying by instalments means there is an interest charge applied to the amount outstanding but it leaves Jen and Tom with more assets that are not tied up.
Fortunately, Jen and Tom are able to afford the cost of Tom’s aged care fees but not everyone will have enough assets to be able to. Most people will choose to pay their refundable accommodation deposit by using a combination of a lump sum and instalments.
