Gaining an understanding of aged-care and post-retirement housing options is important not only to the aging population but for anybody with family members in this phase of life; It can be due to unforeseen circumstances that many individuals lose their independence and decision-making capabilities and so must rely on family members to make some critical decisions. Rapid decline in health can mean aged-care is the only viable option which can prove a complex task to arrange.
The more desired course of development is for the aging process to gradually demand small life changes such as downsizing the principal residence and minimizing the demand of maintenance tasks. This is often a necessary option to supplement passive decline of physical abilities and in some cases a tempered introduction to community living (for example, retirement villages) providing a social, low-maintenance and secure housing option. Varying forms of home-care can also be a great option for those hesitant to forfeit the independence and autonomy associated with remaining in the original home.
There are numerous courses of action available to those in the post-retirement phase, suitable for a variety of lifestyle expectations and a range of budgets. It is always valuable to seek advice from a professional who can ensure the most desired and cost-effective plan is made during these important times.
The Downsizing Option
Downsizing is the most obvious solution for making capital available when a large home is both difficult to maintain and unnecessary, and funds are required to sustain retirement. Currently in place is a twelve month exemption from assets testing for individuals who sell a primary residence – on the proceeds intended to purchase, build or renovate the succeeding primary residence. For example, if an individual were to sell their primary residence for $550,000, in order to downsize to a unit worth $300,000, the surplus $250,000 will be deemed assessable and the remaining balance of $300,000 will stand exempt. This exemption ceases upon purchase, when renovations are complete or there is no longer the intention to use these funds for dwelling purposes. It is also important to keep in mind unavoidable costs such as real estate, marketing and conveyancing fees – and seek advice about whether or not capital gains tax will be payable in your particular situation.
The Dual Occupancy Option
This constitutes multiple living quarters on a property of single-title, often providing a secure but independent living option for aging individuals. This is assessed largely upon who was financially responsible for the purchase or construction of the additional dwelling (for example, granny flat) – either family/original title owner or the pension recipient. If the pension recipient pays for the construction of the dwelling, it will stand exempt from asset testing under the primary residence exclusion. For all other ownership circumstances it is important to seek specific advice from Centrelink as the guidelines can be difficult to navigate and define to determine affects on Age Pension entitlements.
The Subdividing Option
As a close alternative to dual living, this is an option for those seeking to formally subdivide and develop two legally separate assets. This option can be appealing for a number of reasons; however it will create a new assessable asset and will no longer be considered part of the principal residence. There may be further implications if the title of the new division is registered in a different name and rent received through occupancy of developed property will also be subject to means-testing.
Stamp duty could be payable depending on the value of the newly developed property, and if your future financial plans comprise selling one or both of these properties remember Capital Gains Tax will be payable unless both are sold simultaneously – in which case the exemption will apply.
The Retirement Village Option
Retirement villages are community-style complexes for individuals as young as 55 possibly seeking to reduce home maintenance responsibilities and steadily introduce themselves to secure community living. There are a range of cost structures to consider including the purchase price or entry fee, service options and the subsequent fees associated, plus any exit or departure fees payable. As there are a few different model options to consider when deciding which is for you, it is important to consult your financial adviser to ensure you fully understand the costs involved.
The Home Care Option
The Australian Government provides support for those in need of home care services, with eligibility for subsidies dependent on the program required and financial circumstances of the individual who requires care. Some may be required to make a financial contribution towards the service; costs may be involved such as income-tested care fees or a percentage-of-pension contribution (up to $139.58 per fortnight). This contribution would be subject to variation upon ongoing changes to age Pension rules.
The income-tested fee for care would be payable to individuals earning above $25,792 or who have a combined income of over $40, 050.40 for members of a couple.
The Aged Care Facility Option
If moving into an aged care facility is a likely option for you or your loved one, costs can be expected such as accommodation deposits, ongoing care fees (means tested), accommodation fees and general living expenses. Due to subsidies available under the Australian Government, aged care costs will depend on your financial position. Maximum fees payable are set under government guidelines and are assessed against individual financial circumstances.