Close relative moving to aged care facility

Discussion in 'Accounting & Tax' started by Harry30, 14th Aug, 2018.

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  1. Harry30

    Harry30 Well-Known Member

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    A close relative is moving to an aged care facility in the next week. Wanted to check my understanding of what is a complex area.

    This person owns her own home outright, and gets close to full pension as other assets are limited. The family intend to rent out out the house rather than sell (selling family house is a psychological step too far). House is also modern, well located and in good order so will rent easily.

    With the rental and current pension, this defrays next to 100% of cost of the aged care facility (rather than pay accommodation deposit upfront, they will pay this monthly).

    1) I understand additional rent should not impact pension income test if it is being used for aged care costs (see extract from social security website).

    2) The house has no impact on pension assets test for 2 years after you move into the facility (see extract).

    3) Re tax, if you sold house within 6 years, 6 year rule would apply so no CGT as house previously PPOR.

    Who has been through this and can share some learnings.

    Any major issues I have missed?
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    Last edited by a moderator: 14th Aug, 2018
  2. Trainee

    Trainee Well-Known Member

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    Just looking at the parts you posted, what is the plan after 2 years? The old ppor will reduce the pension and selling doesnt change that.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What about land tax/?
     
  4. Tonibell

    Tonibell Well-Known Member

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    We have been through this fairly extensively - I think the rent will be included in the income test.

    For us we had a close relative move into the house rent free and the owner comes home each weekend. The relative occasionally gifts funds to the owner (not rent).

    This allows the full pension to continue.

    The document linked below was pretty helpful.

    http://www.onepath.com.au/public/adviser_advantage_pdfs/TB77.pdf

    It is also worth getting an expert to review the Aged Care contract well before you agree to anything. There are various crucial aspects of this that can be negotiated.
     
    Last edited: 14th Aug, 2018
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  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Many traps to aged care. There are ways to structure matters to maximise benefits for many affected persons. A carer may even be able to retain occupancy. And as Terry said - Land tax strategies. Land tax can apply and a complex concession can sometimes be available. However ignoring land tax could rack up an extensive debt payable later

    Our aged care advisory services have been booming in recent years due to these complex issues

    There is also a very generous tax offset presently available that can be used to offset any tax payable on rent. Rental income is NOT tax exempt due to being used for aged care.
     
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  6. Harry30

    Harry30 Well-Known Member

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    Overlooked that Terry, but yes, would apply. Only around $1-2k based on land value (has threshold as it is the only property owned by the person).