Happy EOFYS - End Of Financial Year Strategy
Many people think about the end of financial year as a great time to take advantage of the End of Financial Year Sales – now just called EOFYS! But the end of financial year can be a great time for aged care residents too.
The rules around gifting for aged care are the same as for social security, which allows gifts of up to $10,000 in a financial year and $30,000 over five years. This means a resident (or prospective resident) could gift $10,000 on 30 June and $10,000 on 1 July, reducing their assets by $20,000 in 24 hours.
Gifting within the allowed amounts can be a great strategy for people whose assets fall between the aged care asset free threshold (currently $47,500) and the first asset threshold of $162,087. It can also assist people whose assets exceed the first threshold but after the gift means that they eligible to be a low means resident.
It comes as a surprise to many but gifting assets can produce an equivalent return of 17.5%.
Let’s look at an example;
Shirley is considering moving into aged care. Her home is exempt as her son is living there. Shirley has $100,000 in the bank and $2,000 of personal assets. Shirley receives the full Age Pension.
Based on Shirley’s Assets and Income her Daily Accommodation Contribution would be $26.20p.d or a Refundable Accommodation Contribution of $165,450.
If Shirley gifts $10,000 on 30 June and again on 1 July her Daily Accommodation Contribution would be $16.59 or a Refundable Accommodation Contribution of $104,764.
By gifting $20,000 Shirley has reduced her Daily Accommodation Contribution by $9.61p.d or $3,508p.a, which is equivalent to a 17.5% return. The equivalent saving as a Refundable Accommodation Contribution is just over $60,000.
Of course if Shirley’s assets were $172,000 then such a strategy could change her from a market price payer to a low means resident – the savings could be even greater but she would need to check if the facility would accept this arrangement.
There is no substitute for quality financial advice.
Steve Jenkosky trading as Golden Age Advisory is an Authorised Representative of Synchron AFS License No. 243313.
Unless specifically indicated, the information contained in this BLOG post is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.