Federal Budget 2018

The surprise in this year’s Federal Budget was not what proposals were announced, but rather what was not announced.

Normally we avoid speculating on Budget changes and don’t listen to the rumours but this year we thought there were some obvious changes that the Government may have picked up from last year’s Legislated Aged Care Review (Tune Report) and we had a list of changes to look out for. But none of them made the Federal Budget.

Older Australians who are already struggling to pay for home care or residential care can breathe a sigh of relief that their share of the costs was not increased.

Opening up more Home Care Packages, even if not enough, is still a welcome move that will help more people to access affordable care in the home.

For those people waiting for allocation of a package, or for whom the allocated package is not enough, access to an extended Pension Loan Scheme may help to provide cashflow to fund some private care services. This may allow people to use the equity in their homes to provide a safer environment to live and maintain independence.

For residents in residential care, the Pension Loan Scheme may provide an additional option for paying for accommodation – borrow from the government at 5.25% or from the provider (as a daily accommodation payment – DAP) at 5.77% or from a commercial reverse mortgage lender at various rates, which tend to be a bit higher.

Of course, each option has different eligibility and lending limits. Borrowing from the provider by paying a DAP is a flat interest rate as it needs to be funded from cashflow, while Pension Loan Scheme and reverse mortgages compound interest onto the debt so the interest rate is effectively increasing over time as the debt accumulates.

However there were a number of interesting proposals that have opportunities for client conversations and strategies. Advice is key to making a decision.