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How to manage the move from retirement village to aged care


Retirement village contracts are commercial arrangements, so financial details vary greatly, but there are generally entry, ongoing and exit costs to consider when moving into aged care accommodation. Always read contracts carefully and seek legal advice to understand the impacts. Most villages operate under a lease or licence right of residency. You don’t own your home, but instead have a contractual right to live there. An emerging category of retirement community living is a land lease community where you do own the home but lease the land it sits on.

Financial implications upon exit: When you leave (including for a move into residential care), the contract usually terminates and the home is sold to a new resident. The implications depend on the community type – whether it’s a retirement village (under a lease or licence arrangement) or a land-lease community.


Paying for the move into residential care: Transition from retirement village to residential care can be complicated by the timing of financial transactions.

Like any property sale, your village refund is generally not paid until the home is sold. This sale process is likely to be out of your control, and timing could be protracted. You may have more control in a land lease community, but you still need to find a buyer. In the interim, you will be paying for your aged care accommodation as fees start when you move in. You could use other savings or choose a daily accommodation payment (DAP) instead. Retirement villages are governed under state legislation and most states have introduced legislation to help with this transition. Check the rules for your state as the village operator (but not the land lease community) might be required to advance you some of the sale proceeds or pay your DAP while you wait for the sale. These amounts are then deducted from your village refund. When you move into aged care, your financial means (both assets and income) are assessed to determine whether the government will subsidise accommodation and how much you pay for care. If you have not received your village refund, you need to declare the amount expected. But the assessable value is limited to the cap (currently $178,839.20) until sold, and then the full refund is assessable. At that point, your fees may go up.

Age pension impact: Moving from a home you own into residential care triggers a two-year rule when determining age pension entitlements. You continue to be a homeowner with the home exempt for up to two years.

At the end of the two years (or when the home is sold), the market value or sale proceeds are assessable which might reduce or eliminate your age pension. You usually don’t have a choice to retain your home when leaving a retirement village, so the impact on your age pension may occur sooner. The reduction in age pension may be minimised by using the sale proceeds to pay the lump sum refundable accommodation deposit, which is an exempt asset.

Advice can help: To help with making the right decisions and understanding the impact for you, it is important to seek advice from a financial planner who is experienced and accredited in aged care advice, with consideration for not only what happens at entry but also what will change at a future point.

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