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2004-2005-2006
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
AGED CARE AMENDMENT (RESIDENTIAL CARE) BILL 2006
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Ageing,
Senator the Honourable Santo Santoro)
AGED CARE AMENDMENT (RESIDENTIAL CARE) BILL 2006
OUTLINE
The purpose of this Bill is to amend the Aged Care Act 1997 (the Act) to harmonise aged care
and pension assets tests in relation to income streams and asset disposals (gifts). The Bill
also amends the Act to allow the Secretary to delegate to specific members of Aged Care
Assessment Teams (ACATs) the powers under the Residential Care Subsidy Principles 1997,
to increase the maximum number of days allowed for a care recipient to receive residential
respite care.
Schedule 1 to the Bill amends Division 44 of the Aged Care Act to give effect to changes to
the treatment of income streams and assets that have been disposed of (gifts) under the assets
test for entry into permanent residential aged care. These amendments will enable gifts and
income streams to be treated in the same way under the aged care assets test, as they are
under the pension assets test.
The aged care assets assessment is undertaken to determine whether a person is eligible for
subsidised aged care accommodation costs. The assessment also helps people to work out
the maximum amount of an accommodation bond, or the maximum daily accrual amount of
an accommodation charge, they may be charged for entry to a residential care service.
The amendments stem from an option proposed in the Review of Pricing Arrangements in
Residential Aged Care that the aged care means testing arrangements should be brought into
line with those that apply for the age pension and that, in determining an individual's income
and assets, the same gifting and deeming rules as apply for the age pension should apply.
These rules already apply for aged care income testing purposes.
Under current arrangements, the total amount of gifts is excluded when calculating the value
of assets under the aged care assets assessment. Income stream products from which the
capital component (principal amount) cannot be drawn upon are exempt.
Schedule 1 to the Bill enables gifts and income streams to be treated for the purposes of the
Aged Care Act in the same way as they are treated under the Social Security Act 1991 and the
Veterans' Entitlements Act 1986 for the pension assets test.
The new arrangements will apply to people who undergo an assets assessment for entry into
permanent residential aged care and enter permanent residential aged care on or after
1 January 2007. However, gifts made on or after 10 May 2006 will be assessable.
The changes will not affect people who are currently receiving permanent residential aged
care unless they undergo another assets assessment on or after 1 January 2007 and change
aged care homes on or after 1 January 2007.
Section 44-8AB of the Aged Care Act makes provision for the Secretary to the Department of
Health and Ageing to make determinations as to the value of a person's assets.
The Secretary of the Department of Health and Ageing has delegated the power to determine
the value of a person's assets under section 44-8AB of the Aged Care Act to the CEO of
Centrelink and the Secretary to the Department of Veterans' Affairs.
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A determination made under subsection 44-8AB(1) of the Aged Care Act, is a reviewable
decision under item 39C of section 85-1 of that Act. Determinations under subsection
44-8AB(1) are made in accordance with section 44-10. Therefore, a decision to include an
income stream or gift amount as an asset when working out the value of a person's assets, is
reviewable.
Schedule 2 to the Bill amends the Act to allow the Secretary to the Department of Health and
Ageing to delegate to members of the Aged Care Assessment Teams (ACATs) the
Secretary's power to extend the maximum number of days per year on which a person may
be provided with residential respite care. The purpose of this change is to remove any
uncertainty about the role of ACATs in this process.
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FINANCIAL IMPACT STATEMENT
Schedule 1 to the Bill has financial implications for the Department of Health and Ageing to
meet costs associated with the policy and legislative changes, and to publicise the new
arrangements, and also to meet Centrelink's costs for forms and system design changes in
relation to the harmonisation measure. There will also be financial implications for the
departmental and capital costs of the Department of Veterans' Affairs for forms and system
design changes required to implement the changed arrangements for veterans, war widows
and widowers and partners.
The amendments will also result in savings to administered costs for the Department of
Health and Ageing because a very small percentage of residents will not receive government
assistance with their accommodation costs.
The departmental and capital costs and estimated savings on administered costs for the
current financial year and the next four years for the Department of Health and Ageing and
the Department of Veterans' Affairs are shown below.
Budget Measure - Harmonising aged care and pension assets testing
05-06 06-07 07-08 09-10 10-11 Total
$M $M $M $M $M $M
Health and Ageing
Departmental costs 1.4
1.4
Savings -
Administered costs (6.2) (15.5) (22.9) (28.8) (73.4)
Subtotal (4.8) (15.5) (22.9) (28.8) (72.0)
Veterans' Affairs
Departmental costs 0.1 0.1 0.2
Capital 0.1 0.1
Subtotal 0.1 0.2 0.3
Total 0.1 (4.6) (15.5) (22.9) (28.8)
(71.7)
Schedule 2 to the Bill has no financial impact.
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AGED CARE AMENDMENT (RESIDENTIAL CARE) BILL 2006
NOTES ON CLAUSES
Clause 1: Short title
Clause 1 provides that the Act may be cited as the Aged Care Amendment (Residential Care)
Act 2006.
Clause 2: Commencement
Clause 2 provides that Schedule 1 commences on 1 January 2007 and Schedule 2 commences
the day on which the Act receives Royal Assent.
Clause 3: Schedule(s)
Clause 3 provides that each Act that is specified in the Schedule to this Act is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other item in a
Schedule to this Act has effect according to its terms.
SCHEDULE 1
HARMONISING AGED CARE AND PENSION REQUIREMENTS IN RELATION
TO INCOME STREAMS AND ASSET DISPOSALS
Summary
Schedule 1 to the Bill amends the Aged Care Act 1997 to enable certain assets that have been
disposed of (gifts) and income streams to be taken into account for the purposes of the assets
test for entry into permanent residential aged care in the same way as they are taken into
account for the purposes of the pension assets test under the Social Security Act 1991 and the
Veterans' Entitlements Act 1986. This alignment of the treatment of gifts and income
streams in the aged care asset test and the pension asset test was announced in the 2006-07
Budget.
ITEM 1
A new subsection 44-10(1A) is inserted and provides for the inclusion of certain income
streams (as that term is defined in the Veterans' Entitlements Act 1986) when working out the
value of the assets of a person who is receiving a service pension or an income support
supplement under the Veterans' Entitlements Act 1986.
New paragraph 44-10(1A)(a) provides that the value of such a person's assets is taken to
include the amount that the Secretary to the Department of Health and Ageing determines is
the value of that income stream that would be included in the value of the person's assets if
Subdivision A of Division 11 of Part IIIB of the Veterans' Entitlements Act 1986 applied for
the purposes of working out the value of the person's assets under the Aged Care Act 1997.
New paragraph 44-10(1A)(b) provides that the value of such a person's assets is taken to
exclude the amount that the Secretary to the Department of Health and Ageing determines is
the value of that income stream that would be excluded from the value of the person's assets
if Subdivision A of Division 11 of Part IIIB of the Veterans' Entitlements Act 1986 applied
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for the purposes of working out the value of the person's assets under the Aged Care Act
1997.
A new subsection (1B) is inserted and provides for the inclusion of certain income streams
(as that term is defined in the Social Security Act 1991) when working out the value of the
assets of a person who is not receiving a service pension or income support supplement under
the Veterans' Entitlements Act 1986.
New paragraph 44-10(1B)(a) provides that the value of such a person's assets is taken to
include the amount that the Secretary to the Department of Health and Ageing determines is
the value of that income stream that would be included in the value of the person's assets if
Division 1 of Part 3.12 of the Social Security Act 1991 applied for the purposes of working
out the value of the person's assets under the Aged Care Act 1997.
New paragraph 44-10(1B)(b) provides that the value of such a person's assets is taken to
include the amount that the Secretary to the Department of Health and Ageing determines is
the value of that income stream that would be excluded from the value of the person's assets
if Division 1 of Part 3.12 of the Social Security Act 1991 applied for the purposes of working
out the value of the person's assets under the Aged Care Act 1997.
New subsection 44-10(1C) is inserted and provides for the inclusion of the value of certain
assets, that the person has disposed of, in the value of the person's assets.
New paragraph 44-10(1C)(a) provides that the value of the assets of a person who is
receiving a service pension or an income support supplement under the Veterans Entitlements
Act 1986 is taken to include the amount that the Secretary to the Department of Health and
Ageing determines to be the amount that would be included in the value of the person's
assets if Subdivisions B and BB of Division 11 of Part IIIB of the
Veterans' Entitlements Act 1986 applied for the purpose of working out the value of the
person's assets under the Aged Care Act 1997.
New paragraph 44-10(1C)(b) provides that the value of the assets of a person who is not
receiving a service pension or an income support supplement under the
Veterans' Entitlements Act 1986 is taken to include the amount that the Secretary to the
Department of Health and Ageing determines to be the amount that would be included in the
value of the person's assets if Division 2 of Part 3.12 of the Social Security Act 1991 applied
for the purpose of working out the value of the person's assets under the Aged Care Act 1997.
A new note to subsection 44-10(1C) states that Subdivisions B and BB of Division 11 of Part
IIIB of the Veterans' Entitlements Act 1986 and Division 2 of Part 3.12 of the Social Security
Act 1991 deals with the disposal of assets.
Subdivisions B and BB of Division 11 of Part IIIB of the Veterans' Entitlements Act 1986
and Division 2 of Part 3.12 of the Social Security Act 1991 provide that the amount of gifts in
excess of the allowable amounts will be included as an asset when working out the value of
the person's assets.
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ITEM 2 - Application of subsections 44-10(1A), (1B) and (1C) - working out the value
of assets on or after 1 January 2007 for people entering an aged care service after that
date
Item 2 provides that new subsections 44-10(1A) to (1C), which take into account certain
income streams and certain assets that have been disposed of (gifts), when working out the
value of a person's assets under the Act, only apply if the value of the person's assets is
calculated on or after 1 January 2007 and the person enters an aged care service on or after
1 January 2007.
ITEM 3 - Application of subsection 44-10(1C) - assets disposed of after 10 May 2006
Item 3 provides that when determining an amount under paragraph 44-10(1C)(a) of the Act,
the Secretary must take into account assets that a person has disposed of (within the meaning
of Subdivisions B of Division 11 of Part IIIB of the Veterans' Entitlements Act 1986) on or
after 10 May 2006.
This item also provides that when determining an amount under paragraph 44-10(1C)(b) of
the Act, the Secretary must taken into account assets that a person has disposed of (within the
meaning of Division 2 of Part 3.12 of the Social Security Act 1991), on or after 10 May 2006.
SCHEDULE 2 - DELEGATIONS
ITEM 1
Subsection 96-2(5) of the Act is amended to enable the Secretary to the Department of Health
and Ageing to delegate functions under the Residential Care Subsidy Principles 1997 to
designated ACAT positions, to allow the delegates to extend the maximum numbers of days
a person can receive residential respite care.
ITEM 2
This Item provides that despite the repeal and substitution of subsection 96-2(5) of the Act,
delegations made under that subsection as in force immediately before the commencement of
Schedule 2to this Bill continue to have effect as if they had been made under subsection 96-
2(5) in force immediately after the commencement of Schedule .2. The effect of this item is
that delegations currently held by Aged Care Assessment Teams (ACATs) members under
Part 2.3 of the Act to assess and approve people for aged care services under the Act remain
in force after the commencement of Schedule 2to this Bill. This will ensure that ACATs can
continue to exercise the Secretary's powers under Part 2.3 of the Act until such time as the
Secretary to the Department of Health and Ageing signs a new instrument of delegation.
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