Super, account-based pensions and deeming in the fee assessment

Families often ask whether a parent's super counts when aged care fees are worked out. The short answer: it can, and it's treated the same way as for the Age Pension. Aged care law borrows the pension's income and assets rules and doesn't make a special exception for super.

What matters is your parent's age, whether the super is paying an income stream, and, for income streams, when it started.

Super that isn't paying an income stream

This is super still sitting in an account, sometimes called accumulation super.

• Under Age Pension age: it isn't counted.
• From Age Pension age: it counts as an asset. It's also treated as a financial asset, so it's deemed to earn income, whatever it actually earns.

The same applies to a partner. Their super starts to count once they reach Age Pension age.

What deeming means

Deeming is a set of assumed earning rates. Instead of looking at the interest or returns your parent actually gets, Services Australia assumes their financial assets earn:

• 1.75% a year on the first $66,800 (for a single person). For a couple where at least one partner gets a pension, it's the first $110,600 of their combined financial assets. If neither gets a pension, each partner gets half of that amount on their own share; and
• 3.75% a year on the rest.

That assumed income is then counted in the income part of the means assessment. Financial assets include bank accounts, shares, managed funds and super from Age Pension age.

Account-based pensions

An account-based pension is a common way of drawing an income from super. Both its balance and the income from it are taken into account, at any age.

How the income is worked out depends on when the pension started.

• Started on or after 1 January 2015: it's deemed, like other financial assets. The balance counts as an asset.
• Started before 1 January 2015: it may be under older, protected rules. These apply only if your parent has been getting an income support payment, such as the Age Pension, without a break since 31 December 2014. Under those rules, the income counted is the yearly payment less a deduction for the amount originally invested, rather than a deemed amount. The balance still counts as an asset.

If an older pension loses its protected status, for example because the pension payments stopped for a time, it's deemed from then on. Closing the pension and starting a new one also ends the protection, even with the same fund, and so does rolling it over to another fund. The protection usually continues if the pension passes to a reversionary partner who is also getting an income support payment.

Why this matters for the fees

Super can change two parts of the assessment:

• the assets side, through the balance; and
• the income side, through deeming or the protected income rules.

Both feed into whether your parent is on low means and how much they pay towards everyday living and care. Our guide to the means test basics explains how those amounts are worked out.

Because the rules are the same as for the pension, changes to super can affect the Age Pension and aged care fees at the same time.

Things to check

• Your parent's age. If they're close to Age Pension age, their super may start counting soon.
• When any account-based pension started, and whether their pension payments have had a break since the end of 2014.
• Before switching products, rolling over, or adding or removing a reversionary beneficiary on an older account-based pension, ask whether it would lose its protected status.
• Report changes. Changes in your parent's finances should be reported to Services Australia within the required time, as they can change the fees.

Getting help

The Aged Care Costs calculator gives an estimate of the fees, with the home counted as it is today, and compares the ways of paying for the room.

Super rules interact with the pension, the fees and the choice of how to pay for the room. A licensed financial adviser who specialises in aged care can look at your parent's super, especially if it includes an older income stream.

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