The 1st of July heralds the annual changes to the Residential Care Subsidy asset and income thresholds, as well as the maximum contribution required to be paid towards care in our region. As our population ages, more and more of us are going to need rest home level care. So how does the Residential Care Subsidy work?
Firstly, a person needs to be assessed as needing rest home level care. The assessments are usually carried out by Access Ability Whanganui NASC. Secondly, if rest home care is needed, Work and Income (WINZ) will undertake a financial assessment to decide how the fees for that care are to be paid.
The financial assessment is in two parts – assets then income.
As at 1 July, the asset thresholds for the financial means test are as follows:
|Living Situation||Asset Level from 1 July 2023|
|A single or widowed person in care||$273,628|
|Couples with both partners in care||$273,628|
|Couples with one partner in care||Either $149,845 excluding the family home, car, and a pre-paid funeral of up to $10,000 Or $273,628 total assets|
Where the assets are above the thresholds, WINZ will require those excess assets to be used to cover rest home fees before any subsidy is granted.
WINZ will want to know if any assets have been sold in the past five years and will check if they were sold at full value. In addition, WINZ will want to know about any gifting that has taken place.
Gifts of up to $7,500 per annum are permitted in the five years leading up to an application for the rest home subsidy. In the years before that, the limit is $27,000 (per person and per couple). This can cause issues where there is trust that was set up many years ago, particularly where it only holds the family home.
Back in the day, gifting was completed at $54,000 per annum per couple which was the amount permitted by the IRD and wasn’t causing any issues with subsidy applications. However, after the abolition of gift duty in 2011 and, no doubt, the steady increase in our older population, WINZ made it clear that it views gifts of $54,000 to be excess gifting, an attempt to deprive yourself of the ability to pay the fees. It allows $27,000 per couple and will add back the additional $27,000 from each gift into the asset calculation.
For some clients with trusts, this will mean the subsidy is not available to them as excess gifting pushes them over the asset threshold. Having said that, WINZ has allowed us to wind up a trust which will make the excess gifting disappear, put the house back into personal names (particularly important where there is a couple with only one partner needing care) and could change the outcome of the subsidy application.
If the assets are below the thresholds, WINZ will then assess income. Income includes the Super, Veteran’s Pension or other benefits; 50% of private pension payment or life insurance annuities; earnings from interest, investments, business or employment and income or payments from a trust or estate. Note that WINZ has an expectation that your trust (or any trust you are a beneficiary of) will help with fees.
Income does not include any money a partner has earned through their work or a War Disablement Pension. Income from assets is also excluded where the income is less than:
- $1,188 a year for single people.
- $2,376 a year for a couple when both have been assessed as needing care.
- $3,564 a year for a couple where one partner has been assessed as needing care.
The maximum contribution to be paid (either by WINZ or privately) for care in our region has increased to $1,365 per week or $5,934.60 per month (incl GST). However, this does not include optional extras such as premium room rates or personal services e.g., hairdressing or the podiatrist. The subsidy does not cover any optional extras.
If the income is less than the maximum contribution, then a full or partial (according to income levels) subsidy may be granted. Where the subsidy is granted, WINZ will take most of the Super that is being paid then top it up to pay the fees directly to the rest home. The balance of the Super, approx. $55 per week, will be given to the applicant for personal items.
If you are assisting an elderly person at this time, it is worth keeping an eye on assets and income so that you are ready to put in a subsidy application as soon as the thresholds are reached. Where there is a trust involved, consider the reasons for the trust and whether it is appropriate for it to be retained.
We are happy to help with both the review of your trust and the application to WINZ for the Residential Care Subsidy. These can be complicated and, particularly where a trust is involved, there can be a considerable amount of paperwork to put together.
Please get in touch if you would like to discuss this further. You can contact us on T: 06 349 0090 or email firstname.lastname@example.org.
Stephanie Bishop FNZILE
Registered Legal Executive
Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.