EXPLANATORY STATEMENT
Issued by the authority of the Minister for Aged Care
Aged Care Act 1997
Subsidy Amendment Principles 2015 (No. 1)
The Subsidy Amendment Principles 2015 (No. 1) (the Amending Principles) amend the Subsidy Principles 2014 to remove the exemption currently applied to rental income when calculating a care recipient’s total assessable income.
Under current provisions, rental income from the former principal residence of a person in residential aged care is exempt from the residential aged care means test, but only for residents who pay at least part of their aged care accommodation costs through daily accommodation payments or contributions. This is inconsistent with the objective of people of like means making like contributions to the cost of their care. Rental income from the former principal home is already assessable for residents who pay for their accommodation costs entirely through a refundable accommodation deposit or contribution (lump sum).
The Amending Principles align aged care means-testing arrangements by removing the rental income exemption for aged care residents who are renting out their former home and paying their aged care accommodation costs by periodic payments.
These changes apply to care recipients who first enter care on or after 1 January 2016 and to care recipients who leave care for 28 days or more (other than because they are on leave), and re-enter care after 31 December 2015.
The Amending Principles will result in an increase to the means-tested care fee for the affected residents, but are consistent with more comprehensive changes that took effect on 1 July 2014 to improve the fairness and equity of aged care means-testing arrangements by ensuring people make appropriate contributions to the cost of their care. The measure will align aged care means-testing arrangements for residents who pay their accommodation costs by periodic payments with the arrangements that currently apply to those residents who pay via a lump sum.
The Amending Principles will apply consistent treatment of rental income in the aged care means-testing arrangements so that those with the capacity to pay for their residential care make an appropriate contribution. The measure was announced as part of the 2015-16 Budget and will improve the affordability, sustainability and equity of the aged care system by ensuring that all income is treated the same for means-testing purposes.
These Amending Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Commencement
These Amending Principles commence the day after they are registered.
Reliance on subsection 33(3) of the Acts Interpretation Act 1901
Under subsection 33 (3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
Consultation
No specific consultation was undertaken on these changes. The changes were considered in the context of the 2015-16 Budget.
Regulation Impact Statement (RIS)
As these changes were considered in the context of the 2015-16 Budget a short form Regulation Impact Statement (RIS) was prepared, and has been assessed by the Office of Best Practice Regulation (OBPR) as compliant with Australian Government RIS requirements (OBPR ID 18659).
Explanation of the provisions
Schedule 1 - Amendments
Subsidy Principles 2014
Item 1-2
These items limit the operation of the current section to care recipients who first entered residential care on or before 31 December 2015. Care recipients who enter care for the first time on or after 1 January 2016 will not be able to exclude rental income from their total assessable income.
If a care recipient re-enters residential care after 31 December 2015, after having residential care cease for a continuous period of more than 28 days (other than because the person was on leave) they will no longer be able to exclude rental income from their total assessable income.
Item 3
This item introduces a new subdivision, Subdivision CA – Care subsidy reduction – amounts included in total assessable income. Paragraph 8(8)(znaa) in the Social Security Act 1991 and paragraph 5H(8)(nf) in the Veterans Entitlements Act 1986 both operate to exclude rent received from calculations of income under those respective Acts. The new provisions inserted in Item 3 will have the effect of removing that exclusion when the calculations in those provisions are used for the purposes of the Aged Care Act 1997. This means that the calculation of income will include rent received.
The effective removal of the exclusions will only apply to care recipients who first enter residential care on or after 1 January 2016 or care recipients who re-enter residential care after 31 December 2015, after having residential care cease for a continuous period of more than 28 days (other than because the person was on leave).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Subsidy Amendment Principles 2015 (No. 1)
The Subsidy Amendment Principles 2015 (No. 1) are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
The legislative instrument reflects the 2015–16 Budget measure to align aged care means-testing arrangements for residents who pay their accommodation costs by periodic payments with the arrangements applied to residents who pay by a lump sum.
The Subsidy Amendment Principles 2015 (No. 1) amend the Subsidy Principles 2014 to remove the rental income exemption under the aged care means test for aged care residents who are renting out their former home and paying their aged care accommodation costs by periodic payments. The legislative instrument improves the fairness and equity of aged care means-testing arrangements for new residents entering aged care from 1 January 2016.
Human rights implications
This legislative instrument is compatible with the right to an adequate standard of living and the right to the enjoyment of the highest attainable standard of physical and mental health as contained in article 11(1) and article 12(1) of the International Covenant on Economic, Social and Cultural Rights, and article 25 and article 28 of the Convention on the Rights of Persons with Disabilities.
This legislative instrument will result in an increase to the means-tested care fee for residents who pay their accommodation costs by periodic payments. To the extent that the legislative instrument limits any rights by increasing the means-tested care fee for those residents, the limitation is reasonable. The limitation is mitigated by the fact that the means-testing arrangements will continue to apply to those residents and existing protections such as annual fee caps and lifetime fee caps remain.
Conclusion
This legislative instrument is compatible with human rights as it promotes the human right to an adequate standard of living and the highest attainable standard of physical and mental health.
The Hon Sussan Ley
Minister for Aged Care