Over the years, we have seen an increasing number of people coming to see us only after they have received the dreaded “OMG letter” from Centrelink.
What is the “OMG letter?”
The OMG letter is the letter that Centrelink and the Department of Veteran’s Affairs (DVA) send out two years after someone moves into aged care, letting them know that their former home is now included in their assets, that they are now considered a non-homeowner for pension purposes and advising of their new pension entitlement—often zero. This is the point at which they exclaim, “OMG!” You can imagine the confusion and panic families face when the letter arrives, often just days before the pension is cancelled! The situation typically arises when a protected person (other than a spouse) is living in the home, often a child who was a carer. When Mum or Dad move into aged care, they are told that they are a protected person and that the home will be exempt from aged care means testing.
However, it’s important to note that the pension exemption is seperate from aged care means testing. From a pension point of view, your home is exempt from the asset test for two years from the date you (or your partner) move out — you don’t need to have a protected person (or anyone) living there. The exemption is designed to enable people to move back home if they can. Renting out the home is often a viable option for many, however it is important to note that the State Revenue Office will remove land tax exemptions so land tax may be payable.
This scenario is one of many where professional advice can play a big part in the end financial outcome. There are many options to consider – depending on a range of factors unique to the resident and their financial situation, including their estate planning wishes, their cash flow, tax consequences and their ability to meet the cost of care. Receiving quality advice early can ensure that aged care remains affordable now and in the future.
