AGED CARE AMENDMENT BILL 1998 Explanatory Memorandum

1998

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

AGED CARE AMENDMENT BILL 1998

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Family Services,
the Hon. Warwick Smith, MP)

ISBN: 0644 516747

This Bill amends the Aged Care Act 1997 (the Act) and the Aged Care (Consequential Provisions) Act 1997 by introducing a number of finetuning measures to the aged care structural reforms and addressing some administrative and procedural issues that have become apparent since the commencement of the new legislation on 1 October 1997.

The Bill introduces accommodation charges, as a replacement for accommodation bonds, for care recipients requiring nursing home level care. The charge will be a capped and will be paid for a maximum of five years. Consumers will be able to pay the charge flexibly, for example, by renting out their former home.

Complementing this change will be amendments to the Social Security Act 1991 and the Veterans' Entitlement Act 1986 which will ensure that rental income will be excluded from the pension income test and the value of the home will be exempted from the pension assets test where the former home is being rented to pay the accommodation charge.

The Bill also introduces protections for consumers who pay accommodation charges that are equivalent to those for consumers who pay bonds. This change will facilitate the capital upgrading of nursing homes and the provision of quality care for older Australians.

The Bill reduces from 5 years to 2 the period for which a carer must have lived in the family home before the home can be exempted from consideration of whether a prospective resident can pay an accommodation bond when they enter hostel level care.

The Bill also clarifies the provisions in the Act dealing with fees that are able to be charged of residents. Provisions have been added that will prohibit the charging of any extra fees by providers that could result in significant extra costs for consumers beyond those already allowed by the Act.

The Bill also addresses anomalies in the new legislation in relation to the revocation of approved provider status and the imposition of sanctions for breaches of responsibilities under previous aged care legislation. The Bill introduces provisions that will enable the Commonwealth to take action against these providers, for example, where they have been convicted of serious crimes such as abuse of residents or fraud.

Lastly, the Bill makes a number of minor amendments to facilitate the administration of the Aged Care Act 1997. These include clarifying definitions, rules about pre-entry leave, rules about entering into accommodation payment agreements where a person has a mental impairment and the keeping of essential aged care service records in English. The Bill also makes minor amendments to the Veterans' Affairs Legislation Amendment (Budget & Simplification Measures) Act 1997 to correct cross reference errors between this legislation and the Aged Care Act 1997.

The amendments have financial implications to running costs for the Department of Health and Family Services as a result of new systems that will need to be implemented to administer the new arrangements. The amendments do not have any financial impact on program costs.

Centrelink will have additional running costs in relation to the income testing service provided to the Department of Health and Family Services.

The Departments of Social Security and Veterans' Affairs will have additional program costs as a result of increased pension payments, primarily due to the exclusion of rental income and the value of the home from the income and assets test where a person rents their home to pay an accommodation charge.

The Department of Veterans' Affairs and Centrelink will have running costs to administer the new arrangements to pensioners.

The running costs and program costs over the next four years for each agency are shown below.

97/98 98/99 99-00 00/01
Health and Family Services
Running Costs $5.764m $0.629m $0.359m $0.270m
Program Costs Nil Nil Nil Nil

Social Security
Running Costs - are still to be agreed between the Ministers for Finance, Social Security and Family Services
Program Costs $0.330 $0.510 $4.294 $9.969

Some elements of program costs are still to be agreed between the Ministers for Finance, Social Security and Family Services

Centrelink
Running Costs $0.255 $0.160 $0.160 $0.160

Veterans' Affairs
Running Costs $1.732 $0.425 $0.411 $0.411
Program Costs Nil Nil $0.540 $1.351

AGED CARE AMENDMENT BILL 1998

Introduction

The Aged Care Amendment Bill 1998 (the Bill) amends the Aged Care Act 1997 and the Aged Care (Consequential Provisions) Act 1997 as a result of announcements made by the Government in November 1997 to finetune various aspects of the aged care structural reforms. The Aged Care Act 1997 established from 1 October 1997, the broad framework for the operation of the aged care structural reforms which ensure that older people have equitable access to aged care services that provide high quality standards of care and accommodation.

The Bill also amends the Social Security Act 1991, the Veterans' Entitlement Act 1986 and the Veterans' Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997, however, these amendments relate to the pension income and assets tests and do not impact on business.

This amending legislation continues to reflect the Government's commitment to not unduly burden small business with administrative red tape under the new aged care funding arrangements while, at the same time, providing quality aged care services with built in protections for older Australians.

Issues in the Current System

As a result of community consultation the Government became aware of the need to finetune arrangements in relation to the payment of accommodation bonds by nursing home level residents. Many older people believed that they would have to sell their homes in order to pay the accommodation bond amount.

It was also necessary to address the 5 year co-residence qualifying period of carers to ensure that the family home is excluded from consideration as an asset in determining eligibility to pay an accommodation bond.

Since the introduction of the Aged Care Act 1997 and the Aged Care (Consequential Provisions) Act 1997 on 1 October 1997 it has become apparent that the legislation has been drafted in a way that makes it impossible to take either sanctions action or revoke the approval of a provider for breaches of responsibilities that occurred prior to 1 October. This is because the relevant provisions of the preceding legislation, the National Health Act 1953 and the Aged or Disabled Persons Care Act 1954, have been repealed.

The Government is strongly committed to ensuring that only people who meet stringent suitability requirements are able to enter and remain in the aged care industry to ensure that only high quality care is provided to older Australians. Similarly, the Government maintains its commitment to take firm and decisive action against those providers who breach their responsibilities to either consumers or the Commonwealth.

The Bill also contains a number of amendments to clarify difficulties in the administration of the legislation that have become apparent since its implementation on 1 October 1997. Most of these are minor amendments of an administrative or procedural nature. For example, greater clarity was needed to ensure providers understood that they could not charge a fee to intending residents for being placed on the service's waiting list, or for administrative services for which they had a responsibility to provide.

The Changes and Their Impact

The Government announced the following measures in November 1997:

i. The introduction of an accommodation charge for nursing home level residents and related matters

From 6 November 1997 people entering nursing home level care will not be required to pay an accommodation bond. Rather, those who can afford to do so, may be required to pay an accommodation charge of up to $12 per day for non-concessional residents or up to $6 per day for assisted residents for a maximum period of five years. The actual amount of charge for each individual will be determined by an income based formula. Concessional residents or those facing financial hardship cannot be asked to pay the accommodation charge.

For nursing home level residents this change provides flexibility in payment options. People will not have to sell their homes and will be able to pay the charge, for example, by renting out their former home to produce an income stream. Where rent is used to pay the charge, it will be exempt from the pension income test and the value of the house from the pension assets tests.

The Bill extends the same kinds of consumer protections to payments of accommodation charge as the Aged Care Act 1997 currently contains for the payment of accommodation bonds. For example, providers and residents will be required to enter into agreements about the accommodation charge just as they currently do for accommodation bond payments.

People will know whether they will be required to pay an accommodation bond or charge when they are assessed by an Aged Care Assessment Team prior to entry to a residential aged care service. Intending residents assessed as requiring nursing home level care may pay an accommodation charge while those assessed as requiring hostel level care may pay an accommodation bond.

The Bill also provides flexibility for those nursing home level residents who have already paid an accommodation bond, when they move to a new service, to either pay another bond of no more than the remaining bond balance or an accommodation charge based on their level of assets at the time of the move.

For aged care providers, payments of accommodation charge will result in much needed capital which must be used in the same way as the income derived from accommodation bonds, that is, for the capital improvement of aged care accommodation and other aged care purposes.

ii. The qualifying period of co-residence for carers will be reduced from 5 years to 2 years.

This change will impact on older Australians by enabling a larger group of people to qualify as concessional residents and for hardship determinations in relation to paying an accommodation bond.

This change will also impact on providers of residential aged care by enabling them to receive increased payments of concessional resident supplement in lieu of income that would have been derived from the payment of accommodation bonds or accommodation charges.

iii. New provisions to facilitate revocation of approved provider status where the approved provider is no longer considered suitable

There are currently provisions in the Aged Care Act 1997 which allow the Secretary to revoke the approval of a provider where there is evidence that the provider is no longer suitable to provider care to older Australians. This would occur, for example, where the provider has been convicted of a serious crime such as abuse of residents or fraud.

The new provisions will rectify a time frame constraint on the Secretary in the current legislation which makes it impossible to take any revocation action in these circumstances. The provisions will allow the Secretary to determine when a revocation takes effect and to allow for revocation to be undertaken in stages as alternative care arrangements are made for care recipients.

This will impact on the very small number of providers who are no longer considered to be suitable to be aged care providers by removing their approval to operate aged care services.

The Government maintains its commitment to ensure that only people who meet stringent suitability requirements are able to provide services to frail, older Australians in order to ensure that the best possible services are provided.

iv. Minor administrative or procedural amendments to the Aged Care Act 1997

The Bill introduces a number of minor amendments to the Aged Care Act 1997 as follows:

a. Clarifying the circumstances in which a service can be considered a 'new service'

There are limited circumstances when a change in conditions of an allocation of places will result in a service being considered a 'new service'. These include where the service is totally rebuilt on a different site as a new purpose built facility or moves to a location that has no part of its catchment in common with the area from which it is moving. These conditions currently appear in a Secretarial determination made under s14-6 of the Aged Care Act 1997.

These provisions will now appear in the Aged Care Act 1997 to provide clarity and certainty to providers about whether their service will be considered a new service where the above changes are made.

b. Entry Form

The Bill contains provisions to create an 'entry form' to be completed by a provider for each new resident and sent quickly to the Department. Information on this form will be used as part of the claim form under s43-4(1) which is forwarded to the Department at the end of each month and will therefore not impose an additional administrative burden on providers.

This form will be used by the Department to notify care recipients as early as possible of the income tested fees they may be required to pay on entry into residential aged care.

c. Concessional and Assisted Resident Status

The Bill contains provisions that enable the assessment of concessional and assisted resident status whenever a resident enters a new service.

This will enable a change in status that better reflects changes in the individual circumstances of residents.

Where residents have only small amounts of assets providers will receive additional subsidy. Where available assets are substantial then no supplement is payable.

d. Pre-entry Leave

The Bill will clarify the provisions in the Aged Care Act 1997 that relate to pre-entry leave that is available to intending residents before they enter a service. This type of leave is designed so that people can make the necessary arrangements to enter a service without fear of losing their place as the provider receives Commonwealth subsidy for the days of pre-entry leave taken.

The Government has become aware that some providers are mis-using this provision by claiming Commonwealth subsidy and charging intending residents fees even where a resident has not agreed to enter the service.

Pre-entry leave will now only be available where a resident has actually agreed to enter a service to provide greater certainty to residents and to limit the mis-use of these provisions by providers.

e. Clarifying Responsibilities for Approved Providers

The Bill contains provisions that clarify existing arrangements in relation to the fees that residents can be asked to pay. Provisions will be added that make it clear that providers are limited to charging residents or intending residents only those fees already allowed by the Act. It will become a responsibility of providers to not charge any additional fees, such as fees to be placed on waiting lists, or for administrative costs which are the responsibility of the provider.

f. Records to be kept in English

The Bill contains provisions that require providers to keep essential records required under sections 88-1 and 88-2 of the Aged Care Act 1997 in English. These records are those that are required to enable the Department to undertake its monitoring functions in respect of standards of care, appraisal of care recipients, payments of Commonwealth subsidy and provider responsibilities. To allow these records to be kept in other languages would make the Department's monitoring function unworkable.

Providers are able to keep other records in other languages if they choose to do so.

g. Agreements where a person has a mental impairment

The Government has become aware that there are problems entering into either resident or accommodation payment agreements where a resident is unable to sign the agreement within 7 days of entry because of a mental incapacity.
In cases where the resident does not already have a legally appointed financial administrator the 7 day requirement is impossible to meet as it currently takes several months to have an administrator appointed through State and Territory Guardianship Boards. The 7 day rule will therefore be qualified so that an agreement must be entered into within 7 days of a financial administrator being appointed where the resident has a mental incapacity.

The Bill will also extend the ability to appoint a legal representative to those residents with a lesser mental impairment, such as dementia. The new 7 day rule will also apply to this group of people.

h. Definitions

The definitions used for 'concessional resident' and 'assisted resident' will be expanded. Where residents fall within these definitions providers will receive greater amounts of Commonwealth subsidy in lieu of payment of income tested fees or accommodation payments they would otherwise have received.

A 'grandchild will be included in the definition of 'close relation' which forms part of the definition of a concessional and assisted resident. Where a 'close relation' has resided with the resident for 2 years or more the resident will be able to qualify as a concessional or assisted resident.

The 'dependent child' component of the definitions of concessional and assisted residents will be expanded to include the situation where a person has a legally based financial responsibility for a child without having actual daily care of the child, for example, where there is a commitment to pay child support.

v. Amendments to the Aged Care (Consequential Provisions) Act 1997

The Bill also introduces some amendments to the Aged Care (Consequential Provisions) Act 1997 as follows:

a. Sanctions for pre 1 October 1997 breaches of responsibility

The Department is currently unable to impose sanctions in cases where a condition of approval was breached under previous aged care legislation and action was not taken before the new Act commenced due to the repeal of the preceding legislation.

The Government has maintained its stated policy to take firm action against those providers who breach their responsibilities in relation to care recipients.
The Bill will amend the Aged Care (Consequential Provisions) Act 1997 to enable the Department to take action to impose sanctions under the Aged Care Act 1997 where an approved provider did not comply with a condition of approval as an approved operator under either the National Health Act 1953 or with the standards of care under the Aged or Disabled Persons Care Act 1954.

These amendments will ensure the provision of quality care to older Australians by taking action against those providers who breach the responsibilities that they have either to consumers or to the Commonwealth.

b. Additional Recurrent Funding

The Bill will allow for the extension of approvals-in-principle (AIPs) for additional recurrent funding for new and rebuilt and upgraded nursing homes.

Without this amendment no extensions could be granted to providers where construction has not yet been completed. The commitments the Commonwealth has in relation to these payments would lapse even if it was considered appropriate to allow the provider extra time to complete construction.

vi. Amendments to the Social Security Act 1991, the Veterans' Entitlement Act 1986 and the Veterans' Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997

The Bill also amends the Social Security Act 1991, the Veterans' Entitlement Act 1986, and the Veterans' Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997, however, these amendments relate to the pension income test and the pension assets tests and do not impact on business.

Consultation

The Government has consulted widely during the development of the Act and the Principles and has listened to older Australians since the implementation of the reforms. The Government has responded by taking immediate action to finetune aspects of the reforms rather than waiting until the two year review of the structural reforms.

Monitoring and Review of the Reforms

While the Government has taken immediate action in these areas, the importance of ongoing review of the reforms to residential aged care is recognised. The Government's commitment to monitoring the reforms will remain.

The Minister for Family Services will report annually to Parliament on the operation of the Aged Care Act 1997 on issues such as unmet demand for places, adequacy of subsidies, compliance of providers with the legislation, amounts of accommodation bonds charged and imposition of sanctions for non-compliance.
There will also be an ongoing, independent review of the reforms, including those contained in this Bill, conducted over two years. While the review will look at a similar range of issues as the annual report it will have a broader role, including the consideration of overall policy and its implementation. It will be able to make recommendations on how the system can be improved and a progress report at the end of the first year of operation will be tabled in Parliament with a final report being tabled at the end of the second year.

The review will contain evidence from all parties involved in the reform process. It will be chaired by an independent person, assisted by a Committee comprising industry, consumer, union, departmental and State and Territory representatives.

CLAUSE 1 - SHORT TITLE

This Clause provides that this Bill, if passed, may be cited as the Aged Care Amendment Act 1998.

CLAUSE 2 - COMMENCEMENT

This Clause provides that the Act will commence when it receives Royal Assent, except that:

. Schedule 4 will be taken to have commenced immediately after the commencement of Schedule 2 to the Veterans' Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997. This will ensure that the technical amendment provided for in Schedule 4 is taken to have been operating since 1 January 1998, as was the original intention; and

. Items 3 and 4 of Schedule 5 are taken to have commenced immediately after the commencement of the Aged Care (Consequential Provisions) Act 1997. This will ensure that an unintended anomaly in the rules relating to Additional Recurrent Funding is removed from the date when the original changes were introduced. It will ensure that approvals-in-principle can be extended in appropriate circumstances, so that approved providers are not prevented from receiving their capital funding where, for legitimate reasons, construction has not been completed within the agreed time frame.

CLAUSE 3 - SCHEDULES

This Clause provides that, subject to the commencement provisions in Clause 2, each Act specified in a Schedule to this Bill is amended or repealed as the individual items describe.

SUMMARY

This Schedule amends the Aged Care Act 1997 to make provision for the payment of accommodation charges as announced by the Prime Minister on 6 November 1997, and to make consequential changes to some of the rules about payment of accommodation bonds. It also provides for clarification and changes required as a result of experience of the operation of the Act.

ITEM 1

This Item adds eligibility to charge an accommodation charge if a service is certified to the list of conditions covered by Chapter 2, which deals with a range of prerequisites for paying subsidy.

ITEM 2

This Item repeals Subsection 10-3(2) which requires revocation of approved provider status not to take effect until alternative care has been arranged for all the residents. This protection is now covered in Item 4, where revocation can be introduced in stages, so that more time and flexibility is available to relocate residents, for example, in smaller numbers.

ITEM 3

This Item amends Paragraph 10-3(3)(c) to provide greater flexibility in the timing of revocation where no submission has been made in response to a notice to the approved provider of the Secretary's intention to revoke approved provider status. The old provision required revocation to take effect on the day after the end of the period for making submissions, if there was no submission. This amendment now provides that revocation may take effect at any time provided there is 7 days between the end of the period for making submissions against revocation and the day when revocation takes effect.

ITEM 4

Revocation of approved provider status is a measure under the Act to remove individuals or companies from involvement in aged care where there are concerns about their performance or ability to provide the necessary care. This is of critical importance where there has been serious cases of abuse of care recipients or fraud against the Commonwealth. This item allows revocation of approved provider status to occur in a managed way in recognition that many providers operate a number of services providing care to large numbers of care recipients, and that arrangements must be made to ensure current care recipients continue to receive care.

This Item repeals Subsection 10-3(7) which requires the Secretary to give effect to revocation as a single action. It is replaced with a provision allowing the Secretary to give the provider notices specifying limitations of approval in the move to final revocation. These notices may limit the provider's approval to one or more types of aged care (e.g. residential care or community care), to one of more services if the provider operates several, or to particular classes of resident. Examples of the limitation might include any combination of:

. residents receiving a particular level of care;

. a particular type of resident, such as concessional or assisted; or

. residents in the service at, before or after a specified event or time.

The Subclause provides that notices of such limitation of approval can be given at different times.

A further provision (Subclause 7A), specifies that the notice takes effect on the day stated in the notice, which must be at least 7 days after the day the notice is given. This ensures that there is a workable time frame allowing conditions to be met by the service.

Subclause 7B picks up, for this staged process, the requirement repealed by Item 3. It ensures that any limitations are not imposed until the Secretary is satisfied appropriate arrangements for care are in place for the residents who will be affected. The care may be provided by another approved provider of aged care or other appropriate carers such as Home and Community Care.

Subclause 7C requires the Secretary to continue any limitation of approval process as described above until the approved provider no longer has approval to provide aged care to any care recipients, at which stage the approval is considered revoked.

ITEM 5

This item adds a new Clause to clarify the conditions under which variation of an approval, e.g. to move to a new location, results in the creation of a new service. A variation of the conditions governing the allocation of places results in the replacement of the original service by another service only if any conditions specified in the Allocation Principles are met, and the Secretary approves in writing the replacement of the old service by the new service.

A Note explains that whether a new service is created may affect other matters such as whether an accommodation bond or charge has become payable.

Another Note states that a decision under Section 17-9 is reviewable.

ITEM 6

This Item requires Aged Care Assessment Teams, (as delegates of the Secretary), to accompany an approval for residential care with a statement that the person is suitable for either nursing home or hostel care, but (except in circumstances specified in the Principles) not for both. The purpose of this statement is to introduce certainty, both for new residents and for service providers, at the time of the resident's entry to a service, about whether an accommodation bond or an accommodation charge may be required. The effect of this statement is further dealt with in Division 57 and 57A. The statement does not restrict the level of care which can be provided by a service to the resident. It is intended to include this statement as an item on the assessment form completed by the Aged Care Assessment Team.

ITEM 7

This Item adds a reference to accommodation charges to the existing reference to bonds, in relation to the effects of certification of a service.

ITEM 8

This Item adds to Paragraph 38-6(2)(d) the requirement to refer to responsibilities about accommodation charges as well as accommodation bonds in a notice approving certification.

ITEMS 9, 10 AND 11

These Items amend Subsections 42-2(2) and (3) to provide that “hospital leave” covered by Subsection (2) can only be taken after a resident has entered a service. A person can be in a hospital and on leave for up to 7 days before they enter a service, but that leave will be taken out of the 52 days of leave for other purposes covered by Subsection (3).

ITEM 12

This Item adds to Subsection 42-3(3) a requirement that, for leave to be taken before a person enters a service, the person must not only be advised that there is a vacancy, but must also have agreed to enter the service.

ITEM 13

This Item adds a new Subclause 43-4(1A) which requires approved providers to use the entry form approved by the Secretary to provide the information about new residents which is requested in the form. The information which can be requested on the form about new residents must be related to the purposes of the Act. It will provide information to assist with identifying new residents and thereby to speed up income testing and the capacity to advise new residents promptly of their correct fees. This information is currently collected on the monthly claim form but with this amendment will not need to be duplicated. The entry form will be used together with the claim form to determine the amount of subsidy that is payable.

ITEM 14

This Item adds liability for accommodation charge to the factors based on which the Minister may determine different amounts of concessional resident supplement.

ITEMS 15 AND 18

These Items amend Section 44-7 to ensure that whether a person is a concessional resident is determined afresh each time a person enters a residential care service.

ITEM 16

This Item Reduces from 5 years to 2 years the time during which a resident's carer must have been living in the resident's home in order for that home not to be counted in the value of the resident's assets at entry for the purpose of determining status as a concessional resident.

ITEM 17

This Item expands the Note to Subsection 44-7(1) to make clear that a concessional resident cannot be required to pay an accommodation charge.

ITEMS 19 AND 22

These items amend Section 44-8 so that a person's status as an assisted resident will be determined afresh at each time the person enters an aged care service.

ITEM 20

This item reduces from 5 years to 2 years the length of time before entry to a service during which a resident's carer must have been occupying the resident's home in order for that home not to count in the value of the resident's assets when determining status as an assisted resident.

ITEM 21

This Item adds to the Note to Subsection 44-8(1) a reference to the fact that an assisted resident can be required to pay an accommodation charge.

ITEM 23

This Item reduces from 5 years to 2 years the period before a resident's entry to a service during which the resident's home must have been occupied by their carer in order for that home not to count in working out the value of their assets at entry.

ITEM 24

This Item includes a grandchild in the definition of “close relation”.
ITEM 25

This Item widens the definition of “dependent child” to include a person who may not actually be caring for the young person but is under a legal obligation to provide financial support, for example, through Child Support.

ITEM 26

This item adds compliance with a provider's responsibilities relating to accommodation charges to the list of responsibilities of providers of residential care.

ITEM 27

This Item adds a responsibility for a provider of residential care not to charge a fee for putting someone on a waiting list for entry to the service, except for a respite booking fee about which separate rules apply, nor to charge for the provider's costs of complying with any other obligations under the Act except where the Act allows such charges. These charges are already prevented under the Act at present but greater transparency is needed to ensure providers understand their responsibilities. It also allows the User Rights Principles to specify other things or circumstances for which a provider may not charge with the intention to specifically prevent a provider from charging fees where no additional service is being provided to the resident or prospective resident.

ITEM 28

This Item adds another responsibility for a provider of residential care. This is not to discharge and then re-admit a resident to the service, even with the resident's consent, so that the provider can get more favourable treatment under this Act. The intention is to make it quite clear that a resident cannot be treated in this way, for example, so that the provider can claim concessional resident supplement, or charge an accommodation bond or an accommodation charge.

ITEM 29

This Item adds a responsibility for providers of community care not to charge for putting or keeping a person on a waiting list for entry to the service, or for any of the costs of complying with obligations under this Act, except as the Act allows. These charges are already prevented under the Act at present but greater transparency is needed to ensure providers understand their responsibilities. It also provides that the User Rights Principles may specify other things or circumstances for which no charge can be made.

ITEM 30

This item adds to the responsibilities of a provider of flexible care compliance with any responsibilities under the Act relating to the charging of accommodation charges.

ITEM 31

This Item adds a responsibility for providers of flexible care not to charge for putting or keeping a person on a waiting list for entry to the service, or for any of the costs of complying with obligations under this Act, except as the Act allows. It also provides that the User Rights Principles may specify other things or circumstances for which no charge can be made.

ITEM 32

This Item adds a rule about accommodation bonds. This is that, at the time the person enters the service, at least one of the following must be true in order for an accommodation bond to be charged:

. the person's ACAT approval must be accompanied by a statement that the person is eligible for hostel care;

. if the approval is not accompanied by any statement about whether a person is eligible for hostel care or nursing home care, the care recipient and the approved provider must have agreed that an accommodation bond is to be payable;

. the service, or the distinct part of the service, where the resident is to live, must have extra service status; or

. Section 57-23 allows the provider to charge a bond. This will be in the case where a resident has moved from one service to another and has agreed with the second provider to pay an accommodation bond, the maximum of which is the balance received from the first service.

ITEM 33

This Item adds a Note to Paragraph 57-2(e) which deals with the timing of accommodation bond agreements, explaining that the time limit is extended if certain legal processes relating to the resident's mental impairment are in progress.

ITEM 34

This Item adds another reference in Paragraph 57-2(g) to include Section 57-23 which deals with additional rules about accommodation payments on transfer between services.

ITEM 35

This Item adds a provision to extend the time allowed for making an accommodation bond agreement where it has been delayed because there is no legally authorised person so far appointed to sign on behalf of a resident with a mental impairment. The Item provides that, where the 7 days allowed has expired, but a process is in progress for a legally authorised representative (other than the approved provider) to be appointed for a resident with a mental impairment, the 7 days time limit is extended until 7 days after:
. the appointment is made; or

. a decision is made not to make the appointment; or

. the process ends for some other reason.

The time limit in this case can also be extended for any further period allowed by the Secretary, taking into consideration any matters specified in the User Rights Principles.

ITEM 36

This Item amends Note 2 to Subsection 57-16(2) to make allowance for the extra time in the situations described in Item 35 above.

ITEM 37

This Item adds a new Subdivision 57-H - charging an accommodation bond instead of an accommodation charge.

Clause 57-23 Charging an accommodation bond instead of an accommodation charge

This provision applies where a person agreed to pay an accommodation bond to a residential care service, left that service and within 28 days moved into another where an accommodation charge would be payable, and the resident and the provider agreed before the resident entered the second service that an accommodation bond would be payable instead. In this case, the second service provider can charge an accommodation bond even though in any other circumstances they would only be able to charge that resident an accommodation charge. The maximum bond that can be charged in this situation is either the balance refunded or payable in accordance with Section 57-21, or the bond amount agreed less any retention amounts if the accommodation bond has not been paid fully as a lump sum.

ITEM 38

This Item inserts a new Division 57A - what are the responsibilities relating to accommodation charges?

Clause 57A-1 What this Division is about

This Clause explains that, if an approved provider charges an accommodation charge for a care recipient's entry to a residential care service, there are a number of rules which must be followed, relating particularly to accommodation charge agreements, the amount of the charge and its payment, and the use of the charge.

Subdivision 57A-A - The basic rules

Clause 57A-2 - Basic rules about accommodation charges

Subclause (1) lists the basic rules applying to charging an accommodation charge for a care recipient's entry to a residential care service as follows:

(a) At the time of entry all the following must be true:

. If the care recipient's approval is accompanied by a statement under Section 22-2A, that statement must be that the care recipient is suitable for continuous nursing care;

. If there is no statement under Section 22-2A, the care recipient and the provider have agreed that an accommodation charge will be payable;

. The service or distinct part of the service where the care recipient has a place does not have extra service status; and

. The application of Section 57-23 does not allow the provider to charge an accommodation bond.

(b) No accommodation charge can be charge if the person enters to receive respite care only.

(c) Before the care recipient enters the service, the provider must supply any information about the accommodation charge which is specified in the User Rights Principles.

(d) The care recipient and the provider must sign an accommodation charge agreement within 7 days of the care recipient's entry. A Note explains that this time limit is extended in some cases of mental impairment referred to in Subsection (2).

(e) Another person must not be required to pay the accommodation charge as a condition of the care recipient's entry.

(f) The daily amount of the charge must not exceed the maximum set in Section 57A-6 and the care recipient must not be asked to pay more than one accommodation charge for entering the service.

(g) The accommodation charge cannot accrue for a total of days in excess of 5 years as set out in Section 57A-7, or in contravention of Section 57A-8 which deals with certification.

(h) An accommodation charge must not be charged if there is a hardship determination in force under Section 57A-9.

(i) The approved provider must comply with the requirements of Section 57A-11 which relates to not requiring payment more than a month in advance.
(j) The care recipient may be required to pay interest on late payment of the charge in accordance with Section 57A-12.

(k) The provider must use the money from the accommodation charge to meet capital works costs related to residential care, to retire debt relating to residential care, or, where no capital expenditure is reasonably required in relation to certification or accreditation purposes, to improve the quality and range of aged care services.

(l) The approved provider must not charge an accommodation charge if prohibited by a sanction under Part 4.4.

(m) Any other rules specified in the User Rights Principles.

Subclause (2) extends the 7 days time limit for signing accommodation charge agreements in certain circumstances. These are where the resident has a mental impairment and a process is in progress to appoint a legally authorised representative (other than the provider). The time limit is extended until:

. 7 days after the appointment is made or a decision is made not to make the appointment or the process ends for any other reason; or

. for a further period which the Secretary allows, having considered any matters specified in the User Rights Principles.

Subdivision 57A-B Accommodation charge agreements

Clause 57A-3 Contents of Accommodation charge agreements

Subclause (a) provides that an agreement between a provider and a resident or intending resident of a residential care service is an accommodation charge agreement if it sets out the following:

(a) the amount of the accommodation charge which accrues for each day, including days of leave;

(b) the date, or proposed date of entry;

(c) how the accommodation charge is to be paid;

(d) when the accommodation charge is payable;

(e) whether payment of the charge entitles the resident to specific accommodation or additional services;

(f) any financial hardship provisions that apply to the resident;

(g) any other matters specified in the User Rights Principles.
Subclause (2) provides that the Principles may specify, but are not limited to, matters relating to:

(a) specific entitlements of a resident which arise from signing an accommodation charge agreement;

(b) provision of information to others about accommodation charges and related matters;

(c) a resident's obligations;

(d) alleviating financial hardship.

Clause 57A-4 Accommodation charge agreements may be incorporated into other agreements

This Clause provides that, if the content requirements are met, an accommodation charge agreement can be incorporated in another agreement.

Clause 57A-5 Agreements cannot affect requirements of this Division

This Clause ensures that the requirements of this Division apply, despite any provisions to the contrary in any agreement.

Subdivision 57A-C Daily accrual amounts of accommodation charges

Clause 57A-6 - Maximum daily accrual amount of accommodation charge

This Clause provides that the maximum daily accrual amount of an accommodation charge is the lowest of the following:

(a) the amount stated in the accommodation charge agreement;

(b) the value of the resident's assets at entry, minus the minimum permissible asset value under Subsection 57-12(3), and then that figure divided by 1,825 (5 years worth of days); and

(c) an amount specified in, or worked out in accordance with, the User Rights Principles.

Subclause (2) provides that, if a resident does not give asset information to the provider to work our the value of their assets at entry, (b) in Subclause (1) above is not considered for working out maximum daily amount of accommodation charge.

Subclause (3) provides that the value of the resident's assets is worked out according to Section 44-10, that is, in the same way as for concessional resident status.

Clause 57A-7 Maximum period of daily accrual of accommodation charge

This Clause provides that an accommodation charge cannot continue for any days after the resident leaves the service or dies. The accommodation charge can only accrue for a total of 5 years in a service, starting on the later of the entry day or the date of certification, if an accommodation charge agreement was signed at entry while the service was not certified.

The 5 years total includes all days of leave, but no day when the resident was not in a residential care service. The period of 5 years during which the charge can accrue in any service is reduced by the number of days a charge has already accrued in another service.

Clause 57A-8 Accommodation charge not to accrue while residential service not certified

This Clause provides that no accommodation charge can accrue for any day on which a service was not certified.

Clause 57A-9 Accommodation charge not payable in cases of financial hardship

This Clause provides that the Secretary may determine, in accordance with the User Rights Principles, that a person must not be charged an accommodation charge because its payment would cause financial hardship. A Note explains that a refusal to make such a determination is reviewable. Circumstances constituting financial hardship are not limited to, but include, any specified in the User Rights Principles.

Determinations end at a time or on the occurrence of an event, if this is specified in the determination. A Note states that such inclusions in the determination are reviewable. The resident or the service provider can apply, in a form approved by the Secretary, for a hardship determination. If the Secretary needs more information to make the determination, this may be requested in a notice. It must be supplied within 28 days of the notice or another time specified in the notice. The notice must also advise that the application will be taken to be withdrawn if the information is not supplied in the time, although this time can be extended by the Secretary. A notice of the Secretary's decision must be given to the resident and the provider within 28 days of the application or of receiving further requested information. If the determination is made, the notice must contain any time or event after which it will cease to be in force.

Clause 57A-10 Revocations of determinations of financial hardship

This Clause provides that, in accordance with the User Rights Principles, the Secretary may revoke a hardship determination. A Note states that this decision is reviewable. Before revoking the determination, the Secretary must give the resident and the provider a written notice stating that revocation is being considered. The notice must invite submissions within 28 days of receiving the notice and inform recipients that, if no submission is received, revocation will occur on the day after the end of the period for making submissions. The Secretary must consider any submissions in making the decision and the decision must be made within 28 days of the end of the submission period.
The Secretary must give written notice of the decision to the resident and the provider within 28 days of the end of the submission period and if no notice is given the Secretary is taken to have decided not to revoke the determination. The revocation takes effect on the day after the resident and the provider have both received their notices.

Subdivision 57A-D Payment of accommodation charges

Clause 57A-11 Accommodation charges may be payable not more than one month in advance

An accommodation charge can be required up to one month before it accrues, but, if it does not in fact accrue, any advance payments must be refunded.

Clause 57A-12 Approved provider may charge interest for late payment

This Clause provides that if, under an accommodation charge agreement, a resident is required to pay an accommodation charge and the resident does not pay some or all of the charge until more than one month until after the charge accrued, the resident may be required to pay interest on the outstanding balance. However, such interest can only be charged if it is specified in the accommodation charge agreement. The rate of interest must not exceed that specified in the User Rights Principles.

ITEM 39

This Item adds a reference to an accommodation charge agreement to the Note at the end of Subsection 59-1(3), mentioning that a resident agreement can be incorporated into other agreements.

ITEM 40

This Item amends Subparagraph 62-1(b)(ii) to allow for disclosure of personal information in limited circumstances also to another provider about whether the resident can be charged an accommodation charge, i.e. how much of the 5 years maximum possible accrual is left.

ITEM 41

This Item amends Paragraph 63-2(2)(d) to include information about amounts of accommodation charges in the information to be included in the annual report on the operation of the Act.

ITEM 42

This Item amends Paragraph 66-1(j) to add to the list of sanctions that may be imposed the prohibition of charging of accommodation charges.

ITEM 43

This Item amends the table in Section 85-1 to provide that a decision under Section 17-9 about the replacement of an aged care service by a new aged care service is a reviewable decision.

ITEM 44

This Item amends the table in Section 85-1 to provide that a decision under Subsection 22-2A(1) to make a statement as to whether a person is eligible for nursing home care or for hostel care is a reviewable decision.

ITEM 45

This Item amends the table in Section 85-1 to provide that a decision under the following provisions of the Act are reviewable decisions:

. Subsection 57A-9(1) that paying an accommodation charge would not cause financial hardship;

. Subsection 57A-9(3) that a hardship determination will cease at a specified time or event; and

. Subsection 57A-10(1) to revoke a determination that paying an accommodation charge would cause financial hardship.

ITEM 46

This Item provides that, in the case of a decision under Subsection 22-2A(1), the application for review can be made only by the person (or their legally authorised representative) to whom the ACAT statement about suitability for nursing home or hostel care refers. An approved provider cannot appeal this decision. This will mean the in-going resident has as much certainty as possible about what they are expected to pay.

ITEM 47

This Item amends Paragraph 86-9(1)(e) to add information about accommodation charges to the list of information which the Secretary can make freely available about a service.

ITEM 48

This Item amends Subsection 88-1(3) to make clear, as was always the intention, that providers must keep records in English.

ITEM 49

This Item adds records about accommodation charges to the list of examples of types of records the retaining of which may be required in the Principles.

ITEM 50

This Item amends Subsection 88-2(3) to provide that records required to be kept under the Principles must be in English.

ITEM 51

This Item amends Paragraph 96-5(b), in line with the provisions in this Bill extending the time for signing accommodation bond or accommodation charge agreements in certain cases of mental impairment. It replaces the concept of mental incapacity with that of mental impairment, to cover cases where residents may have a lower level of mental deficiency than is implied by incapacity, but nevertheless are not in a position to make their own decisions about signing agreements.

ITEM 52

This Item amends the Note to Section 96-5 to include accommodation charge agreements in the range of agreements to which it refers.

ITEM 53

This Item amends the definition of accommodation bond in Clause 1 of Schedule 1 of the Act to make clear that, now that accommodation charges have been introduced, the important difference is that a bond does not accrue daily.

ITEM 54

This Item amends Clause 1 of Schedule 1 of the Act to include a definition of accommodation charge.

ITEM 55

This Item amends Clause 1 of Schedule 1 to the Act by adding a definition of accommodation charge agreement.

ITEMS 56 AND 57

These Items amend Clause 1 of Schedule 1 to the Act to include definitions of hostel care and nursing home care, which are to be used in relation to the ACAT statement in Section 22-2A that the person is suitable for nursing home care or for hostel care. This statement is important is providing certainty as to whether the person can be charged an accommodation charge or an accommodation bond.
ITEM 58

This Item provides that the requirements in Items 48 and 50 about keeping records in English are not retrospective.

SCHEDULE 2 - SOCIAL SECURITY ACT 1991

ITEM 1

This Item amends section 3 (index of definitions) to include a reference to the new definition of "accommodation charge", that is being inserted in subsection 11(1) by clause 5 below.

ITEM 2

This Item makes a consequential amendment to a note to provide for income that is exempted by new section 1099C, that is being inserted by clause 13 of this Bill.

ITEM 3

This Item inserts a new paragraph 8(8)(zn). Subsection 8(8) provides for certain amounts to be excluded from the income test.

New paragraph 8(8)(zn) provides that rental income from a person's principal home is to be excluded from the social security income test if:

· the person or the person's partner are accruing an accommodation charge; and

· the person, or the person's partner, receives rent from a third person in respect of their principal home.

The new provision provides that any rental income exempted under the income test will be exempt for both the person liable to pay the accommodation charge and the person's partner (if applicable).

Note 1 to the new paragraph refers the reader to the definition of "rent" in subsection 13(2) of the Social Security Act.

Note 2 advises the reader that a home may be deemed to be a principal home under subsections 11(6A) and 11(7), notwithstanding that the person liable to pay an accommodation charge (and the person's partner, if applicable) is residing in another place.

ITEM 4

This Item amends subsection 11(1) to provide for the new subsection 11(6A) in the definition of "principal home".

ITEM 5

This Item provides a definition of "accommodation charge". The new definition will be the same as that used in the Aged Care Act 1997. That Act defines an "accommodation charge" as follows:

accommodation charge, in relation to a person, means an amount of money that accrues daily and is paid or payable to an approved provider by the person for the person's entry to a residential care service or flexible care service through which care is, or is to be, provided by the approved provider.

ITEM 6

This Item inserts a new subsection 11(6A) to extend the existing provisions that provide for a residence to be deemed to be a person's "principal home" even though a person is absent from the home.

New subsection 11(6A) provides that a residence is taken to be a person's principal home if the Secretary is satisfied that the person left his or her principal home for the purpose of going into a "care situation" and:

· the person is liable to pay an accommodation charge for the care (or would be liable except for the fact that the care provider's right to charge an accommodation charge has been temporarily withdrawn because of a sanction imposed under Part 4.4 of the Aged Care Act 1997); and

· the person or the person's partner is receiving rent from the premises from a third party.

New subsection 11(6A) provides that, if a premises is deemed to be a person's principal home because of the operation of subsection 11(6A), the premises is also deemed to be the principal home of the person's partner.

Subsection 11(6A) will only apply if the person left the person's principal home to go into a "care situation" (which is defined in subsection 13(9) and includes the case where a person receives, or is likely to receive care in a private residence for at least 14 days).

This amendment means that persons who rent out their principal home in order to pay an accommodation charge will not have their home assessed under the assets test.

A note to the provision also clarifies that a person, and the person's partner cannot have more than one principal home at any one time. That is, only one residence can be the principal home of a person and the person's partner.

ITEMS 7 to 12

These Items update various sections to provide for the new subsection 11(6A) that has been inserted in the definition of "principal home".
ITEM 13

This Item inserts a new Division 1D which inserts new sections 1099A to 1099E.

New section 1099A sets out an overview of the Division. The new Division will apply to two classes of people.

The first class are those people who became liable to pay for an accommodation bond between 1 October 1997 and 5 November 1997, would have been liable to pay an accommodation charge had that been in place, and who subsequently agreed to switch to an accommodation charge.

The accommodation bond scheme was abolished from 6 November 1997 and was replaced with the accommodation charge scheme. If a person paid an accommodation bond, the person or the person's partner can request that the nursing home refund the bond. If the bond is refunded, the person would then, in lieu of the accommodation bond, pay an accommodation charge. To ensure that persons who purchased an accommodation bond are not disadvantaged, the refunded bond will be exempted from the income and assets test.

The second class of people are those people who either sold their home, or became liable to sell their home (that is, there was an exchange of contracts), prior to 6 November 1997, and the Secretary is satisfied that the home was sold to purchase an accommodation bond. This amendment will ensure that a person is not penalised by having income assessed against their social security payments if the person invests the refunded bond or the proceeds of sale.

It is intended that the beneficial income treatment will also cover the partners of the recipient.

Subsections 1099B(1) and (2) provide that the Division applies to a person who:

· between 1 October 1997 and 5 November 1997 became liable to pay an accommodation bond and the person later made an agreement to replace the liability for the accommodation bond with a liability to pay an accommodation charge and an accommodation charge would have been payable for the entry had the person entered residential care after 5 November 1997; or

· on or before 5 November 1997, sold his or her "principal home" (as defined in subsection 11(7)) for the sole or principal purpose of raising money to pay an accommodation bond and an accommodation charge would have been payable for the entry had the person entered residential care after 5 November 1997.

The requirement that an accommodation charge would have been payable, had the person entered residential care after 5 November 1997, ensures that the provision applies only to those persons who paid an accommodation bond to enter a nursing home level of care.

New subsection 1099B(3) provides that the Division applies to partners of a person who sold a home or purchased an accommodation bond in the above circumstances, even if the person is deceased. This subsection reflects the fact that the partner was also likely to be disadvantaged by the above situations.

New subsection 1099B(4) provides that a person is taken to have sold his or her home if the person had entered into a legal obligation to sell the home as at 5 November 1997. That is, if contracts had been exchanged as at 5 November 1997, the person would be obligated to continue the sale despite the fact that accommodation bonds may have been abolished at the date that settlement occurs. This subsection ensures that persons who had entered into a binding agreement to sell for proper consideration are not disadvantaged.

New section 1099C provides that a person's "exempt bond amount" (which is calculated in section 1099E) does not count as income for the purposes of the Act.

New section 1099D provides that a person's income will be reduced by an amount that could subsequently be derived from the refunded bond or the proceeds of sale of a home as if the amount were a financial asset of the person. This will ensure that persons are not penalised by having their social security payments reduced if the person banks or invests the refunded bond or the proceeds of sale. The reduction will occur until the death of the recipient (or the death of the recipient's partner), whichever is later.

That is, section 1099D provides that a person (and the person's partner's income) will be reduced by an amount equal to the income that would be calculated if the social security deeming rules were applied to a capital amount equal to the amount of the refunded bond (or the proceeds of sale of the home, if relevant).

New section 1099E provides a method for calculating the reduction in a person's income and assets (the exempt bond amount) where:

· a person receives a refunded accommodation bond or proceeds from the sale of a house; and

· the person satisfies the criteria in section 1099B (see above).

Subsection 1099E(2) provides for a situation where a person is covered by subsection 1099B(1) only. That is, the situation where a person:

· became liable to pay an accommodation bond during the period 1 October 1997 until the end of 5 November 1997; and

· would have been liable to pay an accommodation charge had the person entered residential care after 5 November 1997; and

· later entered into an agreement to exchange the bond for an accommodation charge.

In this case, the person's exempt bond amount is equal to the amount of the accommodation bond that is refunded to the person under the agreement.

Subsection 1099E(3) provides for the situation where a person is covered by subsection 1099B(2) only. That is, the situation where the Secretary is satisfied that a person sold his or her home for the sole or principal purpose of raising money to pay for an accommodation charge and an accommodation charge would have been payable had the person entered residential care after 5 November 1997.

In this case the person's exempt bond amount is equal to the net proceeds of the sale of the house. That is, the gross proceeds of the sale less any costs associated with the sale and less any mortgage that the person or the person's partner had over the house at the time of settlement.

Subsection 1099E(4) provides that if both subsections 1099E(2) and 1099E(3) apply to a person, then the person's exempt bond amount is equal to the greater of the two amounts. This subsection will ensure that no person is disadvantaged against other persons covered by subsections (2) and (3).

Subsection 1099E(5) provides that, if a person has an exempt bond amount, then the partner also has an exempt bond amount.

Subsection 1099E(6) provides that, if the person is a member of a couple and is not deceased then the amount of the person (and the person's partner's) exempt bond amount is equal to half of the exempt bond amount. This subsection will ensure that if, for example, the amount assessed under subsection 1099E(3) is equal to $10,000, then $5,000 is assessed against the person and $5,000 is assessed against the person's partner. It is not appropriate, of course, to assess $10,000 against the person and $10,000 against the person's partner, as this would result in a doubling up of exempt bond amounts.

If a person is single (including a person whose partner was a member of a couple but the partner is now deceased) , then the person would have the full amount of the exempt bond amount attributed to the person.

ITEM 14

This Item amends note 2 to subsection 1118(1) to provide for the new subsection 11(6A) that has been inserted into the definition of "principal home".

ITEM 15

This item inserts a new section 1118AB.

New section 1118AB provides that, if a person has an exempt bond amount (as calculated under section 1099E), then the person's assets are to be reduced by an amount equal to the exempt bond amount. If a person disposes the exempt bond amount, the deprivation provisions will apply to the disposal. The application of the deprivation provisions may mean that the deprived amount may be included in the person's assets, which means that the deprived amount will be offset against the continued asset reduction under section 1118AB.

SCHEDULE 3 - VETERANS' ENTITLEMENTS ACT 1986

Schedule 3 makes consequential amendments to the Veterans’ Entitlements Act 1986 (the VEA) arising from amendments to the Aged Care Act 1997 and related policy changes. These amendments mirror the amendments to the Social Security Act 1991 in Schedule 2 to ensure consistency of assessment of income and assets tests of people who enter an aged care facility that is approved under the Aged Care Act 1997. The amendments propose to:

A. exempt the former home (principal home) of an aged care resident from the assets test where he or she is paying an accommodation charge and is renting their former home (principal home) to a third party; and

B. provide for exemptions under the income and assets tests to:

. exempt the amount of a refunded aged care accommodation bond (or the proceeds of sale of a resident’s former home (principal home) in certain circumstances), where the bond was paid from 1 October until 6 November 1997 by a person receiving high level aged care;

. exempt from the income test any amounts that could subsequently be derived from those amounts (in accordance with the deeming provisions), if the capital amount was invested;

. exempt any rental income that a person (or the person's partner) is receiving from their former home (principal home) if the person (or the person's partner) is paying an accommodation charge.

ITEMS 1, 6, 11, 12, 13, 14 and 15

These items all make minor technical amendments to correct references in the VEA to the definition of “principal home”.

ITEM 2 Section 5 (index)

This item adds “accommodation bond” and “accommodation charge” to the defined terms listed in the index of definitions.

ITEM 3 Subsection 5H(1) (note to the definition of income)

This item makes a consequential amendment to the note to the definition of “income” to indicate that income may be exempted under the new clause 14 of Schedule 5 of the VEA (to be inserted by item 19 of this Schedule).

ITEM 4 After Paragraph 5H(8)(nb)

This item inserts a new paragraph 5H(8)(nc) to provide that any rental income from a person's principal home is to be excluded from the service pension and income support supplement income tests (and hence the income test applicable to aged fees under the Aged Care Act 1997) if:

. the person or the person's partner is paying or accruing an accommodation charge; and

. the person, or the person's partner, receives rent from a third person in respect of their principal home.

This new paragraph provides that any rental income exempted from the income test will be exempt for both the person liable to pay the accommodation charge and the person's partner (if applicable). The exemption of the rental income will cease when the person ceases to be liable to pay an accommodation charge.

This amendment, together with the new subsection 5L(6A) (item 8 below), reflects concerns that pensioners required to pay an accommodation charge for approved nursing home entry could have their pension reduced (and therefore have to pay higher daily fees) if the pensioner rented a former home (principal home) to pay the charge. Without these exemptions, some pensioners might feel obliged to sell their home rather than to rent it.

ITEMS 5 & 9

These items draw the reader’s attention to the new location of the definitions of an accommodation bond and an accommodation charge.

ITEMS 7 & 8 Subsection 5L(1)

These items insert definitions for “accommodation bond” and “accommodation charge” in the subsection 5L(1) of the Veterans' Entitlements Act. Both terms have the same meaning as within the Aged Care Act 1997: "Accommodation bond" is presently defined in that Act and a definition for "accommodation charge" will be inserted in that Act by Schedule 1 of this Bill.

ITEM 10 After subsection 5L(6)

This item inserts a new subsection 5L(6A) to extend the existing provisions that provide for a residence to be deemed to be a person's "principal home" even though a person is absent from the home.

The former home of an aged care resident is taken to be the person's principal home under the Veterans' Entitlements Act (and therefore not assessed under the assets test) for a period of two years, from the date the person started to be either an aged care resident or in a care situation (such as community care): subsection 5L(7) of the Veterans' Entitlements Act refers. These provisions will continue to apply where appropriate.

New subsection 5L(6A) provides that the former home of a person will be taken to be the principal home of the person and the person’s partner during any period where:

. the person left that residence to go into a care situation or to be an aged care resident (defined in section 5NC of the Veterans' Entitlements Act); and

. the person is paying or is liable to pay an accommodation charge because they are receiving higher level (nursing home) care; and

. is receiving rent for their former home (principal home) from a third party.

Unlike subsection 5L(7), this subsection does not require continuity from when the person left his or her principal home and when he or she became liable to pay an accommodation charge. If a person leaves their principal home and does not move immediately into high level aged care, but rather moves into some other form of care situation, then under this new subsection, the previous residence will regain the status of principal home when the person becomes liable to pay an accommodation charge and is receiving rental income from that property. It is therefore possible that:

. the principal home status of a former residence may overlap under subsections 5L(7) and 5L(6A); or

. there may be a period between the application of the 2 year principal home status under subsection 5L(7) and the application of subsection 5L(6A) when the former residence does not have principal home status and therefore is not exempt from the pension assets test.

The element of continuity in subsection 5L(6A) is that the person must have continued in some form of care arrangement after leaving his or her principal home, up until he or she became liable to pay the accommodation charge, and is receiving rent from the former home (principal home). Generally this special principal home status for the former residence will extend for as long as a person is liable to pay an accommodation charge under the Aged Care Act (Division 57A to be inserted by Schedule 1 of this Bill). Typically, this will be for five years since the charge is payable for that period.

New paragraph 5L(6A)(b) provides that, if a premises is taken to be a person's principal home because of the operation of paragraph 5L(6A)(a), the premises is also taken to be the principal home of the person’s partner.

This subsection is not intended to provide a person, or the person’s partner, with more than one principal home at the same time.

ITEM 16 At the end of section 46

This item adds an extra note to section 46, which refers to the general meaning of ordinary income, to notify the reader that income may be exempted under the new clause 14 of Schedule 5 (to be inserted by item 19 of this Schedule) if the person has an exempt bond amount.

ITEM 17 At the end of section 52

This item adds a note to section 52, which deals with certain assets to be disregarded in calculating the value of a person’s assets, to notify the reader that the total value of the person’s assets may be reduced if the person has an exempt bond amount under the new clause 16 of Schedule 5 (to be inserted by item 19 of this Schedule).

ITEM 18 Before clause 1 of Schedule 5

This item inserts a sub-heading, Part 1, into Schedule 5 under which all the existing saving and transitional provisions in Schedule 5 will be grouped. This is a minor technical amendment to improve the structure of this Schedule.

ITEM 19 At the end of Schedule 5

This item inserts a new part, Part 2, into Schedule 5, Saving and Transitional Provisions, to provide special provisions for the small number of aged care residents who entered high level (nursing home) care in the period 1 October to 5 November 1997 and who paid an accommodation bond or sold their principal home on or before 5 November 1997 in order to be able to pay an accommodation bond. On 6 November 1997 the accommodation bond scheme was abolished for aged care residents in high level care and replaced with an accommodation charge scheme.

New Part 2 mirrors the provisions to be inserted by Schedule 2 of this Bill as the new Division 1D in Part 3.10 of the Social Security Act 1991. The explanation of these new provisions are as described in item 13 in Schedule 2 of this Bill. The following table summarises the equivalent clauses of the Social Security Act 1991 and clauses of the Veterans' Entitlements Act:

Social Security Act 1991	Veterans' Entitlements Act 1986
1099A Overview of Division	12 Overview of Part
1099B Scope of Division	13 Scope of Part
1099C Exempt bond amount does not count as income	14 Exempt bond amount does not count as income
1099D Person’s ordinary income reduced using financial asset rules	15 Person’s ordinary income reduced using financial asset rules
1118AB Value of person’s assets reduced if person does certain transaction to do with aged care accommodation bonds	16 Value of person’s assets reduced
1099E Meaning of exempt bond amount	17 Meaning of exempt bond amount

ITEMS 1 to 4

Items 1 to 4 of Schedule 2 of the Veterans’ Affairs Legislation Amendment (Budget & Simplification Measures) Act 1997 attempted to amend references in the Aged Care Act 1997 to Rate Calculators in the Veterans’ Entitlements Act 1986, in order to reflect the new location of those Rate Calculators from 1 January 1998. The amendments in the Veterans’ Affairs Legislation Amendment (Budget & Simplification Measures) Act 1997 were unsuccessful because they referred to the wrong subsections in the Aged Care Act 1997.

These Items are minor technical amendment to rectify the misdescribed amendments and ensure the correct references are contained in the Aged Care Act 1997.

SCHEDULE 5 - AGED CARE (CONSEQUENTIAL PROVISIONS) ACT 1997

This Schedule amends the Aged Care (Consequential Provisions) Act 1997 to remedy unintended effects and oversights in the original transitional measures.

ITEMS 1 and 2

These Items add, at the end of Division 1 and Division 2 of Part 4.4, covering consequences of non-compliance, new Clauses 78A and 81A. These Clauses provide that where a provider of a nursing home or hostel has failed to comply with conditions prior to the commencement of the Aged Care Act 1997 but no action had commenced then action can now be taken under Part 4.4 of the Aged Care Act 1997. It has always been the stated policy intention to take firm action against those providers who do not meet their obligations and responsibilities and this provision remedies a technical deficit.

ITEMS 3 AND 4

These Items address an unintended consequence of the transitional provisions relating to additional recurrent funding for new and rebuilt and upgraded nursing homes.

They add new Clauses 45A and 49A to Schedule 1.

Clauses 45A and 49A Application - power to extend period

Effectively these Items reverse the repeal of Subsection 52C(3) and Subsection 58CA(3) of the National Health Act 1953. This will restore the power to extend the time for approvals-in-principle for additional recurrent funding where construction has not been commenced within the time. The withdrawal of this power was never intended and would have had unfair consequences.

Commonwealth of Australia Explanatory Memoranda

AGED CARE AMENDMENT BILL 1998