C05/1997 ENTRY CONTRIBUTIONS TO HOSTELS

DATE OF ISSUE:  28 JANUARY 1997

ENTRY CONTRIBUTIONS TO HOSTELS

PURPOSE

The purpose of this instruction is to advise of changes to the Department's policy on the assessment of entry contributions to Government funded hostels.

BACKGROUND

2.A case was recently brought to our attention which revealed that the Department's treatment of entry contributions to hostels is different to that of DSS.  Under DVA's current policy, assets tested pensioners residing in hostels may receive less pension than if they were assessed under DSS Policy.

DVA Policy

3.DVA currently assesses entry contributions to hostels under its special residence rules.  Where the entry contribution is more than the “extra allowable amount” (the difference between the applicable property owner and non property owner assets limits) the amount of the entry contribution is not included in a pensioner's asset assessment. These pensioner's are regarded as homeowners and therefore are assessed under the lower asset limit.  However, where the entry contribution is less than or equal to the “extra allowable amount” the amount of the entry contribution is included in the pensioner's assessment as an asset. These pensioners are regarded as non-homeowners.

DSS Policy

4.DSS policy allows entry contributions to hostels to be assessed under either the special residence provisions or the care situation provisions (nursing home provisions under DVA policy), whichever rules result in the higher rate of pension.

Comparison of DVA & DSS Policy

5.DVA currently treats entry contributions to hostels under the retirement village (or special residence) rules only.  Conversely, DSS tests each case against the care situation provisions and the special residence provisions, and applies whichever rules result in the higher rate of pension.  For cases that are dealt with under the care situation provisions, entry contributions to hostels that take the form of a loan will be deemed.

6.By treating entry contributions to hostels under the special residence rules only, DVA could be open to criticism for applying harsher rules than DSS.  Accordingly, the purpose of the following changes is to bring DVA's policy in line with that of DSS.   The Department will now treat entry contributions to hostels under either the nursing home or special residence provisions, whichever results in the higher rate of pension

Treatment of entry contributions to hostels under the nursing home provisions

7. The nursing home provisions of the VEA allow the former home to be exempt for the first two years of residency in the nursing home (s5L(7)(a) & (b) VEA), but they provide no special rules for dealing with the entry contribution.  (This is because, under current Department of Health and Family Services rules, entry contributions cannot be charged on admission to nursing homes).

8. Generally, hostels deduct an amount from the entry contribution at regular intervals (eg. 6 monthly).  Where the entry contribution to a hostel is a loan, donation or combination of the two, the refundable portion of the loan is treated as a financial asset and deemed.  The refundable portion is the amount of the entry contribution minus any regular amounts deducted (i.e. $1,200 may be deducted 6 monthly up to a maximum period of 5 years.)

9.If the nursing home provisions are applied, rent assistance is payable irrespective of home ownership status, because care situations are excluded from the definition of “ineligible homeowner” in subsection 5N(1) of the VEA.

Treatment of entry contributions to hostels under special residence provisions

10.The policy in relation to the treatment of an entry contribution to a hostel under the special residence provisions has not changed.

PENSIONERS AFFECTED

11.The new policy will only affect pensioners who are assets tested and residing in hostels.

PROCEDURE

12.The care situation provisions and the special residence provisions affect pension entitlement in different ways.  Accordingly, each case should be decided on an individual basis by testing it separately against the nursing home provisions and the special residence provisions.  The provisions which provide the most beneficial result to the pensioner should then be applied.

Identifying assets tested pensioners residing in hostels

13.A list of assets tested pensioners currently residing in hostels who may be affected by this policy change will be forwarded to the Manager Income Support in each State for reconsideration under both the nursing home and special residence provisions.

Reviews for hostel residents assessed under the care situation provisions

14.In cases where hostel residents are assessed under the nursing home rules, the amount to be deemed is the refundable amount of the loan at the relevant time.  Accordingly, it may be appropriate that pensioner records be noted for periodical review to recalculate their entitlement and to establish the most beneficial basis for assessment.

GOSP AMENDMENTS

15.          The relevant amendments to GOSP will be made to reflect this change in policy.  The amendments will be available at the next release of GOSP amendments.

FUTURE REVIEW

16.Effective from  1 July 1997, implementation of the 1996 Budget initiative will occur to replace rent assistance, renamed residential care allowance (RCA) from 1 January 1997, with increased direct subsidies to care providers in respect of pensioners in nursing homes and hostels.  This proposal also includes an equivalent reduction in the basic daily residential care resident contribution to compensate for the loss of RCA.

17.Consistent with the changes mentioned above, a review of the Department's policy on entry contributions to hostels will occur.

QUERIES

18.Any further queries in respect of this matter should be directed to John Bruce on telephone 06 289 6441, fax 06 289 4853, LAN C-C-BA-09.

JEANETTE RICKETTS

ACTING BRANCH HEAD

INCOME SUPPORT