Disregarded Assets Relating to Refund of Accommodation Bond

Assessing refunded nursing home accommodation bonds

A person entering a nursing home between 1 October and 5 November 1997 may have paid an accommodation bond. From 6 November 1997 nursing home accommodation bonds were replaced by accommodation charges.

Accommodation bonds paid for entry to a nursing home may be exempt if:

• a pensioner paid the bond between 1 October and 5 November 1997 and the bond was subsequently refunded, or
• on or before 5 November 1997 a pensioner sold their principal home in order to be able to pay an accommodation bond.

Assessment of refunded bond

The value of the refunded accommodation bond is disregarded depending on how the person funded the accommodation bond. The following table explains the exemption provisions for these accommodation bonds.

The net proceeds from the sale of the principal home are calculated by:

• adding together any costs incurred in the course of the sale and the amount of any debt the person or their partner owed immediately before the sale, so far as the debt was secured by the home at that time; and
• subtracting that figure from the gross proceeds of the sale.

Amount of refunded bond remains constant

The amount of the accommodation bond which is disregarded under the assets test will remain constant in all circumstances. Situations may arise where a person has less assessable assets than the amount to be disregarded. In this circumstance the person would be assessed as having nil assets. Should the person's assets later increase to the extent that their assessable assets exceed the amount to be disregarded, the full amount to be disregarded will be subtracted from their assessable assets.

Assessment of refunded bond for members of a couple

Where a person who is a member of a couple is entitled to the assets test exemption of a refunded bond, 50% of the amount to be disregarded will be applied to the person and the other 50% to their partner. Should one member of the couple die, however, 100% of the amount to be disregarded will be applied to the surviving member.

Assessing refunded nursing home accommodation charges

It was not intended that the accommodation charge for nursing home residents which was introduced on 6 November 1997 would be paid by any pre 1 October 1997 residents. However the enabling legislation did not protect a pre 1 October 1997 resident who moved to a different nursing home after 1 October 1997 from liability for the charge. As a result, the legislation was amended in 1999 to exempt such residents from the charge and to provide for a refund of the amounts already paid.

Amount of refund to be disregarded

The value of the refunded accommodation charge is disregarded under the assets test. The exemption will apply whether the person has retained the funds or not. A deduction equivalent to the amount refunded is to be deducted from the person's total assets.