OCA - Oceania Group - retirement villages

[Bjauck]

There needs to be like a boomer tax or something to help pay for all this. There’s nothing in the coffers! Maybe when you are 50+ you pay 40% tax rate until 65.

Otherwise a country saddled with debt will be passed onto the next generation

Care subsidies are means tested. There are residents who must privately fund the maximum contribution rate.

Good luck getting the voting population to support tax reform in NZ. Even Labour had to shelve its tax reform to a National-lite tax policy to remain electable.

[850man]

Care subsidies are means tested. There are residents who must privately fund the maximum contribution rate.

Good luck getting the voting population to support tax reform in NZ. Even Labour had to shelve its tax reform to a National-lite tax policy to remain electable.

No need for more tax, just less wastage of tax money on sh*t and there will be plenty to go around

[justakiwi]

I would be very interested to know how many government care subsidies OCA (and the others) actually receive, as a percentage of their total care provision. I seriously doubt the majority of their "care" residents are receiving the subsidy. To qualify for it one must have less than $230,000 in cash assets (that figure may have changed but that's what it was when Mum went into care). Which would rule out anyone selling a house to move into care, in almost every location in NZ. Those residents must fund their own care until such time as their assets drop below that figure. They can then apply for a government subsidy.

For anyone with significant wealth, it will take many years to reduce their assets to that qualifying level (if ever, depending on their age at entry). For those who have no cash assets other than the house they sold, they may get to that level, depending on the value of their house.

Standard care beds are for people with no house to sell and no assets. Nobody else would choose that option, they would go with a care suite. So, every standard bed will be receiving the government subsidy, and probably nothing else, unless family can pay for small "add ons." As we have seen, standard care beds are reducing in number and care suites are increasing.

The point I'm making is, the total number of fully subsidised residents across any facility, will be low, compared to the rest of their care (and apartment/villa) operations. So while they may not be making much money from these, I believe they can afford to provide that service. The smaller not for profits or privately owned facilities, can not, as they have no other source of revenue - just standard care/hospital level or dementia beds (no care suites, villas, apartments). Their primary source of income is the government subsidy. It is entirely different for the big players.

It may well be that the government of the day will need to significantly increase the care subsidy, to ensure that providers will continue to provide a minimum number of standard beds. Because those residents can never pay for a care suite, and someone has to provide them with care. I have no idea what National's policy on this is, as I have been unable to find any reference to it anywhere on their website or in their policy documents. I suspect they will be no different from Labour and will be reluctant to play ball. Social conscience is not their forte.

As far as the increased tax suggestion goes ... dream on. How the hell do you think the average Kiwi over 50 could possibly afford to pay a 40% tax rate??? It's a ridiculous suggestion.

Time will tell how this all pans out, but regardless, OCA will survive and do very well as the new "industry leader."

​P.S I have mentioned politics but as BP has said, let's keep the political attacks out of it.

Care subsidies are means tested. There are residents who must privately fund the maximum contribution rate.

Good luck getting the voting population to support tax reform in NZ. Even Labour had to shelve its tax reform to a National-lite tax policy to remain electable.

[BlackPeter]

Wow, shows how little we know. Share price about half what it was a year or two ago. No point in analysing the details when it's the bigger picture that needs to be looked at.

Shame on all you people who voted Labour in.

Lets try and avoid turning this into just another political thread, shall we? And never forget the choice voters had at the last election. Picking the smaller evil is not a good choice, but clearly the majority saw it as the best available choice last election, and while I didn't vote Labour, I can understand the rational of those who did.

[777]

Here is the current maximums that have to be paid towards care.

https://gazette.govt.nz/notice/id/2022-go3691

From 1 July 2021, asset thresholds for Residential Care Subsidy are as follows:

$239,930 for a single or widowed person in care
$239,930 for a couple with both partners in care
$131,391 for a couple with one partner in care (house and car remain exempt). Couples can choose to be tested under the $239,930 threshold, but the house and car will not be exempt.
Asset thresholds increase on July 1st every year.

[Snoopy]

I would be very interested to know how many government care subsidies OCA (and the others) actually receive, as a percentage of their total care provision. I seriously doubt the majority of their "care" residents are receiving the subsidy. To qualify for it one must have less than $230,000 in cash assets (that figure may have changed but that's what it was when Mum went into care). Which would rule out anyone selling a house to move into care, in almost every location in NZ. Those residents must fund their own care until such time as their assets drop below that figure. They can then apply for a government subsidy.

I found the above paragraph difficult to understand. But after reading it several times I think what you are saying is that almost everyone will have to sell their house to get into care, -which is the opposite of what you wrote- (because there aren't many houses around valued at less than $230k). That means almost every former home owner will have a balance significantly higher than $230k (the minimum cut off asset value balance before a subsidy kicks in), before they move into care, and that 'excess cash balance' in excess of $250k must be used up before any subsidy is granted.

For anyone with significant wealth, it will take many years to reduce their assets to that qualifying level (if ever, depending on their age at entry). For those who have no cash assets other than the house they sold, they may get to that level, depending on the value of their house.

If I may make a couple of observations about the assumptions you are making.

1/ You are assuming that those who own their house own it 'mortgage free'. The way house prices are these days, there are people reaching retirement still with a mortgage. And there are those who have paid off their mortgage but have taken out a reverse mortgage. So just because a retiree has a house worth $x, that doesn't mean they will get $x in their bank account when they sell it.

2/ You are assuming that homeowners move directly into care. But it is much more common now for people to take the intermediate step of moving into an independent living unit based in a retirement village first. They may be in that place for ten or even twenty years in some instances. Thus the market price they received for their house in 2012 - remember most ILUs do not give residents any capital gain on that unit during their occupation- , must fund their care unit costs in 2022. So for most people in care suites their 'house gains' are undermined by several years of capital erosion from house price inflation.

The point I'm making is, the total number of fully subsidised residents across any facility, will be low, compared to the rest of their care (and apartment/villa) operations. So while they may not be making much money from these, I believe they can afford to provide that service. The smaller not for profits or privately owned facilities, can not, as they have no other source of revenue - just standard care/hospital level or dementia beds (no care suites, villas, apartments). Their primary source of income is the government subsidy. It is entirely different for the big players.

I hear your call on how difficult it is to make the funding model work for smaller privately owned facilities. But the big guys are facing issues with their care facilities too.

You are right in pointing out that care residents are but a small portion of total retirement village occupants, and that ILU people can be used to subsidise those needing higher levels of care. But what you don't mention is that the ILU people and the people in care are usually actually the same people, but time shifted. So really it is the ILU people who are subsidising themselves. There is no 'extra bucket of money' from an external source to subsidise the care suites.

I had a talk with the manager of what I would call a 'well to do' retirement village a few years ago on just this subject. The problem with the 'self funding care suite model' is that most occupants are in these units for a relatively short time. So even if you start with a full complement of 'self funded care suite occupants' you can't be sure that when some of these residents are 'promoted upstairs', so to speak, that there will be a steady stream of replacement self funded retirees to replace them. Thus you can hope for self funded retirees. But you have to plan for them not to be self funded, or the business model doesn't work.

As far as the increased tax suggestion goes ... dream on. How the hell do you think the average Kiwi over 50 could possibly afford to pay a 40% tax rate??? It's a ridiculous suggestion.

They are probably already doing it. If the average tax on all your wages works out at 25%, add 15% GST and you get to 40%.

SNOOPY

[bull....]

bupa called off sale talks according to the australian

no one wants to buy these assets

[justakiwi]

Now I'm confused

I think the confusion lies with the fact that there are different levels of "care" so we have to ensure we know which level we are talking about. My fist paragraph was related to standard care beds. A basic room with no frills, for people who have been assessed as needing assistance with daily activities of life. I assume that these beds are deemed as "hospital level" beds, but I am not 100% sure about that (hospital level just means the person requires additional medical/health related care, assistance with mobility, and sometimes two carers to shower/mobilise/assist with toileting etc).

What I meant was this:

1. How many residents within OCA for example, qualify for the government subsidy? My guess would be that it is the minority.
2. People in those standard beds, will be most likely be people like me. Who own no property, have no significant cash assets, but who require residential care. The government subsidy covers the full cost of those beds - they are no frills care rooms.
3. To qualify for the government subsidy one must be assessed as being in need of residential care. As I said, you must have less than the $230,000 to qualify. There is no partial subsidy. You either get it all or none, so if your cash assets are higher than the cut-off, you get no subsidy until you've reduced your cash assets to that figure. You can then apply for the subsidy.
4. If you don't qualify for the subsidy you pay the full cost of your care - whether it be a standard care bed or a care suite.
5. I assume if one qualifies for the subsidy that could be applied to the weekly costs of a care suite, with your family paying the difference if they are able/choose to. But again, I am not sure about that. People like me will never be in a care suite because we simply can't afford it.
6. You have to remember that a significant number of people who require residential care have never owned a house. So they have no cash assets from a house sale.

I found the above paragraph difficult to understand. But after reading it several times I think what you are saying is that almost everyone will have to sell their house to get into care, -which is the opposite of what you wrote- (because there aren't many houses around valued at less than $230k). That means almost every former home owner will have a balance significantly higher than $230k (the minimum cut off asset value balance before a subsidy kicks in), before they move into care, and that 'excess cash balance' in excess of $250k must be used up before any subsidy is granted.

No, I wasn't making that assumption. When I said "people with significant wealth" I wasn't just referring to their house. I meant people with significant wealth, outside of their home. If you have a million dollar portfolio, or investment property, or a priceless collection of classic cars, those things are classed as cash assets. So even if you have a mortgage which means your house returns less "cash" when sold, you are still going to be way over the threshold for the government subsidy.

With regards to your second point below - that is a valid comment. But depending on location, I doubt many in that category would come in under the cut-off point. They might if they are a couple.

If I may make a couple of observations about the assumptions you are making.

1/ You are assuming that those who own their house own it 'mortgage free'. The way house prices are these days, there are people reaching retirement still with a mortgage. And there are those who have paid off their mortgage but have taken out a reverse mortgage. So just because a retiree has a house worth $x, that doesn't mean they will get $x in their bank account when they sell it.

2/ You are assuming that homeowners move directly into care. But it is much more common now for people to take the intermediate step of moving into an independent living unit based in a retirement village first. They may be in that place for ten or even twenty years in some instances. Thus the market price they received for their house in 2012 - remember most ILUs do not give residents any capital gain on that unit during their occupation- , must fund their care unit costs in 2022. So for most people in care suites their 'house gains' are undermined by several years of capital erosion from house price inflation.

For every person who moves up the chain from ILU to a care suite - there is someone waiting to move into their unit. So yes, I guess you could argue that they are subsiding themselves, but that's just semantics. Having said that, those people are unlikely to be moving to a care bed. They will go to a care suite. The other thing to remember is that some providers provide a care suite that is for life. If you move into one, you can stay there until you die, and receive a higher level of care without moving, or being separated from your spouse. Those suites are set up for this purpose and in my view, are the absolute ideal solution to care - but again, only affordable by some.

You are right in pointing out that care residents are but a small portion of total retirement village occupants, and that ILU people can be used to subsidise those needing higher levels of care. But what you don't mention is that the ILU people and the people in care are usually actually the same people, but time shifted. So really it is the ILU people who are subsidising themselves. There is no 'extra bucket of money' from an external source to subsidise the care suites. I had a talk with the manager of what I would call a 'well to do' retirement village a few years ago on just this subject. The problem with the 'self funding care suite model' is that most occupants are in these units for a relatively short time. So even if you start with a full complement of 'self funded care suite occupants' you can't be sure that when some of these residents are 'promoted upstairs', so to speak, that there will be a steady stream of replacement self funded retirees to replace them. Thus you can hope for self funded retirees. But you have to plan for them not to be self funded, or the business model doesn't work.

Yes, but the suggestion made had nothing to do with removing GST - and many of us are earning incomes low enough to be currently paying 17.5%. I sure as hell couldn't afford to pay any more. And yes, I realise I'm the exception to the rule here.

They are probably already doing it. If the average tax on all your wages works out at 25%, add 15% GST and you get to 40%.

EDIT: I accept that my assumptions may be wrong/off base, in which case I hope Mav or Ferg will set me straight.

[Bjauck]

...


They are probably already doing it. If the average tax on all your wages works out at 25%, add 15% GST and you get to 40%.

SNOOPY

In an era of higher interest rates, it is unlikely that even NZ will see the same level of house price increases in the next 10 years, that we saw in the previous ten years.

Certainly those that rely solely on taxable income, will be experiencing tax of 40% plus. Those who also have untaxed capital gains as well could have tax levels on their economic income significantly less that. If you factor in the sale of the family home, then the untaxed capital gains from that would push the tax rate on economic income even lower.

[justakiwi]

I just found this on the OCA website. Which seems to confirm my comments above re care suites for life.

These unique suites offer exceptional Rest Home and Hospital care, evolving as your needs increase so you don’t have to move again