After a long wait, new legislation, aimed at reshaping how aged care is funded and delivered in Australia, has been passed.
As with most developed nations around the world, our population continues to age, making it important to have a sustainable aged care system that provides quality care and treats older Australians with dignity. But such a system also requires adequate funding.
The new Aged Care Act (most aspects of which start on 1 July 2025) is founded on person-centred principles. These principles put you, as the user of care services, in the centre. The aim is to provide more choice and greater control, as well as defined rights for older Australians.
But the cost is what most people are worried about. So, here’s what you need to know to stay informed and make sure you can afford the care that you need and want.
Who is affected?
The rights in the (new) Act apply to everyone, but the new rules for fees will only apply if you move into residential care after 30 June 2025 or are approved for Home Care after 12 September 2024.
If you are already in an aged care home prior to 1 July 2025, or receiving a Home Care Package as at 12 September 2024 (or had been approved and are in the queue waiting for a package to be allocated), grandfathering rules apply. The aim is to ensure you are not disadvantaged by some of the rule changes, even if you do move into residential care after 30 June 2025.
What is changing for residential care?
Some changes have already started, with room price caps increasing from 1 January this year, a range of price points will still be seen. And you will still be able to choose to pay for your room as a lump sum or as daily ‘rent’. The lump sum is typically referred to as the Refundable Accommodation Deposit (RAD) and the daily ‘rent’ is either a Daily Accommodation Payment (DAP) or a Daily Accommodation Contribution (DAC) for low means residents.
If you enter aged care from 1 July 2025 and pay a lump sum, each year the provider must deduct and keep 2%. This only applies for the first five years – so you could lose up to 10% of the amount paid, with the remainder refundable to you or your estate. If paying the daily rent, this amount increases each six months in line with inflation.
Ongoing care costs will be split between you and the government, with three new fee categories to work out this split:
- Everyday living expenses – currently $63.57 (indexed) per day, but if you have assets over $238,000 or income above $95,400 (or a combination) you may pay up to an additional $12.55 per day.
- Non-clinical care – this is a means-tested fee up to $101.16 per day. It will only apply for the first four years, or up to a lifetime dollar cap of $130,000 (indexed).
- Clinical care – this is the most expensive component and will be fully paid by the Government.
Some aged care homes may also charge a higher everyday living fee. This is an optional fee set by the care home for a choice of extras and additional services tailored to suit the resident.
What is changing for home care?
The Support at Home program starts on 1 July 2025, expanding care to eight levels instead of just four. Similar to aged care homes, the costs will be split into three categories and means-tested to work out how much you pay:
- Clinical care will be fully paid by the government.
- Self-funded retirees will pay 50% of the costs for independence support and 80% of everyday living costs.
- Full pensioners will pay only 5% of independence support costs and 17.5% of everyday living costs.
- The percentage that part-pensioners and people who hold the Commonwealth Seniors Health Card (CSHC) will pay is between the above two groups and is based upon means-testing.
Your home care contributions are subject to the $130,000 (indexed) lifetime cap. There are also some grandfathering provisions, which mean if you were receiving or approved for Home Care Packages as at 12 September 2024 you will be no worse off under the new rules – discounted contribution rates will apply.
An important change to note is that the package budget will be allocated quarterly, on a ‘use it or lose it’ basis. You will only be able to roll over unused funds up to $1,000 or 10% of the package budget from quarter to quarter.
What do you need to do?
Navigating these changes can be complex and understanding the costs to ensure you access the care services you need in the later years of life is vital to maximise your quality of life.
If you or a loved one require aged care, acting before 1 July 2025 may help you lock in current fee arrangements. But whenever you decide care is needed, it is important to get comprehensive financial advice from an accredited aged care adviser to fully evaluate your options and restructure your assets and investments to manage the costs involved.
Jennifer Langton is Head of Advice at Aged Care Personal Advice (a division of Aged Care Steps)
Visit the Aged Care Personal Advice consumer website for general information, news updates, podcasts and factsheets, or further assistance.
Do you believe that these changes will make aged care more equitable?
Or are you concerned about being able to afford services you may need in later life?
IMPORTANT INFORMATION: This document has been prepared by Aged Care Personal Advice, (a division of Aged Care Steps Pty Limited), ABN 42 156 656 843 AFSL 486723, based on our understanding of the relevant legislation at the time of writing. While every care has been taken, Aged Care Personal Advice makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. © Aged Care Steps Pty Limited, 2024.
It would be helpful to understand the changes and how it will affect retirees if it was clear what services/goods are included in ‘independence support costs’ and ‘everyday living costs’ in Support at Home, and also what is included in non clinical care in the nursing home example. Is it possible to provide this information? Thanks.
I believe that Aged Care should be a responsibility of the government. If a person has worked and paid tax their whole life(40plus years), then it is fair and morally right for the government to look after them if/when aged care is required. It is a disgrace to think that a person has paid tax their entire life, then has to pay again in their old age if care is required.
It’s time for the government to wake up to themselves and prioritise aged care for people who have propped them up throughout their working lives.
No wonder politics and politicians have such a rotten reputation with the general community!
Yes Ian, I agree with everything you said. It’s about time the Government of this country paid more attention to it’s own people instead of getting involved in other countries problems. The elderly people are not well looked after and it seems to me the Government does not care enough about the welfare of it’s aged population. We are just continually taxed from the beginning of our working lives right till the very end. And yes, we prop them up with a hefty wage while in Government along with unnecessary entitlements while the aged retired people of this country struggle to survive. It’s time the people of this country stood together to hold the members of government accountable for their jobs.
Always a At Statutory formula, a “but if…”
I agree with Ian Graham’s comments. These Rules just act to keep civil servants in a job!
Next in line needs to be voluntary euthanasia for those who don’t want to have to deal with all of this in the future!
You have got that right
I totally agree with Wen, It is exactly what I intend to do, when I am unable to care for my self.
Thank you for this informative article. I’m a bit confused about the residential care aspect. Are you saying that if I’m currently receiving a home care package, that if I move into residential care that I will not be subject to the new contribution rules?
Hi Chris, Thank you for your question! Our understanding is that for people receiving or who had received approval for a Home Care Package before 12 September 2024 and move into residential care, the no worse off principle applies. This means you may not be subject to the new contribution rules for residential care. Instead, the current means-tested care fee may apply.
Different rules also apply for those assessed as a low means individual.
For clarity, it’s always a good idea to seek specialist aged-care advice tailored to your situation before making any decisions.
Increased home care packages sounds positive on paper but who is going to provide the people to do the care. Already shortfalls and wait lists. If costs are too high will this increase neglect of the elderly with people trying to manage longer at home to avoid high fees. After recently navigating aged care rules for my mum they need to be simplified and made much easier for people to understand not more complex.
I manage an Aged Care Package for my mother and used to for my Dad before he passed away. The packages have been invaluable for both and have assisted greatly in keeping them living at home and not clogging up the hospital or Aged Care Home systems. For them it was pretty straight forward as both relied on the Aged Care Pension for their income. It seems to start getting messy when people have assests other than the family home of significant value. As for comments re paying taxes, I too have been paying taxes my whole life and as I started work early it’s about 50 years worth. I don’t mind paying taxes. They don’t just cover aged care and if we didn’t pay the country wouldn’t be worth living in. If you use the roads, street lighting, footpaths and everything else then I don’t think you should complain.