Key points
- Aged care costs are changing and families need to understand the financial impact. New rules affect how fees are calculated, including changes to Refundable Accommodation Deposits and means-tested contributions.
- Decisions about the family home and accommodation funding can have broader consequences. Choices such as selling, renting or retaining the home can affect cash flow, Age Pension entitlements, investment income and estate planning.
- Getting advice early can help families make better decisions during a stressful time. Professional financial advice can help families compare options, understand trade-offs and avoid decisions that create unintended costs.
Aged care fees can be hard to understand at the best of times. Changes to the system since 1 November 2025 mean some costs are now calculated differently, making it even more important for families to understand what they may need to pay and what choices are available.
While the changes are intended to support the aged care system over the longer term, families need to look closely at how the fees apply to their circumstances. The date a person first accesses home support or residential aged care determines which fee arrangements they will be assessed under.
The amount someone pays for aged care can depend on their income, assets, the family home, how they choose to pay for accommodation and whether they are receiving care at home or in a residential facility.
Understanding these rules before making major financial decisions can help families avoid unnecessary costs and make the most of available entitlements.
For many families, these decisions come at a difficult time. They may be trying to support a parent or loved one whose health, independence or living arrangements are changing, while also needing to make significant financial decisions quickly.
What families need to understand now
The current aged care arrangements include several important changes for people entering residential aged care.
Refundable accommodation deposits
One of the key changes since 1 November 2025 is the introduction of a retention amount on Refundable Accommodation Deposits (RADs).
Under the new rules, aged care providers must retain 2% of a resident’s RAD each year, for up to five years. This means a maximum of 10% of the original RAD can be retained over five years.
For example, if someone pays a RAD of $550,000, up to $55,000 could be retained.
This is an important change for families to consider when deciding how to fund accommodation.
The RAD decision is often one of the biggest financial choices families need to make. Paying more upfront may reduce ongoing accommodation payments, but it can also tie up a significant amount of capital. For some families, paying a DAP or using a combination of both may provide more flexibility.
The decision can also have implications for cash flow, investments, the Age Pension and ultimately the amount left in the estate.
New means-tested contributions
The previous Means-Tested Care Fee has also been replaced under the new arrangements.
Residents can now be required to pay two contributions:
- Hotelling contribution, which helps cover everyday living costs such as meals, cleaning and laundry.
- Non-clinical care contribution, which contributes towards services such as personal care, mobility assistance and lifestyle activities.
The amount a person pays depends on their income and assets, with limits applying to the non-clinical care contribution.
The rates and thresholds are indexed.
What about the family home?
For many families, the home is not just a financial asset. It may carry emotional value as well as practical considerations, which can make the decision to sell, rent or retain it more difficult.
There is no one answer that will suit everyone.
Selling the home may provide funds to pay a RAD and reduce ongoing accommodation costs. However, it also changes the person’s asset position and the amount of capital they have available.
Keeping the home may provide security and preserve an important family asset, but there can be different implications for aged care fees, the Age Pension and cash flow.
This is where looking at the whole financial picture becomes important. A decision that appears to save money on aged care fees may have an unintended impact on Centrelink entitlements or investment income.
Support at home
The changes were not limited to residential aged care.
The Home Care Packages Program and Short-Term Restorative Care Programme have now been replaced by the Support at Home program. People who were receiving a Home Care Package or support through another previous in-home care arrangement were automatically transferred to Support at Home with a matching level of budget and prices.
Support at Home provides funding for services that help older Australians remain living independently, including personal care, domestic assistance, transport, home maintenance, equipment and other supports.
Participants contribute towards some services, with the amount based on their financial circumstances and the type of support they receive.
The system also includes a lifetime cap on contributions, providing greater protection for people who need care over a long period.
Another change from 1 October 2026
There is another important change for people receiving care at home.
From 1 October 2026, personal care services will be classified as clinical supports under the Support at Home program
This means eligible participants will no longer pay a contribution towards approved personal care services, including assistance with things such as showering, dressing and personal hygiene.
For people already receiving Support at Home, this is another change worth understanding when reviewing their current care arrangements.
What hasn’t changed?
Despite the changes, some familiar parts of the aged care system remain.
People in residential aged care can still have accommodation costs, a basic daily fee and additional fees depending on their circumstances and the services they receive.
Accommodation can still be paid through a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP) or a combination of the two.
The key difference is that the new rules have changed how some of the other costs are calculated and, importantly, how much of a RAD may ultimately be returned.
Why financial advice is important
Aged care decisions are often made at a difficult time for families. There can be a lot to consider, and the financial side of things can easily become overwhelming.
The right approach will depend on the individual’s circumstances, including their:
- income and assets
- Age Pension entitlement
- family home
- accommodation costs
- investment portfolio
- cash-flow requirements
- expected length of stay
- estate planning objectives
For example, two people entering the same aged care facility could have very different costs depending on their financial circumstances and how they choose to fund their accommodation.
An experienced financial adviser can help families work through the options and understand the flow-on effects of different decisions.
This can include looking at whether to sell or retain the family home, how to fund a RAD, whether paying a DAP makes sense, the impact on Age Pension entitlement and what the different options could mean for the person’s estate.
It is not simply about finding the option with the lowest aged care fee. The aim is to find an approach that provides the right balance between paying for care, maintaining access to money and protecting the person’s broader financial position.
Planning ahead
Having a clearer understanding of the costs and options early can make these conversations feel less overwhelming and help families focus on what is right for their loved one.
Whether you are helping a parent move into residential aged care or looking at ways to help them stay at home, professional advice can make the process easier to understand. An adviser can help explain the financial implications, talk through the options and provide a steady perspective at a time when decisions can feel emotional and urgent.
