Aged care fee changes – what does this mean for you?

On 12 September 2024, the Government proposed legislation to aged care fee changes aimed at enhancing the quality and sustainability of aged care in Australia. These proposed reforms are also set to impact the fees associated with home care and residential care services.

Whether you’re currently receiving care or supporting a loved one on their care journey, it’s essential to understand what these changes could mean for your situation. This article will guide you through the recent fee adjustments and the proposed changes to the aged care system from 1 July 2025. We’ll break down everything you need to know so that you can feel confident and well-informed.

Aged care fee changes from 20 September 2024 (existing residents)

As of 20 September 2024, existing aged care residents will experience changes to the aged care fees charged.

• The Basic Daily Care Fee has increased to $63.57 per day (previously $61.96).
• The thresholds for means-tested fees have been raised, which may result in a reduction in your means-tested care fee.
• For residents assessed with a Daily Accommodation Contribution (DAC), this amount may also change.

The Basic Daily Care Fee is set at 85% of the single age pension rate. On 20 March and 20 September each year, this fee is adjusted in line with cost-of-living changes. Means-tested fees, including the means-tested care fee and/or Daily Accommodation Contribution, are calculated based on your assessable assets and income, using specific thresholds. These thresholds are reviewed quarterly, so even if your assets and income remain unchanged, your means-tested fees may vary.

Proposed aged care fee changes from 1 July 2025

On 12 September 2024, the Government proposed legislation for a new aged care system, expected to come into effect on 1 July 2025. For residents already in the current system, fees are expected to remain unchanged under the new legislation.

Accommodation

The main changes proposed

1. Refundable Accommodation Deposit (RAD) retention: From 1 July 2025, providers will be able to apply a retention (non-refundable) fee of 2% per annum on the RAD for up to 5 years, with a maximum retention of 10%.
2. Indexing daily accommodation: For residents choosing to pay a daily fee instead of a RAD, the Daily Accommodation Payment (DAP) will be indexed twice a year in line with CPI.
3. There will be no changes to the treatment of the family home in the aged care means test assessment process. If a spouse or “protected person” resides there, it remains exempt; otherwise, approximately $208,000 of its value (indexed) will be included in financial assessments.

Daily care fees

Home Care (Support at Home)

From 1 July 2025, the Home Care Package framework will transition to the Support at Home Program, with funding categorised into three areas: Clinical Care, Independence, and Everyday Living.

1. New classification system: Recipients will be assessed into one of the ten funding classifications to better align funding with individual needs.
2. Independence and Everyday Living Contributions: While the government will pay 100% of clinical care services, individuals may be required to contribute up to 50% of the price for independence services and up to 80% of the price for everyday living services. The amount payable will be based on Age Pension status or Commonwealth Seniors Health Card eligibility.
3. Home Care grandfathering: Individuals with a Home Care Package on 30 June 2025 will keep the same funding and any unspent funds under the new Support at Home program. Those on the National Priority System or approved for a package by 30 June 2025 will get a Support at Home budget equal to their approved package level when available. If a future assessment entitles a recipient to more funding, they will move to the new Support at Home classification when it’s available.
4. Contribution arrangements: If you were receiving a Home Care Package, on the National Priority System, or assessed as eligible for a package by 12 September 2024, you will not pay more because of the reforms. Your contributions will stay the same or be lower than before. When you move to residential care, your contribution arrangements will remain the same unless you choose to switch to the new program. However, changes to accommodation payments in residential care will still apply, as these are agreed upon between the resident and their provider.

What does this mean for those already in care?

If you’re already part of the current aged care system, fees are expected to remain unchanged under the new legislation. The proposed legislation includes grandfathering provisions, ensuring that the existing rules continue to apply.

It’s helpful to reflect on what happened the last time the rules changed. The current aged care laws, which came into effect on 1 July 2014, did not impose the new fee arrangements on those already in aged care or receiving a home care package. Those looking to move between aged care homes were given the choice to either opt into the new system or stay under the existing rules.

Where can I find out more about the proposed legislation?

On 12 September 2024, the Australian Government introduced the Aged Care Bill 2024 to Parliament. Once passed, this Bill will become the new Aged Care Act, expected to take effect from 1 July 2025. You can find additional details by clicking the following link. https://www.health.gov.au/our-work/aged-care-act

We are here to help, every step of the way

The proposed reforms to residential aged care and home care are significant. If you’re unsure about your current situation or how these reforms might impact your care situation moving forward, reach out to our Lifestyle and Care team.

Our specialist division of financial advisers are accredited in aged care advice and can talk you through all available options and explain the various financial considerations. Our team can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments. Learn more about our accredited aged care financial advisers.

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