Aged care fee reforms – don’t leave it too late

Most people with assets will pay more for aged care if they enter the system after 1 July 2025.

Back in October, we shared information about the aged care fee reforms aimed at enhancing the quality and sustainability of aged care in Australia.

Now, with more details available and these changes fast approaching, it’s critical that people don’t leave care decisions too late. Aged care planning takes time, and delaying could mean higher costs and fewer choices. These reforms will impact the fees associated with home care and residential care services, so now is the time to get informed and consider any necessary action.

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 you.

Aged care fee reforms from 1 July 2025

A new aged care system will come into effect on 1 July 2025.  If someone is already in aged care at that time, their fees will stay the same under the old rules.

However, if an existing resident moves to a different facility after 1 July 2025, it’s important to seek advice from one of our aged care advisers to understand how the current rules may still apply.

Accommodation

The main changes for new residents from 1 July 2025 are:

1. Retention fee on Refundable Accommodation Deposit (RAD): Providers will keep a small portion of the RAD as a non-refundable retention fee of 2% per annum for up to five years, with a maximum of 10% retained.
2. Indexing of Daily Accommodation Payments: For residents who choose to pay a daily fee instead of a RAD, the Daily Accommodation Payment (DAP) will increase twice a year (on 20 March and 20 September) in line with the Consumer Price Index (CPI).

There will be no changes to how the family home is treated in the aged care means test assessment process. If a spouse or a “protected person” lives in the home, the property remains exempt from financial assessments. Otherwise, approximately $208,000 of its value (indexed) will be included.

Daily Care Fees

The government will continue to fund all clinical care. Care fees can be compared to the current cost structure as follows.

Home Care (Support at Home)

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

1. New Classification System: Recipients will be assessed into one of ten funding categories to better match funding with their individual needs.
2. Independence and Everyday Living Contributions: The government will cover 100% of Clinical Care costs. However, individuals may need to contribute up to 50% for Independence Services and up to 80% for Everyday Living Services. The amount payable will be based on Age Pension status or Commonwealth Seniors Health Card eligibility.
3. Home Care grandfathering: People with a Home Care Package as of 30 June 2025 will keep the same level of funding under the new Support at Home program along with any unspent funds. Those on the National Priority System or approved for a package by 30 June 2025 will receive an equivalent Support at Home budget when available. If a future assessment qualifies a recipient for more funding, they will transition to the new Support at Home classification once it becomes available.
4. Contribution arrangements: People who were receiving a Home Care Package, were on the National Priority System, or were assessed as eligible for a package by 12 September 2024, will not pay more due to the reforms. Their contributions will remain the same or be lower. If they move to residential care, their contribution arrangements will continue unless they choose to switch to the new program. However, changes to accommodation payments in residential care will still apply, as these are determined by agreements between the resident and their provider.

What does this mean for those already in care?

If you’re already in residential aged care, your fees are unchanged by the new legislation. As mentioned earlier, if there is a more from the current care, it is important to get advice to understand how the impact.

It’s useful 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.

Where can I find out more about the proposed legislation?

On 24 November 2024, Parliament passed the Aged Care Bill 2024. This Bill becomes the new Aged Care Act, coming into effect from 1 July 2025.For more details, click the link below. https://www.health.gov.au/our-work/aged-care-act

We are here to help, every step of the way

The proposed aged care fee reforms to residential aged care and home care are significant. If you’re unsure about your current situation or how these aged care fee 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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