Explainer: Means Tested Fees

Residential aged care fees can vary enormously as they are based on the financial position of the person entering care. The care fees charged to a resident, that are subject to means testing, can vary from $0 to $370 per day*.

Residents under the new rules have a maximum amount payable of $22.15, plus a further $107.32 a day for the hotelling contribution and non-clinical care contribution (NCCC). The NCCC has a lifetime cap of $137,917 or 1,460 days (4 years), whichever is reached first.

Grandfathered residents instead have the means tested care fee with a maximum amount of up to $370 per day, with an annual cap, which is currently $35,910*. What this means is that, once you reach this cap, your means tested care fee will be $0 until the anniversary of care is reached. There is also a lifetime cap, which is currently $86,185*. These caps are indexed.

The four types of aged care fees explained

To see where the Means Tested fees sit, it helps to understand the full fee structure. Residential aged care in Australia is funded through four distinct fees, and each one behaves differently.

Basic Daily Fee

Every resident pays this, regardless of income or assets. It is set at 85% of the single basic Age Pension ($66.80) and is indexed twice a year. Think of it as the baseline contribution towards living costs, including meals, laundry, cleaning, and utilities.

Unless exempt due to grandfathering provisions, there is also a Hotelling Contribution of up to $22.15 a day which is means tested.

Means Tested Care Fee (MTCF) or Non Clinical Care Contribution

The additional contribution some residents pay towards the cost of their care, calculated from a combined income and assets assessment conducted by Services Australia. Not every resident pays it. For those who do, the amount can range up to the statutory daily maximum, subject to the caps covered above.

Accommodation Payment (RAD or DAP)

A separate cost for your room. It can be paid as a lump sum Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of both. The amount varies by facility and room type. Accommodation costs can be Government supported for residents with ‘low means’ as shown below in ‘who pays’.

Higher Everyday Living Fee (optional)

An optional fee for hotel style services such as Foxtel, wine with meals, or hairdressing. This is agreed directly between the resident and the provider and sits outside the means assessment.

Most of the public conversation focuses on the RAD because the headline numbers look alarming. But it is the fees that are means tested that often makes the greatest impact on long-term costs and is where strategic planning can make the biggest difference.

Who pays Means Tested Fees (and who dosen’t)?

Not every resident pays the means tested fees. Services Australia sorts residents into three broad categories based on the assessment outcome.

Fully supported residents sit below both the income and asset thresholds. They pay no means tested fees at all, and the government covers their care and accommodation costs.

Partially supported residents were initially assessed to receive government support to help fund their accommodation. Rather than paying the usual accommodation costs, their daily accommodation contribution is means tested. They can also pay other fees that are means tested if their assessed assets and income increase above the thresholds.

Non-supported residents sit above the asset and income thresholds when they were initially assessed. They are responsible for their own accommodation payment and pay means tested fees, subject to the caps.

Your category is not just about the care fees. The big difference is it determines whether the government helps with your room costs, which can shift the total bill by tens of thousands of dollars.

Strategies to reduce aged care costs

There is no single trick to reducing aged care costs. What works is a coordinated strategy that looks at the whole financial picture at once. These are the main levers advisers consider.

Accommodation payment structure. How you split your accommodation payment between a lump sum RAD and a daily DAP changes your ongoing fees. Paying a larger RAD reduces the ongoing costs but ties up cash. Paying a DAP keeps liquidity but increases the regular costs. The right mix depends on several factors including available assets, future expense needs, age pension eligibility and estate planning.

Family home treatment. Keeping, renting, or selling the former home each produces a different outcome for the assessment. A rented home can create new assessable income, while a sold property converts a favourably assessed asset into fully assessable cash. Granny flat arrangements sit in their own category and have specific rules.

Superannuation strategies. The treatment of super depends on whether the resident (or their spouse) has reached Age Pension age and whether the super is in accumulation or pension phase. Small changes here can move the dial on both the aged care assessment and the Age Pension.

Gifting and deprivation rules. Giving assets away to reduce the assessment is a trap. Services Australia applies five-year deprivation provisions, which means gifts above the allowable limits are counted as if you still owned them. The strategy often backfires.

Timing of entry. If you and your spouse are both entering care together, the date you enter care can affect government support. For families with some flexibility, timing can matter more than people realise.

These levers interact. Pulling one without considering the others tends to produce a worse outcome overall, which is why modelling the full scenario before committing is so valuable.

How aged care costs interact with the Age Pension

Aged care and the Age Pension are two separate systems, but they use very similar assessment rules. The catch is that optimising one can work against the other.

Paying a Refundable Accommodation Deposit will reduce the Daily Accommodation Payment and can lift your Age Pension entitlement but depending on how assets are structured may push the means tested fees higher. The tests are not identical (the home is treated differently, and some exemptions only apply in one system), which creates both complications and planning opportunities.

The goal is to optimise both at once, not one at the expense of the other.

When to get professional advice on aged care costs

Most families face these decisions in the middle of a crisis. A parent is in hospital, a social worker is asking for a placement decision, and the family may have days, not weeks, to work through the numbers. That is the worst possible time to learn how the system works.

Alteris specialists model every fee scenario before families commit, so the choice is made with full visibility rather than under pressure. Proactive planning, done before a crisis, consistently delivers the best outcomes. Even a single conversation can save tens of thousands of dollars over the course of a care stay.

Frequently asked questions

How much does aged care cost per week in Australia?

It varies significantly depending on your financial position and the facility you choose. The basic daily fee, which every resident pays, is currently $467.60 a week. It’s set at 85% of the single basic Age Pension. On top of that, you may pay for accommodation and fees that are means tested, which depend on your assessed income and assets.

Are Aged Care Fees tax deductible?

No. Aged care fees are treated as personal living expenses and are not tax deductible for the resident. The broader financial strategy around funding care (investment income, super drawdowns, pension structuring) may still have tax implications worth discussing with an adviser and accountant.

What happens if I can’t afford to pay the Aged Care Fees?

If you are experiencing genuine financial hardship, you can apply to Services Australia. If Hardship criteria is met, your fees may be reduced or waived depending on your circumstances.

Does superannuation count toward the aged care means test?

It depends on your age and how the super is structured. If you have reached Age Pension age, your super is counted as an assessable asset. If you (or your spouse) are below pension age, it is excluded while it’s in accumulation phase. The rules around accumulation versus pension phase super are complex in the aged care context and could shift your assessment meaningfully, so they are worth professional review before entry.

This article is general information only and does not take into account your personal circumstances. Aged care, Centrelink, and tax rules change frequently, and the strategies discussed here may not be appropriate for every family. You should seek personal advice from a qualified financial adviser, accountant, and solicitor before acting on the information contained in this article. Figures referenced in this article are current as at the date of publication and may be subject to change. Alteris Financial Group is licensed to provide personal financial advice in Australia and works with families across the country on aged care, retirement, and intergenerational wealth strategies.

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