Residential Care Financials
New Financial Rules in 2025
Residential Care Financials - Changes in 2025
If you’re thinking about entering residential aged care, here are some new changes to be aware of. People with assets over $238,000, annual income over $95,400, or a combination of the two will now pay a supplement. However, the family home won’t count as part of these assets. Room prices in aged care facilities can now go up to $750,000 without needing special approval—that’s $200,000 more than before—and this cap will be indexed over time.
In addition, providers can retain 2% of accommodation deposits per year for five years to help manage accommodation costs, as nearly half of facilities are currently losing money on these expenses. With these reforms, new residents who receive a full pension (around 3 in 10) and part-pension recipients (around 7 in 10) may be asked to contribute more if they have higher means.
Residential Care - New Financial Rules from 1st July 2025
Based on the Aged Care Taskforce’s advice, these changes include:
- New residents will pay more based on their means.
- A higher maximum room price that will increase over time.
- Providers can keep a small part of the refundable accommodation deposits (RAD).
- No changes to how the family home is treated in the aged care system.
People already in care won’t have to pay more. These new rules will only apply to those entering care from 1 July 2025. If you're in care by 30 June 2025, your current arrangements will stay the same until you leave.
Increasing Maximum Capped Room Prices
Currently, providers need permission to charge more than $ 550,000 for any room, a rule in place since 2014.
It is most important to note that from 1st January 2025, the Commonwealth will raise the capped level to $ 750,000, and the capped level will go up every year with inflation. From 1 July 2025, this amount will be indexed annually to the consumer price index on 1 July each year.
Check out the Independant Health and Aged Care Pricing Authority (IHACPA) latest information:
IHACPA Changes to Higher Max RAD Payment Amounts.
Retention of Refundable Deposits
From 1 July 2025, providers can "retain" a portion (2% a year) of the RAD, up to a maximum of five years.
So if a resident pays a RAD of $750,000 and has been a resident for more than 5 years, the provider will be allowed to retain $75,000 of the initial RAD lump sum payment !
($750,000 x 2 % = $15,000 for 5 years = $75,000)
This will also apply to Refundable Accommodation Contributions (RAC), which some residents pay if they get partial government support.
However, this won’t affect those already in care before 1 July 2025.
Daily Payment Increases
For those entering care after 1 July 2025, the Daily Accommodation Payment (DAP) will be adjusted twice a year to match inflation, ensuring payments keep up with rising costs.
However, this change won’t apply to people already in care before 1 July 2025.
Phasing Out RADs by 2035
The goal is to stop accepting new RADs by 2035, but the government will review the situation in 2030 before making any final decisions.
Living Costs Contributions
Residents already pay a Basic Daily Fee (BDF), which is 85% of the single Age Pension, for meals, cleaning, and other services. This won’t change.
But those with over $238,000 in assets or $95,400 in income will contribute more to their living costs. A supplement will continue to cover the gap between the BDF and the actual costs.
Non-Clinical Care Contributions
The Means Tested Care Fee will be replaced.
The government will cover all clinical care costs. However, those with enough money will have to contribute to non-clinical care (like bathing and mobility support).
If your assets or income are above a certain level, you’ll contribute 7.8% of assets over $502,981 or 50% of income over $131,279, up to a daily limit of $101.16.
After four years in care, your non-clinical care costs will be fully covered by the government. There will also be a lifetime cap of $130,000 on these contributions, adjusted twice a year.
Family Home Treatment
The family home’s value will only be counted in the means test if no one (like a spouse) is still living in it, and even then, only up to a capped amount ($206,039 as of 20 September 2024).
No Changes for Current Residents
If you're in care by 30 June 2025, these new rules won’t apply to you. Your current setup will stay the same until you leave care. The new means-testing and payment arrangements will only affect people entering care after 1 July 2025.
Home Care
Starting next July, the new Support at Home program will provide a range of services to help people stay in their homes for longer. It will cover nursing care, occupational therapy, help with daily tasks like showering, medication management, cleaning, and even gardening. The program will also have means-testing based on personal circumstances.
For example, full pensioners will pay 5% of their support costs and 17.5% for everyday living expenses. Self-funded retirees will pay more—about 80% for everyday living costs and 50% for their independence supports. Clinical care, however, will be fully covered. Over a lifetime, the cap for non-clinical care costs will increase from $80,000 to $130,000 across both home and residential care.
Government Savings
Through these reforms, the Australian Government will save $12.6 billion over the next 11 years but will still be the main funder of aged care. For every $1 paid by residents, the Government will contribute $3.30 in residential care and $7.80 in home care. The Government’s share of residential care costs will decrease slightly to 73%, while its contribution to home care will reduce to 89%. The sector will also see an extra $930 million over the next four years.
For more information, check out the Government’s Accommodation Reform Paper.
