It has been more than a decade since the last major reform to Australia’s aged care system, and in that time a Royal Commission into Aged Care Quality and Safety was convened followed by an Aged Care Taskforce highlighting that aged care funding was 'insufficient… to meet the cost of providing … high quality care' 1 and 'means testing arrangements … are insufficiently progressive, affecting equitable access.' 2 These issues were addressed in the new Aged Care Act 2024, meaning residents entering from 1 November 2025 may pay different fees to those that entered before that date.
Underlying the new Act is Australia’s changing demographics which are projected to have an increasing number of older Australians and simultaneously a lower number of working age people. The ‘old-age dependency ratio’ which measures the number of people aged 65 and over for every 100 people of traditional working age (15-64), is projected to increase from 26.6 per cent in 2022-23 to 38.2 per cent by 2062-633, creating future federal budgetary constraints as the Federal Government is the majority funder of the aged care system with funding ‘projected to increase as a proportion of GDP from 1.1 per cent in 2022-23 to around 2.5 per cent in 2062-63.’4
Conversely ‘over the next 20 years, the number of people with superannuation balances at age 85 will grow considerably, with a greater proportion of people having significant funds available.’5 These diverging factors serve as the basis to change the mix of sources of aged care funding increasing the proportion from residents who have the means to pay with the intent of ensuring sustainability and fairness.
Fees for new residents6 from 1 November 2025 (indexed) as at 20 March 2026
The following table sets out the fees that will be payable into the future for new residents in aged care facilities.
| Category | Day-to-day | Accommodation | Non-clinical care | Additional goods and services |
|---|---|---|---|---|
| Purpose | Meals, cleaning and laundry | Room price | Bathing, mobility assistance and lifestyle activities | Higher quality goods and services e.g. specialised menus, higher quality linen |
| Name | Basic daily fee (BDF) and hotelling contribution (HC) | Refundable accommodation contribution / deposit (RAC/RAD) and/or daily accommodation contribution / payment (DAC/DAP) | Non-clinical care contribution (NCCC) | Higher everyday living |
| Who pays |
BDF paid by all residents HC payable by the residents if the daily means tested amount (MTA) is greater than the maximum accommodation supplement (MAS), currently $72.30 per day |
Residents are means tested on entry May be paid as either an upfront lump sum, a daily payment or a combination of both |
Residents are means tested ongoing and NCCC is payable if the MTA is greater than the sum of the MAS and maximum hotelling supplement (MHS), currently $94.45 per day | If resident agrees |
| Amount |
BDF: 85% of basic single rate of age pension, currently $66.80 per day HC: Means tested ongoing, with a Government subsidy up to $22.15 per day |
Low means residents pay a means tested contribution capped at the accommodation supplement for the facility and DAP Non-low means residents pay the agreement cost DAP will index to CPI twice a year RAC/RAD retention amount of 2% per annum, calculated daily and deducted between every month to every quarter but not longer than 5 years |
Capped at $107.32 per day Lifetime cap of $137,917.01 and 4 years, whichever is attained first7 |
Provider may advertise price lists |
Highlights to the changes include (as at 20 March 2026):
- Day-to-day living expenses – the Government currently funds the hotelling contribution for pre-1 November 2025 residents and this will now be paid by aged care residents if their daily means tested amount exceeds the MAS which is currently $72.30 per day. It will be capped at the maximum HC which is currently $22.15 per day.
- Accommodation costs – there are multiple alterations:
o Low means residents’ contributions will be limited also by the agreement cost, preventing a pre-1 November 2025 unintended outcome where it is possible for some low means residents to pay more than if they had entered as non-low means.
o Non-low means residents who pay a DAP will have the real value of this cost stay the same. The amount will index to CPI twice a year at the same time as the age pension.
o If a resident pays a RAC or RAD, there will be a retention amount deducted by the provider. This will be 2% per annum, calculated daily and deducted as frequently as monthly or infrequently as quarterly. This is capped at 5 years.
- Means tested care fee – this will no longer be payable, and the Government will fully fund clinical care costs.
- NCCC – residents will need to pay for their non-clinical care if their daily means tested amount exceeds the sum of the MAS and maximum hotelling contribution, currently $94.45. It will be capped at $107.32 per day, and there will be a lifetime cap of $137,917.01 or 4 years whichever is reached first. It should be noted that pre-1 November 2025 residents who wish to opt-in to the new fees do not have any means-tested care fees count towards this cap. Any support at home individual contributions will count against the $137,917.01 cap.
- Additional goods and services – the additional services and extra services fees will be replaced by the higher everyday living fee and is payable if the resident agrees to receive and pay these amounts.
Changes to means-testing
The means-test continues to have the same definitions of assets and income as the pre-1 November 2025 rules however it will be rebalanced:
- The daily means tested amount is equal to the sum of the asset tested amount and the income tested amount
- The asset tested amount is equal to the sum of the following divided by 364:
| Assets | |
|---|---|
| First $64,500 | Nil |
| $64,500 – $214,884 | 17.5% |
| $214,884 – $258,000 | Nil |
| $258,000 – $361,366.66 | 7.8% |
| $361,366.66 – $536,384 | Nil |
| $536,384+ | 7.8% |
- (Single) The income tested amount is equal to the sum of the following divided by 364:
| Income | |
|---|---|
| $0 - $35,313.20 | Nil |
| $35,313.20 - $87,947.60 | 50% |
| $87,947.60 - $101,105 | Nil |
| $101,105 - $117,230.20 | 50% |
| $117,230.20 - $141,252.80 | Nil |
| $141,252.80+ | 50% |
- (Illness separated couple – per partner) The income tested amount is equal to the sum of the following divided by 364:
| Income | |
|---|---|
| $0 - $34,585.20 | Nil |
| $34,585.20 - $87,219.60 | 50% |
| $87,219.60 - $101,105 | Nil |
| $101,105 - $117,230.20 | 50% |
| $117,230.20 - $138,340.80 | Nil |
| $138,340.80+ | 50% |
As a result of these changes the government expects that ‘half of new residents will not contribute more under the new consumer contributions:
- All “fully supported” residents will not contribute more.
- 7 in 10 full pensioners will not contribute more.
- 1 in 4 part pensioners will not contribute more.’8
Case studies
To illustrate the effect of these reforms in each of the following case studies, we have compared the fees payable by the hypothetical client in two scenarios (a) if they entered aged care pre-1 November 2025; and (b) if they entered aged care post-1 November 2025.
Case study 1 – Partial RAD, part age pensioner
Peter is aged 82, is single and receives a part age pension. His assets consist of:
| Home | $600,000 |
| Cash | $600,000 |
The facility he wishes to enter advertises a room with a price of a $450,000 RAD or DAP of $98.14 per day, using a maximum permissible interest rate (MPIR) of 7.96% for the quarter ending 31 December 2025. He intends to pay a RAD of $250,000 and DAP of $43.62.
| Pre‑1 November 2025 entry | Post‑1 November 2025 entry | Difference | |
|---|---|---|---|
| Daily means‑tested amount | $100.03 | $157.15 | $57.12 |
| Fees | |||
| Basic daily fee | $66.80 | $66.80 | $0 |
| Hotelling contribution | N/A | $22.15 | N/A |
| Daily accommodation payment | $43.62 | $43.62 | $0 (at the start) |
| Means tested care fee | $27.73 | N/A | N/A |
| Non‑clinical care contribution | N/A | $62.70 | N/A |
| Total | $138.15 | $195.27 | $57.12 per day |
Under the post-1 November 2025 scenario, the facility will retain an amount equal to 2% per annum of the $250,000 RAD, for a maximum of 5 years. The DAP which starts at $43.62 per day will also index to CPI biannually.
The non-clinical care contribution will cease after 4 years. At this point the post-1 November will be lower than the pre-1 November fees, and while it is possible for pre-1 November 2025 residents to opt in to the new fees, careful analysis is required. Importantly both the 4 year and lifetime amount cap only apply to non-clinical care fees and any means-tested care fees paid by a pre-1 November 2025 resident (both in duration and amount) do not count towards these caps. In this example, the higher fees for the first 4 years have a greater difference than the fee reduction after this time and would take over 20 years to breakeven keeping all figures the same.
Case study 2– Partial RAD, full age pensioner
Here is an example for the same purpose but for a full age pensioner. Stacy is aged 77, single and approved for residential aged care. She receives the full age pension and her assets consist of:
| Home | $500,000 |
| Cash | $250,000 |
The facility she wishes to enter advertises a room with a price of $400,000 as a RAD or DAP of $87.23 using an MPIR of 7.96% applying the same rationale in Case Study 1. She intends to pay a RAD of $150,000.
| Pre‑1 November 2025 entry | Post‑1 November 2025 entry | Difference | |
|---|---|---|---|
| Daily means‑tested amount | $79.17 | $94.45 | $15.28 |
| Fees | |||
| Basic daily fee | $66.80 | $66.80 | $0 |
| Hotelling contribution | N/A | $22.15 | N/A |
| Daily accommodation payment | $54.52 | $54.52 | $0 (at the start) |
| Means tested care fee | $6.87 | N/A | N/A |
| Non‑clinical care contribution | N/A | $0 | N/A |
| Total | $128.19 | $143.47 | $15.28 per day |
Under the post-1 November 2025 scenario, the facility will retain an amount equal to 2% per annum of the $150,000 RAD, for a maximum of 5 years. The DAP which starts at $54.52 per day will also index to CPI biannually.
Unless Stacy’s means increase, no non-clinical care contributions are payable. Despite not incurring this fee, the total fees if Stacy entered post 1 November 2025 remains higher than if she entered before this date.
Case study 3 – Low means resident
Finally, a comparison is provided for a low means resident. Austin is aged 63, single and undertakes an aged care assessment. He receives the full age pension and his assets consist of.
| Cash | $150,000 |
The facility he wishes to enter advertises a room with a price of $300,000 as a RAD or DAP of $65.42 using an MPIR of 7.96% applying the same rationale in Case Study 1. The facility’s room receives the maximum accommodation supplement of $72.30. He intends to pay a RAC of $40,000.
| Pre‑1 November 2025 entry | Post‑1 November 2025 entry | Difference | |
|---|---|---|---|
| Daily means‑tested amount | $41.11 | $41.11 | $0 |
| Fees | |||
| Basic daily fee | $66.80 | $66.80 | $0 |
| Hotelling contribution | N/A | $0 | N/A |
| Daily accommodation contribution | $32.38 | $32.38 | $0 |
| Means‑tested care fee | $0 | N/A | N/A |
| Non‑clinical care contribution | N/A | $0 | N/A |
| Total | $99.18 | $99.18 | $0 per day |
Under the post-1 November 2025 scenario, the facility will retain an amount equal to 2% per annum of the $40,000 RAC, for a maximum of 5 years. The DAC does not index to CPI.
Unless Austin’s means increase, no hotelling contributions or non-clinical care contributions are payable.
There is no difference between whether Austin enters pre- or post- 1 November 2025 other than the RAC retention amount.
In Summary
Rebalancing the aged care means test addresses the structural concerns raised in the Royal Commission by making means testing more progressive. As illustrated by the three scenarios, those with greater means are expected to contribute more towards their aged care costs, but those classified as ‘low means’ will not see any change to their fees under pre- or post- 1 November 2025 rules. The changes will make the aged care system more sustainable and allow the sector to better deliver high quality and safe care. But to accomplish the equity in how fees are calculated a natural consequence is increased complexity that strengthens both the demand for financial advice and the value that financial advisers can provide when assisting their clients with how to reduce the impact of the changes and assisting with funding any increases.
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1. Royal Commission into Aged Care Quality and Safety (Final Report Volume 1, March 2021) vol 1, p. 74.
2.Ibid, p. 77.
3. Australian Government, Intergenerational Report 2023: Australia’s future to 2063, 2023, p. 48.
4. Ibid, p. 160.
5. Final Report of the Aged Care Taskforce, p. 8.
6. Pre-1 November 2025 residents may opt-in to the new means-tested fees and accommodation fees, and those that exit care for more than 28 days may also be subject to the new fees.
7. The daily and lifetime caps are expected to index in March and September.
8. Anika Wells, ‘Once in a generation aged care reforms’ (Media Release, 12 September 2024).
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Information current as at 20 March 2026.
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