Aged care fee reforms – what every Australian needs to know
A new Aged Care Act is on the way.
As well as building the foundation for a better person-centred aged care system, it aims to address the financial challenges faced by Australia’s aged care sector.
Australia’s population continues to age, and care needs are changing. The need for legislative reforms was highlighted through the Royal Commission which triggered a reform program spanning the last five years. However, the implementation of a new Act with fee changes is possibly the most significant and important component.
Last year’s report from the Aged Care Taskforce emphasised the need for increased investment to meet the growing demand for aged care services now and into the future, with the number of people aged over 85 projected to triple over the next 40 years.
Every Australian is likely to be affected by an aged care need at some point in their lives, whether for yourself or a loved family member, and at Aged Care Steps, we want to help you stay informed and prepared while planning for your future and that of your loved ones.
Are you going to be affected?
Most fee changes will come into effect from 1 July 2025, but some grandfathering rules will apply so that some people will continue to be assessed under the current fee rules.
In residential care, the new fees will only apply to people entering care from that date, with grandfathering under the current rules if you were receiving a home care package (or in the queue waiting for a package to be allocated) as at 12 September 2024. The changes to home care fees will only apply to people who are approved for a Home Care Package after 12 September 2024.
Fees under the new rules may be higher for some people, but contributions will still be means-tested and protections are in place for anyone with lower financial capacity.
If you’re considering moving into residential care before the new rules come into action, it’s important to move swiftly – we recommend connecting with a trusted, licensed financial adviser to understand the full implications.
Residential care – accommodation
Financial reform is necessary to allow aged care providers to provide more aged care places and better quality services – current financial constraints are limiting both aspects. The changes around the cost of accommodation include:
From 1 January 2025, providers will be able to set room prices up to $750,000 without gaining government approval (currently limited to $550,000). This may see some room prices increase, but we will still expect to see a range of prices.
Lump sums paid for a room (as a refundable accommodation deposit/contribution – RAD/RAC) are currently fully refundable, but from 1 July 2025 providers must deduct and keep up to 2% in each of the first five years (up to a total of 10%).
If you choose to pay for your room as a Daily Accommodation Payment/Contribution (DAP/DAC), this “rent” will index every six months in line with CPI.
Residential care – daily fees
Ongoing fees will be reclassified so that you pay more of the everyday living expenses (which we all pay no matter where we live) and the government pays more of the actual care costs. How much you pay will continue to be means-tested, but under a new set of rules:
Everyday living expenses - residents with assets over $238,000 or income over $95,400 (or a combination of the two) may pay up to $12.55 more per day as a hotelling supplement.
Non-clinical care - a fee of up to $101.16 per day may apply if you have assets over $502,981 or income over $131,279 (or a combination). This will only apply for the first four years but is capped at a maximum of $130,000 (indexed).
Clinical care - to be fully funded by the Government.
Getting used to new rules is always complicated, and making the right financial decisions for you is important, but some of these changes may simplify the administration and paperwork for fee assessments.
Home care fees
A new Support at Home program will start on 1 July 2025, increasing the range of in-home care packages from four levels to eight levels to better match a person’s needs and provide quicker access to packages once approved.
Available home care services will be divided into three categories (clinical care, independence support and everyday living costs) to determine how the costs are split between the person accessing care and the government. Means-testing will also move from just income testing to including assessable assets as well.
Some of the key changes include:
Clinical care will be fully paid for by the government.
Self-funded retirees will pay 50% of the costs for independence support and 80% of everyday living costs. Full pensioners will pay less, with only 5% of independence support costs and 17.5% of everyday living costs. Part-pensioners and people who hold the Commonwealth Seniors Health Card will pay somewhere in between based on means-testing.
The lifetime cap (for client contributions) will increase to $130,000 (indexed) and contributions paid will count towards the residential care cap if a move is made into residential care at a later stage.
Budgets will be calculated quarterly and you will only be able to accumulate unspent funds of up to $1,000 or 10% of the package budget (higher of) across each quarter, but you may have access to additional funding if you need to pay for disability aids or home modifications to meet your care needs.
We know that was a lot of information, and a lot of complex numbers too.
To learn more about how these changes may affect your plans, or the plans of your loved ones, the best thing you can do is talk to us and make sure you have the right plan in place, particularly when taking these new changes into consideration.
