Australia’s aged care system is set to undergo significant reforms with the introduction of the new Aged Care Act, commencing on 1 July 2025. These changes aim to enhance the quality and sustainability of aged care services, ensuring that older Australians receive the support they need while maintaining the system’s financial viability.
The following is an overview of the key changes relating to resident fees:
Introduction of a Means-Tested Services Contribution
A new means-tested services contribution will be implemented for residents entering care from 1 July 2025. This contribution is designed to cover non-clinical service costs, such as personal care, cleaning, and laundry services. Clinical care, including nursing services, will continue to be fully subsidised by the government.
Increase in Room Prices Cap
The maximum price for residential aged care accommodation rose from $550,000 to $750,000 starting in January 2025. This cap applies to Refundable Accommodation Deposits (RADs), representing the maximum “market price” an aged care home can charge without government approval. The cap will be indexed over time to reflect economic changes.
Introduction of an Exit Fee
An exit fee, calculated at 2% per year of the resident’s RAD for up to five years, will be introduced. This means that if a resident stays for five years or more, a total of 10% will be deducted from the RAD upon departure. The RAD is a lump-sum payment covering accommodation costs in aged care facilities and is currently fully refundable upon exit, minus any agreed deductions.
Basic Daily Fee (BDF) Remains Unchanged
The Basic Daily Fee, set at 85% of the age pension, will remain unchanged. All residents are required to pay this fee, which contributes to daily living costs such as meals, cleaning, and utilities.
Grandfathering Provisions for Current Residents
For individuals in residential aged care as of 30 June 2025, their contributions will remain unchanged under the government’s ‘no worse off’ policy. This ensures that current residents will not face increased costs due to the reforms. Those transitioning from home care to residential aged care after 1 July 2025 will be subject to the new accommodation payment changes but can choose between existing contribution arrangements or the new ones.
For further information please reach out to us today.
For details of how the changes may impact you personally, we recommend that you consult your financial adviser.