Although the prospect of moving into aged care isn’t appealing to everyone, it is sometimes necessary. Understanding aged care costs and the impact they have on finances can provide valuable insights for the financial choices you or a family member make now. Recent legislative changes to the aged care system mean that the amount you contribute is increasing.
The Aged Care Taskforce Report estimates that by 2050, the number of Australians over 65 will more than double, and those over 85 will more than triple. It also estimates that due to this ageing population, the residential aged care sector will require $56 billion in capital funding by 2050 to upgrade facilities and meet the growing demand. In response to this report, the Australian Government is investing $5.6 billion in an immediate reform package.
The Australian Government is applying a number of changes to the Aged Care sector, including a new aged care fee structure from 1 November 2025, aimed at balancing the financial burden between taxpayers and aged care recipients. They are also reworking the in-home care system to operate more like the NDIS, where recipients receive a budget to spend on approved services rather than a fixed care package.
Residential care fees
Residential aged care fees can still be broken into 4 pillars:
- Accommodation Payment – A daily payment and/or a refundable lump sum pays for the room. If you can’t afford the room, you may be able to get assistance. Under the new rules, a portion of the Refundable Accommodation Deposit balance is deducted by the aged care provider at 2% per annum for a maximum of 5 years. Where you pay a Daily Accommodation Payment, the payment will be indexed.
- Essential Living Expenses – Covers electricity, water, cleaning, laundry services, etc. This is currently paid via the Basic Daily Care Fee. Under the new rules, the Basic Daily Care Fee will continue, but there will also be an income and asset tested Hotelling Contribution.
- Contribution to care – A contribution towards your cost of care based on your assets and income. This is currently paid via a Means Tested Care fee. Under the new rules, you will pay this via a Non-Clinical Care Contribution instead.
- Luxuries – Additional services. The current Extra services fee will cease from 1 July 2026, and under the new rules, there will be a Higher Everyday Living Fee.
Aged care is a complex area, and dmca advisers can help you review how aged care fees may impact you or a family member.