Aged care costs: what families need to know
When a parent or partner needs more care, families usually have to make big financial decisions quickly, often under emotional pressure. Understanding how aged care is paid for makes those decisions easier.
Aged care funding changed significantly when the new Aged Care Act started on 1 November 2025, so advice or information from before then may be out of date [check: confirm current fee settings before quoting any figures].
Step 1: an assessment
Everything starts with My Aged Care, the government’s entry point. An assessment determines what care someone is eligible for and at what level. Book it early; waiting times can be long.
Care at home: Support at Home
The Support at Home program replaced Home Care Packages from November 2025. It funds services such as personal care, nursing, cleaning, meals and home modifications, with a participant contribution that depends on the type of service and your income and assets. Clinical care (like nursing) is fully funded; everyday living support attracts the highest contributions.
Staying at home is what most people want, and it’s often the cheapest option until care needs become very high.
Residential care: the costs
Residential aged care costs fall into several parts:
- Basic daily fee. Paid by everyone, set as a percentage of the single Age Pension.
- Contributions to care and everyday living. Under the new Act, residents with sufficient income and assets contribute towards non-clinical care and “hotel” costs (meals, cleaning, laundry), subject to caps. Clinical care is government funded.
- Accommodation. The cost of the room, which each home sets and publishes.
- Extra or additional services if chosen.
Paying for accommodation
Accommodation can be paid as:
- a refundable accommodation deposit (RAD): a lump sum, refunded when the person leaves care or dies (for new residents, providers can now retain a small percentage each year for up to five years),
- a daily accommodation payment (DAP): interest charged daily on any unpaid amount, or
- a combination of the two, often drawing the DAP from the RAD.
Choosing between them affects cash flow, the Age Pension, aged care fees and what’s left in the estate.
The family home
- If a spouse or close relative still lives in it, the home is generally exempt from the aged care means test.
- For the Age Pension, the former home is generally exempt for two years after the person moves into care, then counts as an asset unless a protected person still lives there.
- Renting the home out brings in income, but the rent counts for the Age Pension and fees, and the home may lose part of its CGT main residence exemption.
- Selling it releases funds for a RAD, but the proceeds count as assets.
There’s no single right answer; it depends on the numbers and the family’s wishes.
The Age Pension
Paying a RAD can increase Age Pension entitlements, because the RAD itself is exempt from the assets test. Every option needs to be checked against the Age Pension, aged care fees and tax together.
Practical steps for families
- Arrange a My Aged Care assessment early.
- Make sure an enduring power of attorney and enduring guardianship are in place while the person still has capacity. See estate planning.
- Gather details of income, assets, super, pensions and the home.
- Shortlist homes and request their fee schedules.
- Get advice before signing an agreement or selling the home.
Getting advice
Aged care advice is specialised. Clarity Wealth’s financial planners can model the fees, the accommodation payment options and the effect on the Age Pension, and we can handle the tax, including the former home and any trusts or SMSF.