Understanding Australia’s Aged Care Reform

Australian Aged Care Reforms: What You Need to Know

What Is the Australian Aged Care Reform?

The Australian Parliament passed the Aged Care Bill on 25 November 2024. The New Aged Care Act will affect the cost of residential aged care for those entering care starting 1 July 2025.

I highly recommend this resource for details on the New Aged Care Act: New Aged Care Act | Australian Government Department of Health and Aged Care.

Goals of the Aged Care Reform Act

With a growing ageing population, the government recognised the need to build a sustainable aged care system.

The Australian government took recommendations from the Aged Care Taskforce and Royal Commission into Aged Care Quality and Safety to build a system aimed at meeting long-term goals.

Australia’s Aged Care Reform Act aims to:

Strengthen Australia’s aged care system
Ensure older individuals have the care they need to enjoy the quality of life they deserve
Provide greater choice and independence
Increase access to aged care services that respect and meet their needs
Deliver person-centered care
Strengthen the quality of aged care standards
Improve funding for residential aged care services
Give older individuals the support they need to live in their homes longer and retain independence
Provide additional support to the growing aged care sector

Learn more about the goals of the Aged Care Reforms here: About aged care reforms and reviews | Australian Government Department of Health and Aged Care.

What Are the Main Changes to Residential Aged Care Costs?

The changes may result in higher charges for individuals entering the aged care system depending on the person’s financial situation.

There was already one change introduced from 1st January 2025. The room price cap, which is the amount a provider can set the Refundable Accommodation Deposit has increased from $550,000 to $750,000 and will be indexed over time.

Here is a look at some of the main changes you need to know for those entering aged care from 1 July 2025:

The ‘no worse off’ principle applies to individuals who are already in aged care as of 30 June 2025 and means they will not be asked to pay more once the new rules are implemented
Fees will remain the same for low-income individuals. Individuals with higher assessable income and/or assets will pay higher fees under the aged care reform.
Aged care recipients may be required to contribute more toward the cost of non-clinical residential aged care services, such as accommodation, bathing, personal care, laundry, lifestyle activities, mobility assistance, and other living expenses
The government will pay for 100% of clinical care costs
Refundable Accommodation Deposits were previously fully refundable at the time a person was discharged from an aged care home. Under the new changes, aged care providers will be able to apply a retention (non-refundable) fee of 2% per annum on the RAD for up to 5 years, with a maximum retention of 10%.
For residents choosing to pay a daily fee instead of a RAD, the Daily Accommodation Payment (DAP) will be indexed twice a year in line with CPI.
There will be no changes to the treatment of the family home in the aged care means test assessment process. If a spouse or “protected person” resides there, it remains exempt.

Fee	Current	From 01/07/2025
Basic Daily Care Fee	Paid by everyone Set at 85% of the basic Age Pension, indexed	Paid by everyone Set at 85% of the basic Age Pension, indexed
Hotelling Supplement		Residents with assets over $238,000 or income above $95,400 (or combination) $12.55/day indexed
Means Tested Care Fee	Paid by those with assets and income above a certain threshold
Non-Clinical Care Contribution		Residents with assets over $502,981 or income over $131,279 (or combined) Up to $101.16/day Max $130,000 (indexed) or after 4 years whichever occurs first

Trusted, Knowledgeable Guidance with Aged Care Consultants

Choosing an aged care home for your loved one is hard enough, but I know these changes can make the process even more overwhelming. As an aged care consultant, I help families understand and navigate these changes with confidence.

From Choosing the Right Aged Care Facility to knowing when to consider aged care services for your loved one, I’m dedicated to giving families the knowledge needed to find the right solution for their family.

Learn more about the role of a care consultant in aged care or contact me at Care Match Solutions with questions.

Grace Conboy is a Registered Nurse with over 15 years of experience in the aged care sector. For the past decade, she has dedicated herself to helping families access home care services and residential aged care.