Aged Care Reforms Coming From 1 July 2025 – What You Need To Know
The Australian Government is implementing significant reforms to aged care from 1 July 2025, affecting both residential aged care and home care. These reforms aim to improve service quality and funding sustainability, however they will also introduce higher fees and new payment structures for many individuals entering care.
If you or a loved one are considering aged care, it’s essential to understand how these changes may impact your financial planning and care choices.
What’s Changing in Residential Aged Care?
For those entering residential aged care from 1 July 2025, new fees and accommodation payment rules will apply.
Key Changes to Accommodation Payments
- Price cap increase: The maximum room cost will rise from $550,000 to $750,000 (indexed to inflation).
- New retention fee: Facilities will retain 2% per year of lump-sum accommodation payments for up to five years.
- Refundable Accommodation Deposits (RADs) phased out: By 2035, these upfront payments will be replaced by other payment models.
- Daily Accommodation Payments (DAPs) will rise: These payments will now be indexed to inflation twice a year.
Higher Ongoing Fees for Residents
Three new fees will apply to residents based on their income and assets:
| Fee Type | Purpose | Maximum annual Amount |
|---|---|---|
| Hotelling Contribution | Covers living costs such as meals, cleaning and laundry. | $4,580.75 p.a |
| Non-Clinical Care Contribution (NCCC) | Covers personal care and lifestyle services | $36,923.40 p.a |
| Higher Everyday Living Fee | Replaces additional service fees | Varies by provider |
These fees are means tested and will be calculated for all individuals separately.
Home Care is Also Changing – Introducing “Support at Home”
The Support at Home program will replace the current Home Care Package system, bringing a new fee structure and care levels.
How Home Care Fees Will Change
Unlike the current fixed daily fee, the new system introduces fee-for-service payments, where clients pay a percentage of the cost of each service, depending on their means.
| Age Pension Status | Clinical Care (e.g. nursing) | Independence Services (e.g. transport, personal care) | Everyday Living (eg. cleaning, gardening) |
|---|---|---|---|
| Full Pension | 0% | 5% | 17.5% |
| Part Pensions & Commonwealth Seniors Health card Holders | 0% | 5-50% | 17.5-80% |
| Self-funded Retirees | 0% | 50% | 80% |
Clinical care services will continue to be fully funded by the Government, ensuring no out-of-pocket costs for essential medical support.
Other Notable Changes in Home Care
- More care levels: The current four package levels will expand to eight, allowing for more tailored support.
- Quarterly budgets: Unspent funds will now be capped at $1,000 or 10% of the budget per quarter.
- Lifetime cap on fees: Total home care fees (plus non-clinical care in residential care) will be capped at $130,000.
- Shorter waiting times: The Government aims to reduce home care wait times to 3 months by 2027.
No ‘Worse Off’ Principle
Residents who entered residential aged care before 1 July 2025 will not experience any changes to their accommodation costs or ongoing fees because of the aged care reforms.
For individuals who were covered by the ‘no worse off’ principle under the Home Care system and later transition to residential aged care on or after 1 July 2025, their ongoing fees will continue to be assessed under the pre-1 July 2025 rules, unless they choose to opt into the new system.
However, it is important to note that the updated rules for residential aged care accommodation payments will still apply, meaning changes to pricing structures and payment methods may impact new residents.
The ‘no worse off’ principle applies to individuals who, as of 12 September 2024, were:
- Receiving a Home Care Package
- Listed on the National Priority System
- Assessed as eligible for a Home Care Package.
Summary
- Higher fees in residential aged care: If you’re considering entering aged care, doing so before 1 July 2025 may save you money.
- Home care will be means-tested differently: Your assets and income will determine your fees, not just your income, as under current rules.
Next Steps – Planning for the Changes
If you or a loved one may need aged care in the future, it’s important to plan ahead of the 1 July 2025 deadline. These changes will have a impact on costs and financial strategies.
We are here to help you navigate the new system and make the best financial decisions for your situation.
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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.
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