Changes Ahead for Aged Care
Article by: Jennifer Langton, Aged Care Steps.
After a long wait, new legislation aimed at reshaping how aged care is delivered and funded in Australia was passed through parliament in late 2024, with most changes coming into effect from 1 July this year.
Like most countries around the world, our population continues to age, making it important to have a sustainable aged care system that provides quality care and treats our older Australians with the care and dignity they deserve. The new Act is founded on person-centred principles – providing more choice and greater control, as well as defined rights for older Australians.
But this also requires adequate funding and the money is what most people are worried about. So, here’s what you need to know to stay informed and make sure you can afford the care that you need and want.
Who is affected?
The rights in the Aged Care Act apply to everyone, but the new rules for fees will only apply if you move into residential care after 30 June 2025 or are approved for Home Care after 12 September 2024.
Grandfathering and transitional arrangements
Those already in residential care before 1 July 2025 will remain on the current fee arrangements & transitional rules apply If you were receiving a Home Care Package as at 12 September 2024 (or had been approved and in the queue waiting for a package to be allocated).
The aim is to ensure you are not disadvantaged by some of the rule changes even if you move into residential care after 30 June 2025.
What is changing for residential care?
Some room prices have increased but we still expect to see a range of price points. And you will still be able to choose to pay for your room as a lump sum or as daily “rent”.
Room costs - If you enter residential care after 1 July 2025 and pay a lump sum, each year the provider must deduct and keep 2% per year for the first 5 years. If paying the daily rent, this increases each six months in line with inflation.
Ongoing care costs will be split between you and the government, with new fee categories for consumers:
Clinical care – this is the most expensive component and will be fully paid by the Government.
Basic Daily fee, currently $63.57 (indexed) per day, which will continue under the new system. But if you have assets & income over a certain level, you may pay up to an additional $12.55 per day as a Hotelling Contribution. These fees cover everyday living expenses.
Non-clinical Care Contribution – this is a means-tested fee up to $101.16 per day. It will only apply for the first four years, or up to a lifetime dollar cap of $130,000 (indexed).
Higher Everyday Living Fee – this is an optional fee charged by some care facilities for additional services such as excursions, happy hour, pay tv.
What is changing for home care?
The Support at Home program starts on 1 July 2025, expanding care to eight levels instead of just four. Similar to residential care, the costs will be split into three categories – Clinical care, Independence support and Everyday living expenses, with the last two being means-tested to work out how much you pay. The means testing is closely linked to the age pension status of the consumer:
Clinical care will be fully paid by the government.
Full pensioners will pay only 5% of Independence support costs and 17.5% of Everyday living costs.
Self-funded retirees will pay 50% of the costs for Independence support and 80% of Everyday living costs.
Part-pensioners and people who hold the Commonwealth Seniors Health Card will pay a means tested percentage between the above two groups.
Your means tested home care contributions are subject to the $130,000 (indexed) lifetime cap.
An important change is to note that the package budget will be allocated quarterly, on a ‘use it or lose it’ basis. You will only be able to roll over unused funds up to $1,000 or 10% of the package budget from quarter to quarter. Home modifications and assistive technology will have separate budgets.
What you need to do?
Navigating these changes can be complex and ensuring you understand the implications of accessing services to meet your care needs in the later years of life is vital to maximise your quality of life.
If you or a loved one require aged care, acting before 1 July 2025 may help you lock in current fee arrangements. But whenever you decide care is needed, it is important to get comprehensive financial advice to fully understand your options and how to restructure your assets and investments to manage the costs and protect your estate.
For further information on this topic, a webinar is being held on Wednesday 7th May 2025 at 5.30-6.00pm which will cover:
The types of aged care services available
The costs for home care and residential aged care
The payment options available to you
Strategies to cover the costs and create an optimal financial outcome.
. To register for the webinar, click here: