Aged Care reform to cost government and older Australians more

For those entering residential aged care from 1 July 2025, the proposed new rules may result in higher accommodation fees and charges. The changes include:

• Accommodation price cap increase: From 1 January 2025, the price of some rooms in residential facilities is set to increase, with providers able to charge up to $750,000 for a room without seeking special approval – an increase of $200,000 above the current limit. This will be indexed to the Consumer Price Index (CPI) over time. 

• Accommodation payment retention fee: From 1 July 2025, aged care providers will retain a portion of any lump sum accommodation payments paid by new aged care residents when they leave the aged care facility: 2% for each year of care up to a maximum of five years, debited monthly. 

• Indexation of Daily Accommodation Payments (DAPs): For residents entering care from 1 July 2025, DAPs will be indexed to CPI, twice per year.  

• Possible phasing out of Refundable Accommodation Deposits (RADs): The Government will consider phasing out RADs from 2035, subject to an independent legislated review. 
   

There will also be changes to ongoing fees for residential aged care, including:

• Hotelling Contribution of up to $4,580.75 per year: From 1 July 2025, new aged care residents will be asked to pay a means-tested payment of up to $12.55 a day to help cover everyday living costs such as meals, cleaning and laundry. This is currently paid by the government.  
  Fully and partially supported residents will not pay the Hotelling Contribution as their means tested amount is below the applicable thresholds. 

• Non-Clinical Care Contribution (NCCC) of up to $36,923.40 per year: From 1 July 2025, new aged care residents may be asked to pay an NCCC to cover the cost of bathing, mobility assistance and provision of lifestyle activities. This will replace the means tested care fee. 
  The daily NCCC is calculated as a resident’s means tested amount, less the sum of the maximum accommodation supplement (currently $69.49 per day) and the maximum Hotelling Contribution (currently $12.55 per day), up to a maximum daily NCCC of $101.16 per day. 
  A lifetime cap will apply to the NCCC. Aged care residents will no longer be required to pay the NCCC when they reach $130,000 in total contributions, or after 4 years, whichever occurs first. Fees paid under the Support at Home program also count towards the lifetime cap.  

• Everyday Living Fee: From 1 July 2025, this fee is designed to enable residents to purchase additional daily living services and replaces existing additional service fees. 
  

From 1 July next year a new Support at Home program will provide nursing care, occupational therapy, in-home personal care and assistance with everyday living to allow more people to remain in their home for longer. 

This replaces the current Home Care Packages and Short-Term Restorative Care programs and will be subject to greater means testing.

Available services under the program will be split into three categories:

• Clinical care: This includes services such as nursing, physiotherapy and occupational therapy (which will be 100% government-funded). 

• Independence: This covers services such as personal care, transport and social support. 

• Everyday living: This includes services such as cleaning, meal delivery, gardening and home maintenance.

   

Existing Home Care recipients and people on the National Priority System waiting for a Home Care Package, will automatically transition to the Support at Home program from 1 July 2025. 

A ‘no worse off’ principle will apply to people who on 12 September 2024 were receiving a Home Care package, on the National Priority System, or assessed as eligible for a package. They will pay the same level of fees, or lower, under the new Support at Home program as they were paying under the current system. 

Key changes to fees under the Support at Home program include:

• New fee structure: Clients will pay a means-tested percentage of the cost of each service they receive depending on the type of service. This replaces the current basic daily fee, and in some cases an income tested fee. 

• Means testing based on Age Pension status: Different contribution percentages apply to full pensioners, part pensioners, those who are eligible for a Commonwealth Seniors Health Card and self-funded retirees.  
  The percentage contribution will be based on the Age Pension means test which considers income and assets. This differs from the current Home Care Packages program which only considers assessable income. 
  Full pensioners will pay 5% of the cost of supports to live at home, and 17.5% of the cost of everyday living assistance. Part-pensioners and Commonwealth Seniors Health Card holders will pay between 5%-50% of the cost of supports to live at home and 17.5%-80% of the cost of everyday living assistance. 
  Self-funded retirees will pay 80% of the cost of their everyday living assistance, and 50% of costs to support living at home.

• New classification system: From 1 July 2025, the new Support at Home program will have eight classification levels for ongoing services, replacing the current system of four Home Care Package levels. The highest classification level has an annual budget of $78,000, which is significantly higher than the current highest Home Care Package level budget of $61,440.45. The new classification levels are designed to provide services more tailored to a person’s individual needs.

• Limited quarterly budget rollovers: Under the new Support at Home program, clients will receive a quarterly budget. If they do not spend their budget within the quarter, the maximum amount they will be able to carry over is limited to $1,000 or 10% of their quarterly budget (whichever is higher). 
   

For an overview of how Australia’s aged care system currently works, read our guide to aged care.