Understanding the Changing Aged Care Landscape

The Australian aged care system is undergoing some of its most significant changes in over a decade. With new rules coming into effect from 1 November 2024, individuals entering aged care will face different cost structures and contribution requirements, making sound financial advice more important than ever.

Why Are These Changes Happening?

Following findings from the Royal Commission into Aged Care Quality and Safety, the government is aiming to improve case standards, ensure sustainability, and better fund their system. Many aged care facilities were under financial stress, and the government determined that new entrants - not taxpayers at large - should contribute more toward their care if they have the means.

Key Changes in Aged Care Costs

If you or a loved one is considering aged care, here’s a snapshot of what’s changing:

• Room Costs Are Rising: From January 2025, the maximum room price increases to $750,000 (up from $550,000) and will now be indexed annually to inflation.

• Retention on Refundable Deposits: Previously, accommodation payments were fully refundable. Under the new system, up to 10% can be retained over five years.

• Interest on Outstanding Balances: Interest rates on unpaid room costs will no longer be locked in and will rise with inflation every six months.

• New Daily Fees: While the basic daily fee remains at 85% of the age pension, new fees include:

  • A Hotelling Contribution of up to $12.55/day

  • A Non-Clinical Care Contribution of up to $101.16/day, capped at $130,000 or four years of payments.

  • A Higher Everyday Living Fee, replacing existing additional service charges.

    
    

Home Care Is Changing Too

Home care will be restructured under a new Support at Home Program, with ten levels of care and clearer distinctions between types of services. While clinical care remains government-funded, recipients will now contribute to:

• Independence support (e.g., transport, personal care)

• Everyday living expenses (e.g., cleaning, meals, gardening)

Income testing will be central to determining how much users contribute, and full pricing details are expected later in the year.

Who’s Affected?

The new rules apply to those entering aged care or home care after 1 November 2024. Importantly, existing aged care residents will not be worse off — transitional arrangements (known as "grandfathering") are in place to protect current users.

Why You Should Consider Financial Advice

With new fees, variable interest rates, and complex income assessments, navigating aged care costs can be overwhelming. Yet, making the wrong decisions — like selling the family home too early, misjudging pension impacts, or mismanaging cash flow — can result in thousands of dollars lost.

This is where a qualified financial adviser can help.

An experienced, accredited aged care adviser can:

• Clarify the new rules and how they apply to your personal situation

• Help structure your finances to reduce out-of-pocket costs

• Maximise government entitlements and aged pension benefits

• Provide peace of mind during a highly emotional and uncertain time

Source: Financial Advice Association Australia (FAAA).