Changes in Aged Care are coming – Will Aged Care Cost More? 

If you’re part of the ‘sandwich generation,’ juggling the care of ageing parents and your own family, you’re not alone. Many families are unprepared for the practicalities and emotions of aged care. While the emotional toll is significant, navigating the financial side—is key to reducing stress and making informed decisions. 

After a long wait and much speculation, the full Aged Care Bill was tabled by the Albanese government in Parliament on 12 September 2024, with support from the coalition. The changes will impact the provision of both home care and residential care.  

While some people will see their fees increase, the good news is that aged care remains heavily subsidised. Fees will continue to be based on an individual’s financial situation to help maintain affordability. 

Here’s what we know so far:

• The government will continue to cover 73% of the cost of residential care and 89% of the cost of home care. 

• These changes are designed to improve aged care quality and help providers meet growing demand. 

• Most changes will only apply to people starting home care or entering residential care from 1 July 2025. 

Proposed residential care changes 

1. Room Price Cap: From 1 January 2025, some room prices might start to rise. Providers who want to charge more than $550,000 currently need approval, but this cap will increase to $750,000, making it easier for providers to increase prices.
2. RAD retention amount: Individuals can pay for their room with a lump sum (Refundable Accommodation Deposit or RAD) or as a daily fee. Currently, RADs are fully refundable when you leave care, but from 1 July 2025, up to 10% of the RAD paid could be lost.
3. Indexing rent: If you choose to pay a daily fee instead of a lump sum, this “rent” (called the Daily Accommodation Payment or DAP) will be indexed over time, meaning the amount could increase over time.
4. Living expenses: Depending on your loved ones’ financial situation, their contribution to daily expenses like food, laundry, and electricity could rise by up to $12.55 per day. Some providers may charge more for higher standards or quality, so it’s important to check prices before deciding where to live.
5. Care expenses: Depending on your loved one’s finances, they may be asked to contribute more to care costs, including services like entertainment, bathing, and mobility assistance. The government will still cover most care costs, but a portion could go up by around $10 per day, with the lifetime cap rising from approximately $80,000 to $130,000.
6. Assessment of family home: No changes are planned for how their home is assessed when determining what individuals can afford to pay. If a spouse or “protected person” lives there, it remains exempt; otherwise, only approximately $208,000 of its value (indexed) will be included in financial assessments. 

Proposed home care changes 

1. New Support at Home program: A new program will combine the current home care options into 10 levels of care packages to better meet individuals’ specific needs
2. Higher contribution fees: While the government will fully cover clinical care (up to the available budget of your care package), individuals may have to pay more for services like cleaning and gardening
3. Means-testing: Your contributions to home care will now become means-tested, picking up assets as well as income, bringing them more in line with typical Centrelink means-testing practices. 

Who will be impacted the most by these changes? 

The higher costs will mostly impact self-funded retirees and some part-pensioners. However, many could face higher costs (and more significant decisions), making it essential to choose care providers carefully and understand accommodation costs.  

Need aged care soon? Get started early 

These changes are just around the corner; they could mean significantly higher costs for many. Seeking professional advice is paramount, especially if you or your loved ones may need aged care soon. Comprehensive advice received early will help you navigate and understand the complexities of the upcoming changes and ensure you’re making informed decisions appropriate for your or your loved-one’s personal and financial position. 

How Can Morrows Help?

At Morrows, our experienced aged care financial specialists will work closely with you to understand your unique situation and help you create a plan for accessing care for you or your loved ones—while protecting your financial future. Please contact us today at 9690 5700 to speak to our aged care advisors and start planning with confidence. 

IMPORTANT INFORMATION: The information is general only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness of your personal investment objectives, financial situation or individual needs. We recommend you speak to your financial adviser, registered tax agent or legal adviser before making any decisions based on this information.