Big changes are on the way for aged care in Australia, set to reshape both the costs and the care available to you. It all begins on 1 January 2025 with changes to the maximum Refundable Accommodation Deposit (RAD), setting the stage for broader reforms taking effect from 1 Novmeber 2025. These reforms aim to deliver better care and accountability but will also introduce new fees and changes to how costs are calculated.
Maybe you’ve heard about these changes, or maybe this is all news to you but either way, it’s important to have a clear understanding of what’s coming. These updates will impact everything from residential care fees to in-home support, so staying informed now can help you make better decisions for yourself or your loved ones.
Let’s break down what’s changing, how it might impact you or your loved ones, and what steps you can take to prepare.
How the RAD Cap Will Shift Starting January 1st?
From 1 January 2025, the Refundable Accommodation Deposit (RAD) cap will rise from $550,000 to $750,000. This change allows aged care providers to charge higher upfront accommodation fees without requiring government approval.
What It Means for You?
- Expect Higher Costs
Starting 1 January 2025, the Refundable Accommodation Deposit (RAD) cap will rise from $550,000 to $750,000. This change allows aged care providers to charge higher upfront accommodation fees without requiring government approval.
- Impact on Daily Payments
Even if you choose not to pay the RAD as a lump sum, the change will still affect you if you opt for Daily Accommodation Payments (DAP). DAP is essentially interest charged on any unpaid RAD, and with current rates at 8.43% annually, higher RAD prices mean higher daily costs.
For example:
- At today’s RAD price of $550,000, the daily cost is around $127 per day.
- After the price rises to $750,000, this cost would increase to $173 per day, leading to an additional $16,790 per year in daily fees.
Whether you’re considering a lump sum or daily payments, it’s important to understand how these changes might affect you. Planning ahead and seeking advice from an aged care expert can help you make the best decision and potentially save significantly.
Cost of Residential Aged Care: What’s New?
1. Rise in Basic Daily Care Fees with the Introduction of the Hotelling Supplement Contribution (HSC)
- Residents with assessable assets exceeding $238,000 or a combination of assessable income of more than $95,400 will pay an additional fee, the HSC.
- The HSC is calculated as 7.8% of assessable assets above $238,000 or 50% of assessable income exceeding the relevant threshold. This can add up to a maximum of $22.15 per day (indexed).
- Residents with assets above $290,453 will pay the maximum HSC, on top of the existing Basic Daily Care Fee (BDCF) of $63.57 per day.
2. Replacement of the Means-Tested Care Fee (MTCF) with the New Non-Clinical Care Contribution (NCCC)
The current MTCF will be replaced by the NCCC, a new means-tested fee designed to simplify contributions.
- Under the NCCC:
- A person with assets exceeding $502,981 or income above $131,279 will pay a daily fee up to $107.32 and a lifetime maximum of $137,917.01.
- The NCCC eliminates the annual cap based on amounts paid, replacing it with a cap based on the length of stay (4 years or more) or the cumulative fee paid overtime, whichever comes first.
- Under the new rules anyone with assets (including the RAD) over $975,061 are liable for the maximum daily rate of the NCCC. Previously this amount was approximately $2,000,000 in assets before you met the annual cap.
3. Higher Everyday Living Fee (HELF)
The Higher Everyday Living Fee (HELF) will replace the current Additional Services and Extra Services fees, introducing a new framework for accessing optional, enhanced services in aged care. This is designed to give residents greater choice and control, allowing them to opt into additional services beyond the standard care.
Extra services fees have long been a point of contention with residents as they are a mandatory fee paid by all residents in Extra Services facilities, meaning the HELF is a change for the better.
4. Accommodation Payment Retention Amount & Interest Changes
Facilities will now retain 2% per annum of any lump sum payments made towards a resident’s accommodation costs for a maximum of 5 years/10% in total. This will be calculated on a daily basis.
Residents will no longer lock in their Maximum Permissible Interest Rate (MPIR) on entry, this will now increase in line with CPI twice per year from 1 July 2025. This will affect residents who have not fully paid their accommodation costs.
New Home Care Program
From 1 Nov 2025, the aged care system will introduce the Support at Home Program, a comprehensive replacement for the current Home Care Packages with the introduction of eight ongoing care classifications (replacing the current Level 1 – 4 system) and two short term care programs – the restorative care pathway and end-of-life care pathway.
This new scheme is designed to help more Australians live independently in their homes for longer, offering tailored support services across three key categories:
- Clinical Care
Essential medical services like nursing, physiotherapy, and occupational therapy will be 100% government-funded, ensuring everyone has access to necessary healthcare at home. - Independence Support
Services such as personal care, taking medication, transport, and social interaction.
- Everyday Living Assistance
Practical support for daily tasks, including cleaning, meal delivery, gardening, and home maintenance, will be available to enhance convenience and comfort.
Key Changes to Home Care Fees
Means-Tested Contributions:
Contributions will now vary based on income and assets, replacing the current basic daily fee and some income-tested fees.
Automatic Transition and Protections
If you’re currently receiving a Home Care Package or are on the National Priority System, you’ll automatically transition to the Support at Home Program. A ‘no worse off’ principle will protect individuals already receiving care as of 12 September 2024, ensuring their fees remain the same or decrease under the new scheme.
Plan Ahead for 2025 and Beyond
With the significant changes coming to aged care, it’s natural to feel unsure about where to start or how to make the best decision. The question of whether to act now or wait until after changes is on many minds.
The upcoming reforms aim to improve the quality and sustainability of aged care, but they also come with increased financial responsibilities for many families. From higher accommodation fees to new contributions for daily care, these changes will affect both residential and in-home care costs.
To navigate this evolving landscape, it’s essential to take proactive steps. Start by assessing the level of care you or your loved one might need, whether it’s residential aged care or in-home support. Familiarise yourself with the current fee structures and compare them to what’s coming. Most importantly, seek guidance from an experienced advisor who can help you understand your options and create a plan tailored to your unique situation.
How Yield Advisors Can Help You?
At Yield, we understand that aged care decisions are deeply personal, and every journey is different. That’s why we take the time to really get to know you, your needs, your concerns, and your goals.
Aged care is just one part of the bigger picture, and we carefully consider how your decisions impact your overall financial wellbeing. From preparing for the transition to managing your financials once you’re in care, we’re with you every step of the way, helping you feel confident and secure about the future.
If you’re feeling unsure about how these changes might affect you or a loved one, connect with an experienced aged care advisor today. We take the time to listen and work with you to find the right solution for your unique situation.
