New Act 2025
Australia’s New Aged Care Act 2025 – Key Changes & What It Means for You
Reason For These Changes
The Australian Government is developing a new Aged Care Act to take effect from 1 November 2025 that will replace the existing 1997 Aged Care Act.
The predominant reason for the change centres around the fact that in FY23 almost 50% of Residential Aged Care providers were operating at a loss. Given that the number of aged care beds needed in Australia is projected to increase over 400% from 180,000 today to over 750,000 in 2050, the government is attempting to encourage more facilities to be built to meet the growing demand.
As a result, those who enter care after November 1, 2025 will be paying more for their care than those who enter before the deadline. Specialised aged care advisors can assist you in understanding what the difference in cost will be for your specific circumstances.
Key Changes in Aged Care Fees & Charges
| Fee Type | Current Rules | Proposed New Rules |
|---|---|---|
| Refundable Accommodation Deposit (RAD) | The lump sum RAD paid is entirely refundable when the resident leaves the facility | Providers must retain 2% of the RAD per year for a maximum of 5 years (total of 10% retained) |
| Daily Accommodation Payment (DAP) | The interest rate charged on the unpaid RAD is locked in at time of entering permanent care | The interest rate will be indexed with CPI twice per year |
| Basic Daily Care Fee | Set at 85% of the full pension amount and payable by all residents | Unchanged |
| Hotelling Supplement | Entirely paid by the government | Currently set at a maximum of $22.15 a day This fee will be means tested so residents will pay none, some or all of it with the Government paying the balance |
| Extra Services Fee | A daily fee set by the aged care facility for additional services provided on top of care needs such as Foxtel, WiFi, newspapers etc. Agreed upon before entering care, can be negotiated and reviewed throughout the resident’s life | To be replaced by the Higher Everyday Living Fee (HELF). To be negotiated by the facility and resident only AFTER the resident has moved into care. There will be a cooling off period and regular review opportunities. This fee will be indexed with CPI |
| Means Tested Fee | Charged by the government (via the aged facility) to compensate them for their contribution. Assessed on assets and income up to a maximum fee of ~$422 per day. Annual cap of $34,311 and lifetime cap of $82,347 that would be reached after 2.5 years. Annual/lifetime cap usually reached by residents with assets above $2M | Replaced by Non-Clinical Care Contribution (NCCC). All clinical care costs to be paid by the government. NCCC is a means tested fee capped at a daily rate of $101.16 per day. No annual cap, only a lifetime cap that has increased to $130k and will be reached after 3.5 years. Lifetime cap likely reached by residents with assets above $500k |
Who Will Be Most Impacted by the 2025 Aged Care Act?
- All residents who are in care, or enter care before November 1, 2025, will be grandfathered into the current system
- It is estimated that 50% of residents will pay more for care than they would have previously, broken down as follows:
- No ‘low means’ residents will contribute more
- 30% of full pensioners will contribute more
- 75% of part pensioners will contribute more
- 100% of self-funded retirees will contribute more
- The government will still cover an average of 73% of the cost of residential care on average
Other Changes to Aged Care Costs
- The previous RAD limit of $550k that facilities could price rooms at without needing government approval is increasing to $750k
- RADs paid will still be exempt from pension calculations
- RADs will remain government guaranteed
- Residents will need to factor in CPI increases to the amount they will need to pay for aged care
- The value of the principal place of residence will remain capped (around $200k)
- All protected person rules for the home will still apply
- The fee for low means rooms will be reviewed over the next 2 years to make them more affordable for aged care facilities
Key Implications
- Overall, those who can afford it will need to pay more for their aged care
- There may be no need for high-net-worth individuals to declare their finances to Centrelink due to the reduced maximum daily rate payable
- The fact that extra services cannot be guaranteed before moving into care may lead to higher RADs
- As we get closer to 1 November 2025, it is particularly worthwhile seeking advice to understand if moving before the changes take effect will save residents money
What Should I Do Next?
Whilst the changes will make aged care in Australia more sustainable, they also adds complexity to the decision making process by adding additional factors for consideration. Ultimately, now more than ever, obtaining appropriate aged care advice before moving into care is critical.For personalised aged care advice or planning, Contact Us.