Residential Aged Care reforms from November 2025

Recently the Government announced a delay to the implementation of major residential aged care funding reforms that were due to commence in July 2025. The changes will now take place from November 2025, to give the aged care sector more time to implement the changes.  

However, there is also more time for the individual and their families to plan for these significant changes, as the costs for care is changing and in most cases, more expensive. 

In this article we can show you a breakdown of the aged care fees, what’s changing and also to provide a before and after cost comparison. 

 What’s changing?

The key change is that new residents entering care from 1 November 2025 will face a new schedule of fees. However, those already in care before this date will be “grandfathered”, meaning they retain their existing rules for care fees, and in most cases more favourable rules.  

There are other grandfathering arrangements in place for people approved in home care packages prior to 12 September 2024.   

1. New RAD rules

When entering Aged Care you will need to agree on an accommodation payment being a Refundable Accommodation Deposit (RAD), or you can pay a Daily Accommodation Payment (DAP), which is a non-refundable daily payment, or you do a combination of both.  

Whether or not you need to pay the agreed amount will depend on your financial means assessment. 

Currently the RAD is fully refundable, but from November, aged care providers will be allowed to retain up to 2% per annum of the Refundable Accommodation Deposit (RAD), capped at 10% over five years. 

 2. Hotelling supplement contribution (HSC)

For all care recipients there is a basic daily fee to cover the day to day costs, and this is not changing.  

However, there is the introduction of the Hotelling Supplement which is a new means-tested fee of up to $4,580 per year, for everyday living costs such as meals, cleaning, and entertainment.   

 3. Non-Clinical Care Contribution (NCCC)

The Non-Clinical Care Contribution replaces the current Means-Tested Care Fee. This NCCC will cover personal services like mobility assistance, bathing and lifestyle activities. This fee, just like the hotelling supplement, depends on the resident’s assessable assets and income.

This following table provides a good summary of the ongoing costs for a single person and we have assumed all of the assets are held as financial investments (i.e. superannuation / bank savings).

For someone holding $250,000 in financial assets, they can expect to pay total ongoing fees of $24,142 per annum, whereas someone holding $1,000,000 or more in financial assets would pay $64,707 per annum.

Aged Care example

Lastly, let’s take a look at example to illustrate the difference in aged care fees for a single pensioner who:

• Holds a Refundable Accommodation Deposit (RAD) for $550,000
• Has $700,000 in financial assets (super / bank savings/ term deposit)
• Receives part Age Pension of $19,302 per annum

Here, we can see that the ongoing aged care fees for someone entering care before 1 November is $41,238 over the course of one year and $34,469 less expensive compared to someone being captured under the new rules from 1 November 2025.

Summary

These reforms were introduced to improve the quality of aged care and the ongoing viability of the aged care sector, considering the current system is under pressure and with increasing operational costs. However, they also signal higher costs for future residents, especially those with moderate to high assets.

With aged care planning, there is still a sense of confusion and complexity for many Australian families when it comes to navigating the options in the decision making process. The key considerations may include:

• Whether to sell, retain or rent the family home
• Take a look at the resulting Age Pension entitlements
• Selecting the right facility to suit care requirements and location to supporting family members
• And lastly to selecting the right Strategies to pay the Refundable Accommodation Deposit if required

 The financial planning process would help identify the cash flow outcomes for the different options, and plan a financial strategy to cover the deposit and ongoing fees, all while optimising any Age Pension assessment.

Shaun Jones MAppFin (FP) 
Financial Planner at About Retirement