Relocating a beloved family member into a residential aged care home can be a stressful endeavour, especially when it comes to calculating the costs. While the government subsidises much of the cost, your contribution depends on your unique situation (how much care you need, your finances, etc.).
This article explains the basics of aged care, the maximum costs under the new rules, and which services affect your fees.
What Affects the Cost of Aged Care?
Even though the Australian Government subsidises the cost of aged care in many cases, you may be expected to contribute depending on your financial situation. For example, if you have savings, assets, and a generous pension, you may not have access to all government subsidies.
Factors that affect your contribution include:
- The services you require.
- Your financial status (income and assets)
- Where you receive care (at home or in an aged care home)
- The fees charged by your care provider.
The government sets maximum limits on the fees a provider can charge, ensuring you are never unable to pay for the basic care you require.
Key Fees & Changes from 1st April 2026
- All residents pay a basic daily fee for daily living services (meals, cleaning, laundry, utilities).
- Maximum basic daily fee: $66.80 per day (as of March 2026), calculated as 85% of the full single age pension. This amount is indexed in March and September each year.
All residents may be asked to pay for accommodation, depending on their means. The amount is negotiated with the provider and may be subsidised by the government for low-means residents.
Accommodation costs in residential aged care can be paid in three ways:
- A lump sum called a Refundable Accommodation Deposit (RAD)
- A Daily Accommodation Payment (DAP)
- A combination of both
Refundable Accommodation Deposit (RAD) Retention
- From 1 November 2025, providers will deduct a retention amount from the RAD for new residents.
- The retention is 2% per annum, calculated daily and deducted monthly, for a maximum of 5 years (total retention capped at 10% of the initial RAD).
- For example, if the RAD is $500,000, up to $50,000 may be retained over five years.
- The remaining balance of the RAD is refunded to the resident or their estate when they leave care.
- This retention only applies to residents entering care on or after 1 November 2025, or those who opt into the new arrangements.
Daily Accommodation Payment (DAP) and Indexation
- The DAP is a non-refundable daily payment, calculated on any unpaid portion of the RAD.
- From 1 November 2025, DAPs will be indexed twice a year (on 20 March and 20 September) in line with the Consumer Price Index (CPI).
- This means your DAP may increase over time to keep up with inflation.
- DAP indexation applies only to residents on the new (post-1 November 2025) arrangements.
Choosing Between RAD and DAP
- You can pay all as a RAD, all as a DAP, or a mix (e.g., pay half as a RAD and the rest as a DAP).
- The RAD is partially refundable (minus retention), while the DAP is not refundable.
- The choice depends on your financial situation and preferences.
- For personal care (bathing, mobility, lifestyle activities). Means-tested and capped.
- Low-means residents (full pensioners with income below $34,762 and assets below $63,000) will not pay these new means-tested fees; the government covers their care costs. They continue to pay only the basic daily fee.
- Capped at $107.32 per day, with a lifetime cap of $137,917.01 (or after four years, whichever comes first). Fees paid under the Support at Home program count toward this cap.
- Clinical care (nursing, physiotherapy, medication management) is now fully subsidised for all residents—no matter your income or assets.
- Means-tested care fee (for residents under the old system): Annual cap of $35,910.43 and lifetime cap of $86,185.23. These caps remain for residents who entered care before 1 November 2025.
For daily living services (meals, cleaning, laundry). Means-tested and capped at $22.15 per day.
