Aged Care Reforms: What They Mean for New Residents from November 2025

Last year, new Aged Care legislation was enacted aiming to improve aged care quality and sustainability. The changes were originally set for 1 July 2025 but will now start on 1 November 2025. Here’s a look at the main changes and what they mean for older Australians. 

The reforms aim to strengthen the aged care system through increased government funding, while also requiring residents with the financial means to contribute more towards non-clinical costs such as accommodation and daily living expenses. 

Aged care fees can be split into two categories: accommodation payments and ongoing fees.

Accommodation payments are typically paid in the form of a refundable lump sum called a Refundable Accommodation Deposit (RAD). The RAD is generally refunded upon leaving the aged care facility. If the resident does not pay the RAD in full, the facility may ask the resident to pay a Daily Accommodation Payment (DAP), calculated using a government set interest rate applied to the advertised RAD amount. People on lower means may not have to pay these fees but instead have similar lump sum or daily payment options based on their means.

Ongoing fees cover daily care and living expenses. All residents are required to pay a basic daily care fee, which is currently set at $63.82 per day or $23,294 per year. It is equivalent to 85% of the single person basic age pension. This fee will remain unchanged under the new reforms. 

Residents with higher means may be asked to pay a means-tested care fee. This fee will be replaced by the Non-Clinical Care Contribution from November 2025.

Accommodation payments:

• Retention amount: Starting from November 2025, providers can keep 2% per year of lump-sum accommodation payments (Refundable Accommodation Deposits, or RADs) for up to five years from when it was paid.
• Indexed Daily Accommodation Payments: Daily Accommodation Payments (DAPs) for new residents will rise with inflation twice yearly, unlike the current fixed rates. This means that if a RAD is not paid and the resident has to pay a DAP, the amount of this DAP may change every six months.

Ongoing fees:

• Basic daily care fee: This existing fee will remain unchanged.
• Hotelling contribution: From November 2025, new residents may pay up to $12.55 per day or $4,580.75 yearly for living costs (e.g., meals, laundry), based on their means. Low-income residents are exempt.
• Non-clinical care contribution: A new fee, replacing the means-tested care fee, could reach $101.16 per day or $36,923.40 yearly for non-clinical care (such as mobility support, bathing, etc). A $130,000 lifetime cap applies, including prior home care contributions.
• Higher everyday living fee: Replaces extra service fees, allowing residents to opt for additional services with consumer protections like cooling-off periods.

From November 2025, the means test used to determine how much residents contribute will change, with updated income and asset thresholds. Low-means residents won’t face higher accommodation contributions than standard payments. Current residents are protected under a “no worse off” rule, keeping their fees unchanged unless they opt into new rules.

These changes may mean higher costs for people entering aged care from November 2025. If you or a loved one are thinking about entering aged care, give us a call to discuss how you can plan around meeting these expenses.

In any of these scenarios we are here to help – as this is a matter which clearly requires the expertise of a tax professional. Email us at [email protected] or call us on (08) 7078 3505