Paying for an aged care home: fees, the room price and your choices

Paying for an aged care home can look complicated, but it comes down to two things. First, fees and contributions for daily living and care. Second, the cost of the room, called accommodation costs.

The rules changed when the Aged Care Act 2024 started on 1 November 2025. This guide covers the arrangements for most people entering an aged care home from that date. People who moved in on or before 31 October 2025 generally keep their old arrangements unless they choose to switch. People who had a Home Care Package, or were approved and waiting for one, on or before 12 September 2024 are protected by a “no worse off” rule and pay under the older arrangements.

Under the new arrangements, the government fully funds clinical care, such as nursing and wound care. What you pay goes towards everyday living, non-clinical care such as help with bathing, and the room.

Many of the amounts are indexed (updated) during the year, so this guide describes how they work rather than quoting figures. My Aged Care publishes the current amounts, and its aged care home fee estimator gives a personal estimate.

A means assessment looks at your income and assets and works out how much you contribute and how much the government pays. For most people it’s done by Services Australia, or by the Department of Veterans’ Affairs for people on a DVA means-tested payment.

If you get a pension, much of the information is already held. If you own a home, you’ll also need to fill in a form with property details (SA485). If you don’t get a means-tested payment, you’ll need the full means assessment form (SA457). Doing an assessment isn’t compulsory, but without one you can be asked to pay the maximum. For couples, half of your combined income and assets is counted for each partner, and you can still be treated as a couple when living apart for health reasons.

Afterwards, Services Australia sends a fee advice letter setting out what you can be asked to pay. You can get assessed before choosing a home; the letter is valid for 120 days. Changes in circumstances, such as selling a home, must be reported. If you disagree with the result, you can ask for a review. Services Australia’s aged care line is 1800 227 475.

Everyone pays the basic daily fee, whatever their means. It covers daily living services such as meals, cleaning, laundry and utilities. It’s set at 85% of the single basic Age Pension and goes up in March and September each year. It applies every day you’re a resident, including days away, such as in hospital.

Some people also pay a hotelling contribution towards those same services. The government pays the home a hotelling supplement, and the means assessment decides whether you contribute part or all of it. If your means are below the thresholds, the government pays it all.

Some homes offer higher everyday living services for an extra fee, such as Wi-Fi, a term of yoga classes, a haircut or a coffee at an on-site café. This fee is optional. It can’t be agreed or charged before you move in, and it can’t be a condition of entry or used to secure a room. Services planned in advance need a written agreement listing each service and its cost, there’s a 28-day cooling-off period after signing, and the agreement must be reviewed at least once a year. A one-off extra, like that café coffee, can be agreed on the spot.

If the means assessment means you pay the full hotelling contribution, you may also be asked to pay a non-clinical care contribution. This goes towards care such as help with bathing, moving around, and lifestyle activities. It has a daily cap.

There’s also a lifetime cap. You stop paying the non-clinical care contribution once your total contributions reach the cap, or after four years of contributions, whichever comes first. Contributions paid for help at home under the Support at Home program also count towards the same lifetime cap.

Clinical care, such as nursing, has no contribution under the new arrangements.

Each home publishes its maximum room prices on My Aged Care. You can negotiate a lower price, but you can’t be charged more than the published price. Above a government-set amount, a home needs approval from the national aged care pricing authority to charge more. You agree the room price in writing, in an accommodation agreement, before you move in.

If your means assessment says you pay the room price, there are three ways to pay it, and the choice is yours:

• A refundable accommodation deposit (RAD): a lump sum. The balance is refunded when you leave, less any amounts deducted from it.
• A daily accommodation payment (DAP): works like rent and isn’t refunded. It’s the room price multiplied by a government-set interest rate (the maximum permissible interest rate, or MPIR), divided by 365. The rate that applies is fixed on the day you agree the price. For people entering from 1 November 2025, the DAP goes up twice a year with indexation.
• A mix of both: part lump sum, with a smaller daily payment for the rest. You can split it any way you like, and you can ask the home to take the daily payment out of the lump sum.

Nobody can ask you to choose a payment method, or pay accommodation costs, before you move in. Until you pay a lump sum, you pay daily. A lump sum, in full or in part, can be paid any time after you move in and your means assessment is finalised. There’s no 28-day deadline for people entering from 1 November 2025.

For people entering from 1 November 2025, the home must keep part of any lump sum, called RAD retention. It’s worked out daily at 2% a year of the balance, deducted at least every three months but no more than once a month. It stops after five years from when the lump sum was first paid, and the retained amounts aren’t refunded. The home can’t ask you to top up the lump sum, or pay a higher daily amount, to make up for retention. As a rough example, on a $500,000 lump sum, retention would be a little under $10,000 in the first year.

A lump sum counts as an asset in the aged care means assessment, even if family paid it. For the Age Pension, a refundable deposit is generally not counted as an asset. The two tests work differently, which is one reason the choice of how to pay can affect both fees and pension.

If your income and assets are below set amounts, the government pays some or all of your room costs. You may be asked to pay an accommodation contribution towards the rest, as a daily amount, a lump sum or a mix. Services Australia works out the amount. If both income and assets are below lower set amounts, the government pays the full room cost.

Whether you count as having lower means is decided on the day you enter care, and it doesn’t change while you stay in the same home, even if your money changes later. Your other contributions can still change.

If you can’t afford your fees for reasons beyond your control, you can apply to Services Australia for financial hardship assistance. It can help with the basic daily fee, the hotelling and non-clinical care contributions, and accommodation costs, but not with higher everyday living fees.

If you keep your home, its value counts in the aged care means assessment only up to a capped amount, or its net value if lower. For couples, each partner is treated as owning half. The home isn’t counted at all while a “protected person” lives there: your partner or dependent child; a carer eligible for an income support payment who has lived there with you for at least 2 years; or a close relative eligible for an income support payment who has lived there with you for at least 5 years. If the home is rented out, the net rent counts as income.

The Age Pension treats the home differently. It’s generally not counted for 2 years after you move into care. If your partner still lives there, it isn’t counted while they do, and the 2 years start only when they leave. After that it counts as an asset. Rent from it counts as income. Our guide to what happens to the family home explains the choices in more detail.

This is where free, expert help pays off. The Financial Information Service at Services Australia is free for everyone: call 132 300 and say “Financial Information Service”. My Aged Care’s fee estimator gives a personal estimate. For advice on your own situation, a licensed financial adviser who specialises in aged care can help; check they’re on the Financial Advisers Register on Moneysmart. The Older Persons Advocacy Network (1800 700 600) can help if you feel pressured.