Australia’s residential aged care model has undergone a sweeping transformation, with new fee structures and funding mechanisms introduced for all new entrants as of this month. While existing residents remain under previous arrangements, self-funded retirees entering care after 1 November may face an additional financial burden of up to $50,000 annually, according to Clarity Aged Care Advisors.
The move, described as a “once-in-a-generation” reform by Health Minister Mark Butler, aims to address mounting operational challenges in an industry grappling with rising costs, underfunded services, and a rapidly ageing population. Although designed to improve sustainability, the shift has prompted serious concern among prospective residents and their families.
New Rules Shift Cost Burden to Those with Means
The recent reforms introduce several changes affecting how accommodation and living costs are calculated and collected. For incoming residents, Refundable Accommodation Deposits (RADs), previously returned in full upon leaving care, will now be reduced by 2% per year for up to five years, effectively lowering the amount refunded to residents or their estates.
Meanwhile, Daily Accommodation Payments (DAPs) will now be indexed twice yearly to inflation, rather than remaining fixed at the time of admission. This change introduces future uncertainty for residents planning long-term stays.
The government has also restructured the hotelling supplement, which covers daily services like catering and cleaning. This cost, previously subsidised, will now be means-tested, with residents potentially contributing up to $22.15 per day, depending on their financial situation.
A further shift is the replacement of the current means-tested care fee with the new Non-Clinical Care Contribution (NCCC). Unlike the previous system, which had an annual cap of $34,311 and a lifetime cap of $82,347, the NCCC will impose no annual cap and sets a higher lifetime maximum of $135,318.69. Some residents could now face non-clinical care costs of over $100 per day, although clinical care will remain fully government-funded.
These changes do not apply to residents who entered care before 1 November, whose arrangements have been grandfathered.
Industry Seeks Viability, Residents Urged to Plan Ahead
The reforms follow widespread concern that Australia’s aged care sector is on an unsustainable trajectory. With more than 233,000 residential care beds currently in use and projections indicating a need for 400,000 by 2043, aged care providers have warned of declining profitability and limited incentive to expand capacity.
“It’s not a profitable industry,” said Michael Horin, principal at Clarity Aged Care Advisors, speaking to Yahoo Finance. “There’s no reason for a provider to create more beds, because it doesn’t actually make money.” Horin explained that although the government will increase funding, families and residents are now expected to shoulder more of the financial load.
Occupancy rates currently hover around 95%, making it harder than ever to secure a place, especially in high-demand regions. As such, experts are encouraging Australians to prepare early for future care needs and understand how the revised system could affect their finances. Start planning “as soon as you see the writing on the wall,” Horin advised. “Super was bought in for spending like this.”
While the changes may feel abrupt, they are part of a broader push to balance care quality with economic reality. The message from providers is clear: without these contributions, the system risks becoming unsustainable, and for many retirees, that may mean budgeting differently for their final years.
