The Shared Funding Model: Government and Resident Contributions
In Australia, aged care funding is a collaborative effort between the government and individuals receiving care. This approach aims to provide accessible, high-quality care while requiring those with greater financial capacity to contribute more to their costs. Permanent residential care funding primarily involves a basic daily fee, a means-tested care fee, and accommodation costs. The government allocates funds directly to approved aged care providers, while residents are responsible for paying their portion to the facility.
The Australian Government's Role: Subsidies and Supplements
The Australian Government is the main source of aged care funding, utilizing a model that adjusts based on individual care needs. The Australian National Aged Care Classification (AN-ACC) model has been the primary funding tool for residential care since October 2022.
The AN-ACC Funding Model
The AN-ACC model distributes funding according to a resident's assessed care needs. Funding components include:
- Base Care Tariff (BCT): Offers fixed daily funding based on facility characteristics like location and specialisation.
- AN-ACC Classification Subsidy: A variable amount determined by an independent assessment of a resident's individual care needs, categorised into 13 funding classes.
- Other Supplements: Additional government support for specific needs such as palliative care, dementia support, and respite care.
Resident Contributions: Fees and Payments
Resident contributions to aged care costs are determined by a financial means test, ensuring contributions align with financial capacity.
- Basic Daily Fee (BDF): A mandatory fee covering daily services like meals and cleaning, set at 85% of the basic single Age Pension and updated biannually.
- Means Tested Care Fee (MTCF): An extra fee for personal and clinical care, applicable to individuals with income and assets exceeding certain levels. The amount is based on the means assessment and subject to annual and lifetime limits.
- Accommodation Costs: Covers the resident's room and is also means-tested. The government may cover full, partial, or none of this cost depending on the financial assessment. Payments can be a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination.
The Financial Assessment Process
A financial assessment, conducted by Services Australia, is required before accessing government-subsidised aged care. This Income and Assets Assessment determines the resident's contribution level. Low-means individuals receive greater government support, including for accommodation.
Upcoming Changes in November 2025
Major reforms are scheduled for 1 November 2025 under the new Aged Care Act. These changes will affect funding and fee calculations, particularly for new residents.
- Means-Tested Hotelling Contribution: The Hotelling Supplement for daily living costs will be means-tested for new residents, requiring contributions from those who can afford it.
- Non-Clinical Care Contribution (NCCC): A new means-tested contribution for non-clinical care services will be introduced. Clinical care costs will be fully government-funded. The NCCC has a lifetime cap.
- No Worse Off Principle: Existing residents and those on the waitlist by 12 September 2024 will not face higher costs under the new system.
Comparison Table: Government vs. Resident Contributions
The following table illustrates the division of funding responsibilities between the government and residents for various aspects of residential aged care.
| Feature | Government Funding | Resident Contribution | Calculation Basis | Indexed | Subject to caps |
|---|---|---|---|---|---|
| Core Care Costs | AN-ACC Subsidies (clinical and non-clinical) | Means Tested Care Fee (MTCF) | Assessed care needs (AN-ACC), Resident's income and assets | Yes (AN-ACC price), Yes (MTCF) | Yes (MTCF) |
| Daily Living Costs | Hotelling Supplement (means-tested from Nov 2025) | Basic Daily Fee (BDF), Hotelling Contribution (from Nov 2025) | Facility characteristics (BCT), 85% of Age Pension, Resident's income and assets | Yes (BCT price), Yes (Pension increases), Yes (Hotelling thresholds) | No (BDF), Yes (Hotelling contribution) |
| Accommodation Costs | Accommodation Supplement | Accommodation Payment (RAD/DAP) or Contribution | Resident's income and assets | Yes | No |
| Extra Services | None | Extra Service Fee | Provider determined | No | No |
Navigating the Aged Care Funding System
Understanding aged care funding can be intricate. The My Aged Care website is a key resource for information, fee estimators, and details on financial hardship assistance [https://www.myagedcare.gov.au/]. Seeking independent financial advice is also advisable to understand personal financial implications on aged care fees.
Conclusion
Australian aged care facility funding is a joint effort between the government and residents, utilizing a needs-based and means-tested system. This model ensures access to quality care, with government subsidies covering costs for those unable to pay the full amount. Pending reforms in November 2025 aim to refine the system, particularly regarding responsibility for different care costs, in response to the needs of an ageing population.
