The Core of Australian Aged Care Funding
The funding model for aged care in Australia is a shared responsibility between the government and the individual seeking care. The government pays a subsidy to aged care providers on behalf of the resident, while the resident contributes to the costs based on their financial situation. The assessment of a person's financial situation is a key step in determining their individual contribution.
The specific fees vary depending on the type of care, whether it is delivered in a residential aged care home or in your own home through a Home Care Package. It is important to have a clear understanding of these financial structures to make informed decisions about your future care. Government resources like the My Aged Care website and financial hardship assistance programs are designed to provide support and information throughout this process.
How Residential Aged Care is Paid For
Residential aged care fees generally consist of three main components. These fees contribute to the overall costs of living and care in a residential facility.
- Basic Daily Fee: This is a standard, non-means-tested amount that every resident pays for day-to-day living costs. It covers basic services such as meals, cleaning, and laundry. As of late 2025, this fee was set at 85% of the single Age Pension, and it is indexed twice a year.
- Means-Tested Care Fee: This is an additional contribution towards the cost of personal and clinical care, determined by a financial assessment of your income and assets. Your individual fee can be between $0 and a daily maximum, and annual and lifetime caps apply to limit the total amount you will pay.
- Accommodation Costs: This covers the cost of your room, and whether you pay this in full, in part, or not at all depends on your means assessment. You have several options for payment, including a refundable lump sum (Refundable Accommodation Deposit, or RAD), a non-refundable daily payment (Daily Accommodation Payment, or DAP), or a combination of both.
Funding for Home Care Packages
For those who wish to remain in their homes, a Home Care Package (HCP) provides funding for a range of support services. Similar to residential care, funding is a combination of a government subsidy and the individual's contribution. The government subsidy amount depends on your approved package level, with higher levels for greater care needs.
Your individual contribution is determined through an income assessment, which calculates two potential fees:
- Basic Daily Fee: This is a non-means-tested fee that providers may ask you to pay. Not all providers charge this fee, so it is important to check when choosing your provider. This fee adds to your total package funds.
- Income-Tested Care Fee: If your income exceeds certain thresholds, you may be asked to pay an income-tested care fee. Like the residential care fee, this has annual and lifetime caps.
Support for Financial Hardship
It is a core principle of the Australian aged care system that no one will be denied the care they need due to an inability to pay. The government provides financial hardship assistance for those who cannot afford their aged care costs for reasons beyond their control. If you are eligible, the government may pay some or all of your basic daily fee, means-tested care fee, and/or accommodation costs.
Comparison of Residential and Home Care Funding
| Funding Aspect | Residential Aged Care | Home Care Package |
|---|---|---|
| Government Contribution | A subsidy and supplements paid directly to the aged care home. | A subsidy (and supplements if eligible) paid to your home care provider. |
| Individual Contribution | A basic daily fee, a means-tested care fee, and potentially an accommodation payment. | A basic daily fee (if charged by provider), an income-tested care fee (if applicable), and any additional service fees. |
| Means Test | Both income and assets are assessed to determine means-tested care fees and accommodation costs. | Only income is assessed for the income-tested care fee. |
| Accommodation Costs | Covered by a refundable deposit (RAD), a daily payment (DAP), or a combination, based on your means assessment. | Not applicable, as care is delivered in your own home. |
| Maximum Fees | Annual and lifetime caps on the means-tested care fee apply. | Annual and lifetime caps apply to the income-tested care fee. |
| Financial Hardship | Assistance is available for basic daily fees, means-tested care fees, and accommodation costs. | Assistance is available for the basic daily fee and income-tested care fee. |
Key Considerations for Planning
When planning for aged care, it is crucial to start by completing an assessment. For residential care, this is the Combined Assets and Income Assessment, while for home care, it's the Home Care Package Calculation of your cost of care form. These are processed by Services Australia and will determine the level of government subsidy and your required contribution.
Seeking independent financial advice can help you understand how your specific financial situation will impact your aged care costs and which payment options are most suitable for you. Whether you choose residential care or a home care package, understanding the funding model is the first step toward securing appropriate and affordable care.
Conclusion
Paying for aged care in Australia is a joint effort between the government and the care recipient, with subsidies and individual contributions making up the total cost. The amount an individual pays is dependent on a financial assessment and the type of care received. For residential care, this includes a basic daily fee, a means-tested care fee, and accommodation costs. For home care, fees include a basic daily fee and a potential income-tested care fee. Annual and lifetime caps provide financial protection, and hardship assistance is available for those with limited means. To navigate this system effectively, obtaining an assessment through My Aged Care and seeking professional advice are recommended steps.
