Clarifying the Confusion: Age Pension vs. Aged Care Fees
One of the most common points of confusion for older Australians and their families is the difference between the Age Pension and aged care fees. The Age Pension is a fortnightly income support payment from the Australian government, paid through Centrelink (Services Australia), for those who meet eligibility criteria based on age, residency, income, and assets. Aged care fees, in contrast, are the payments you make for aged care services, such as residential care or a Home Care Package. These fees are determined by a separate, and different, means test to assess your capacity to pay. The government subsidises the majority of aged care costs, with your means-tested contribution filling the gap based on your financial situation.
Maximum Australian Age Pension Rates (September 2025)
As of the most recent indexation on September 20, 2025, the maximum fortnightly Age Pension rates for eligible Australians are:
- Single: $1,178.70 (includes maximum basic rate, pension supplement, and energy supplement)
- Couple (each): $888.50 (includes maximum basic rate, pension supplement, and energy supplement)
- Couple (combined): $1,777.00
These rates can increase every six months in line with inflation and other economic factors, providing a regular and predictable income source for retirees. Your specific payment amount will depend on the outcome of Centrelink's income and assets tests. It's important to note that you don't necessarily have to spend all your superannuation or savings to qualify for a part pension.
The Three Main Components of Aged Care Costs
Unlike the Age Pension, aged care costs are not a single, fixed payment. They are comprised of several parts:
- Basic Daily Fee: This is a set, daily fee everyone in residential aged care must pay to cover day-to-day living costs like meals, cleaning, and laundry.
- It is currently set at 85% of the maximum single Age Pension.
- This amount is non-means-tested and is updated in March and September each year.
- Means-Tested Care Fee: This is an additional daily contribution towards your care costs, based on a combined assessment of your income and assets.
- The amount you pay is determined by Services Australia and can range from $0 up to a maximum daily amount.
- There are annual and lifetime caps on this fee to protect you from excessive costs. Once you reach the lifetime cap, the government covers all future means-tested care fees.
- Accommodation Costs: These fees are for your room and are influenced by factors like room size, location, and the facility's amenities.
- Your means assessment determines if the government will fully, partially, or not at all contribute to this cost.
- You have options to pay via a lump sum (Refundable Accommodation Deposit - RAD), a rental-style daily payment (Daily Accommodation Payment - DAP), or a combination.
Comparison: Age Pension Means Test vs. Aged Care Means Test
It is crucial to understand that the means tests for the Age Pension and for aged care are not the same. This table highlights the key differences:
| Feature | Age Pension Means Test | Aged Care Means Test |
|---|---|---|
| Tests Applied | Separate Income Test and Asset Test. The test that results in the lower pension rate is applied. | Combined Income and Asset Test. Determines both means-tested care fees and accommodation costs. |
| Family Home | Generally excluded, unless not occupied by a partner or dependent child. | Counted, but the value is capped. The cap is applied differently for singles versus couples and depends on whether a 'protected person' lives in the home. |
| Investment Income | Deemed income is applied to financial assets like bank accounts and managed investments, rather than actual earnings. |
Deemed income also applies to financial assets. |
| Assessors | Services Australia (Centrelink) | Services Australia (Centrelink) or the Department of Veterans' Affairs (DVA) |
Getting an Accurate Assessment and Support
Before entering the aged care system, the first step is an assessment by an Aged Care Assessment Team (ACAT, or ACAS in some states). This clinical assessment determines your care needs and is your 'passport' to accessing government subsidies.
Once assessed, you will need a financial assessment from Services Australia or DVA to determine your means-tested care fees and accommodation costs.
- You can apply for a financial assessment at any time, even before you move into a facility.
- The outcome of your financial assessment is valid for 120 days.
- It is possible to get an estimate of your costs using the online fee estimator on the My Aged Care website.
Making Sense of Your Aged Care Financial Options
Financial planning for aged care can be complex, and understanding your options is vital.
- For Residential Care: Once your means assessment is complete, you'll know if you are considered a low-means, partial-supported, or full fee-paying resident.
- Low-means residents receive significant government subsidies for accommodation.
- You can choose how to structure your accommodation payment (RAD, DAP, or hybrid) within the government's rules.
- For Home Care: If you have more complex needs than the Commonwealth Home Support Programme can provide, you might be eligible for a Home Care Package.
- Under upcoming changes from November 1, 2025, the new 'Support at Home' program will replace Home Care Packages.
- Your costs for a Home Care Package include a basic daily fee, an income-tested care fee, and potentially additional fees for extra services.
- Important Considerations:
- Work Bonus: If you are an Age Pensioner, the Work Bonus scheme allows you to earn more income from employment without affecting your pension.
- Hardship Provisions: If paying for aged care causes you financial hardship, you can apply for government assistance.
Conclusion
While there is no single payment called the 'aged care pension', it is a combination of the government-provided Age Pension and a means-tested contribution towards your aged care services. Understanding the critical difference between these two financial concepts is the first step toward effective retirement planning. For comprehensive, up-to-date information on payments and eligibility, always refer to the official Services Australia website. For a more detailed look at the Age Pension, visit the official government resource: Services Australia guide.
