By Ilya Egorov, Certified Financial Planner®
Shared in partnership with Colledges Accountants + Advisors
If you’re about to start looking at your aged care options, for yourself or a family member, it’s quite natural to feel overwhelmed – emotionally, financially, and practically. With complex rules, changing fee structures, and evolving government programs, there are many aspects of aged care planning that need to be taken into account. And it’s important to have knowledge and clarity before making decisions that affect your and your family’s wellbeing.
That’s why we’re sharing this comprehensive Guide to Aged Care in Australia, written by Ilya Egorov from Financial Balance Group, a trusted financial planner who specialises in helping families understand their options, prepare for assessments, and make confident choices about care, housing, and funding.
This guide answers the most common questions that older people and their families ask – from how to access care and what fees apply, to whether you should sell the family home or how to protect your pension and estate.
What aged care options are available in Australia?
How do I start the process of accessing aged care services?
What is a Home Care Package and who is it for?
How long does it take to receive a Home Care Package after approval?
What is Residential Aged Care, and how does it work?
What are the main costs of residential aged care?
What is a RAD (Refundable Accommodation Deposit)?
Do I have to pay the full RAD amount upfront?
Can someone else pay my RAD for me?
Will I lose my age pension if I move into aged care?
Should we sell the family home to pay for aged care?
What if I can’t afford to pay for aged care?
What is means testing in aged care?
What are Additional Services Fees in aged care?
How can a financial adviser help with aged care planning?
What information do I need to provide for aged care advice?
Can I act on behalf of my parent as their Power of Attorney (PoA)?
What is financial hardship for aged care Centrelink?
What is the maximum means-tested fee in aged care?
What are the changes to the aged care fee in 2025?
What can I do to prepare for aged care?
What aged care options are available in Australia?
Australia offers several aged care options based on the level of care needed:
- Commonwealth Home Support Program (CHSP) – for those needing basic support to live at home.
- Home Care Packages (HCPs) – coordinated services for more complex needs while still living at home.
- Residential Aged Care – for people who can no longer manage independently and require ongoing care.
Each option has different levels of government funding, and your eligibility is determined through an assessment process.
How do I start the process of accessing aged care services?
The process begins with an assessment through My Aged Care.
- For CHSP: a Regional Assessment Service (RAS) will visit your home.
- For HCPs and Residential Care: an Aged Care Assessment Team (ACAT/ACAS) conducts a comprehensive review of your needs.
Following approval, you can choose a provider and begin planning your care or transition.
What is a Home Care Package and who is it for?
A Home Care Package is a government-subsidised service for older Australians who need help to live safely at home.
There are four levels of support, ranging from basic to high-level care, covering services such as:
- Personal care
- Domestic help
- Nursing and allied health services
Funding is paid directly to your chosen provider, and you may need to contribute depending on your financial situation.
How long does it take to receive a Home Care Package after approval?
Wait times depend on your assessed priority and the package level. Typically, it can take 1 to 12 months to receive funding.
During this time, CHSP services may help bridge the gap. Planning early and joining the national waitlist promptly is recommended.
What is Residential Aged Care, and how does it work?
Residential Aged Care provides 24-hour assistance with daily living, meals, and medical care.
It suits people who can no longer live safely at home. To access it, you need an ACAT/ACAS assessment, and your fees and contribution are based on a means test (your income and assets).
Both short-term respite and permanent care options are available.
What are the main costs of residential aged care?
There are four key types of fees:
- Accommodation payment (e.g., RAD or DAP).
- Basic daily care fee (85% of the Age Pension).
- Means-tested care fee (varies with your income and assets).
- Additional services fees for optional extras like upgraded meals, entertainment, or hairdressing.
A financial adviser can help you structure your finances to reduce or manage these costs.
What is a RAD (Refundable Accommodation Deposit)?
A RAD is a lump sum payment for your room in aged care. It is government guaranteed and refunded to you or your estate when you leave the facility.
You can also opt to pay a Daily Accommodation Payment (DAP) instead of a lump sum – or use a combination of both. Choosing the right strategy requires considering cash flow, estate planning, and government benefits.
Do I have to pay the full RAD amount upfront?
No. You can choose to:
Pay a full RAD (lump sum)
Pay a DAP (daily rate based on interest charged on the RAD), or
Use a combination of both.
You have 28 days after moving in to make this choice. You may also switch to a RAD later if you initially opt for Daily Accommodation Payment.
Can someone else pay my RAD for me?
Yes, but this requires careful planning. The RAD is counted as your asset, regardless of who pays it.
It may increase your care fees and reduce age pension entitlements, and will be refunded to your estate, not the contributor. Legal and financial advice is essential in these scenarios.
Will I lose my age pension if I move into aged care?
Not necessarily. Your pension eligibility is subject to means-testing, which considers your assets and income.
Moving into care may affect your entitlements, especially if your home is sold or rented. A financial adviser can model the best approach to maintain or maximise your pension.
Should we sell the family home to pay for aged care?
Selling the home is not always necessary or financially optimal. Keeping or renting the home, on the other hand, can impact:
- Age pension entitlements
- Means-tested care fees
- Estate planning outcomes
We provide modelling to help families understand the implications of each choice and make informed decisions.
What if I can’t afford to pay for aged care?
No one is excluded from residential care due to lack of funds. If you’re assessed as a low-means resident, the government may subsidise all or part of your accommodation costs. Finding suitable placements may take longer, but specialist advice and placement consultants can assist.
What is means testing in aged care?
Means testing is a government assessment of your income and assets to determine:
- How much you pay for care
- Whether you receive subsidies
The outcome affects both daily care fees and accommodation payments. A financial adviser can help you optimise your asset structure to reduce fees and improve cash flow.
What are Additional Services Fees in aged care?
These are optional (or sometimes bundled) lifestyle services not covered by basic fees. They may include:
- Meal upgrades
- Alcohol or specialty diets
- Haircuts and manicures
- Newspapers or internet access
Costs vary and may be negotiable depending on the provider.
How can a financial adviser help with aged care planning?
A specialist Aged Care financial planner can provide expert advice to help you:
- Understand and navigate fee structures
- Determine whether to keep, rent, or sell the home
- Maximise Age Pension/DVA benefits
- Choose the right RAD/DAP payment mix
- Protect and manage your estate
- Create sustainable cash flow plans
This guidance helps avoid common and costly mistakes while supporting your family’s wellbeing.
What information do I need to provide for aged care advice?
To give tailored advice, we’ll need:
- Income and asset details
- Centrelink statements
- Property values and ownership details
- Wills, Powers of Attorney, and Advance Care Directives
All information is treated with strict confidentiality and protected under privacy laws.
Can I act on behalf of my parent as their Power of Attorney (PoA)?
Yes. If the PoA is valid, you can act on your parent’s behalf for financial decisions, including aged care arrangements.
We can work directly with you to prepare advice that meets your parent’s needs, while keeping the legal framework in place.
What is financial hardship for aged care Centrelink?
Financial hardship assistance can help you, if for reasons beyond your control, you can’t afford your aged care costs. Each case is assessed on an individual basis. If you are eligible, the Australian Government will pay some, or all, of your fees and charges – helping you to get the care you need.
What is the maximum means-tested fee in aged care?
The maximum fees for aged care, specifically the means-tested care fee, are capped both annually and over a lifetime. As of March 20, 2025, the annual cap is $34,311.23, and the lifetime cap is $82,347.13, according to My Aged Care. These caps represent the maximum amount a resident may be required to pay for means-tested care fees during their time in aged care.
Means-Tested Care Fee Caps:
- Annual Cap:$34,311.23 (indexed on March 20 and September 20 each year).
- Lifetime Cap:$82,347.13 (indexed on March 20 and September 20 each year).
Important Considerations:
- Indexation:
The cap amounts are adjusted twice a year, on March 20 and September 20, to reflect changes in the consumer price index says Services Australia.
- Home Care Packages:
If you were receiving home care before entering residential aged care, any income-tested care fees paid while in home care will be counted towards the annual and lifetime caps in residential care.
- Daily Rates:
The means-tested care fee is calculated daily, based on your means assessment and care costs.
- Basic Daily Fee:
This fee covers essential living costs and is a separate charge, capped at 85% of the single age pension.
- Accommodation Costs:
These are separate from the means-tested care fees and depend on your financial situation and the specific aged care home.
What are the changes to the aged care fee in 2025?
From July 2025, significant changes to aged care fees will be introduced in Australia, impacting both residential and home care services. These changes are part of broader aged care reforms aimed at improving the system and ensuring its sustainability.
Key Changes in Residential Aged Care:
- Increased Accommodation Price Cap:The maximum price for a room in a residential aged care facility will increase to $750,000, up from $550,000, and will be indexed to inflation.
- RAD Retention Fee:A new retention fee of 2% per year (up to a maximum of 10% over five years) will be applied to Refundable Accommodation Deposits (RADs) for new residents.
- Increased Daily Accommodation Payments (DAPs):Daily Accommodation Payments (DAPs) will be indexed to the Consumer Price Index (CPI) twice a year.
- New Ongoing Fees:Three new ongoing fees based on income and assets will apply to residents.
- Phasing out RADs:Refundable Accommodation Deposits (RADs) will be phased out by 2035.
Key Changes in Home Care:
- Support at Home Program:
The existing Home Care Packages program will be replaced by the “Support at Home” program, with changes to how care is funded and delivered.
- Means Testing:
Under the new program, contributions will be based on a means test that considers both income and assets, not just income as in the current Home Care Packages.
- Pay for Services Used:
You will only pay for the services you actually use under the Support at Home program, unlike the current system where a basic daily fee may apply regardless.
Other Important Considerations:
- Wage Increases:
Award wages for aged care workers will increase due to the Fair Work Commission’s Aged Care Work Value Case.
- Financial Hardship Assistance:
Financial hardship assistance will be available for those who cannot afford aged care costs.
- Transitional Arrangements:
There will be transitional arrangements for those already in aged care, ensuring they are not worse off under the new system.
Important Dates:
- 1 January 2025:Accommodation price cap increase takes effect.
- 1 July 2025:New fees and accommodation payment rules will apply to new residents.
- 1 November 2025 (Initially July 2025):The new “Support at Home” program is expected to commence.
What can I do to prepare for aged care?
To prepare for aged care in Australia, you should start by exploring your options through My Aged Care, then apply for an assessment to determine eligibility for government-funded services, and gather necessary documentation for both the assessment and any financial means test.
Steps to prepare for aged care in Australia:
- Understand your options:
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- Visit My Aged Care or call 1800 200 422 to learn about different types of aged care services available, including support at home, short-term care, and residential aged care.
- Apply for an assessment:
- You must apply for an assessment through My Aged Care before accessing government-subsidised aged care services. This can be done online or by phone.
- If you’re applying online, you’ll need your Medicare card. If you prefer to speak to someone, call the My Aged Care number.
- An assessor will then arrange a time to visit you, usually at your home, to conduct the assessment and discuss your needs.
- Prepare for your assessment:
- Have your Medicare card and another form of identification ready (e.g., DVA card, driver’s license, healthcare card, or passport).
- Gather any doctor’s referrals or contact details for your GP or other health professionals.
- Consider if you need a support person present during the assessment and if you require communication assistance like a translator or Auslan interpreter.
- Consider financial assessments:
- You may need to complete an income and assets assessment with Services Australia/Centrelink to determine your contribution to the cost of care and accommodation, especially for residential aged care. This can take time, so it’s good to start early.
- If considering residential aged care:
- Research and tour aged care homes to get a clear understanding of the facilities and services offered.
- Observe staff interactions, cleanliness, and available activities, and discuss care plans with management.
By Ilya Egorov
BEc, MAccFinMngt, DipFS(FP), GradDipFP, CERTIFIED FINANCIAL PLANNER®
Director, Principal Financial Planner
Phone 0432 673 370 | Email ilyaegorov@financialbalancegroup.com.au
Web https://www.financialbalancegroup.com.au/
Supporting You and Your Family’s Financial Future
At Colledges, we’re here to support you through every stage of life’s financial journey. If you or a family member are preparing for aged care, our team can work with you and your professional advisers to model the tax and cash flow impacts, help with government requirements, and coordinate advice that gives you peace of mind.
Let’s talk about how we can help you plan ahead with confidence. Please give us a call on (03) 9851 6500 or email hello@colledges.com.au.
