Understanding Aged Care costs
When the time comes for a loved one to move into Aged Care, there are lots of complex and emotional decisions to be made, not least of which is how to fund Aged Care costs.
The best way to pay for Aged Care depends on your family’s unique circumstances.
It’s important to seek personal financial advice because getting funding arrangements wrong can be costly and erode family wealth that could, instead, be passed to the next generation.
You can book a meeting with one of our expert aged care advisers here if you need personal financial advice.
Because Aged Care costs changed from 1 November 2025, it’s more important than ever to understand how the updated system works and what it means for you and your family. Here we explain the types of costs you’ll encounter and what changed when the new rules came into effect.
Who do the new rules apply to?
Anyone who entered residential Aged Care on or after 1 November 2025 will be assessed and charged under the new fee structure. People who were already living in Aged Care before that date stayed on their existing arrangements unless they chose to switch to the new structure.
Accommodation costs — paying for the room
Just like moving into a new home, you can pay for Aged Care accommodation in a few different ways. The structure of these options is the same as it used to be, but the rules around them have changed.
1. Refundable Accommodation Deposit (RAD)
This is the lump sum paid upfront for the room (for example: $600,000). Traditionally, it was refunded in full when a resident left.
What’s changed from 1 November 2025?
Providers are allowed to retain 2% of the RAD per year, for up to five years, to a maximum of 10% in total. This means families now receive slightly less back than the full amount originally paid.
2. Daily Accommodation Payment (DAP)
Instead of paying a lump sum, some residents choose to pay “rent” — a daily amount based on the room price and the government set interest rate.
From 1 November 2025, DAPs began being indexed twice a year, linked to inflation. This means daily payments now increase over time.
3. A combination of RAD + DAP
This option still works the same way: you pay part lump sum, part daily payment. Up to 2% of the lump sum is retained by the provider, and the daily payment is indexed.
Ongoing care costs
Ongoing care costs is a broad term for the amount a resident pays each day in Aged Care. This is where some of the biggest changes in the new legislation come into effect, as detailed below.
1. Basic Daily Fee (stayed the same)
Everyone still pays the Basic Daily Fee. It covers essential day-to-day services like meals, cleaning, and heating. It remains set at 85% of the basic Age Pension, currently $65.55 per day.
2. The Means Tested Care Fee (Removed for new entrants)
Before the reforms, new residents paid a 'Means Tested Care Fee' based on their income and assets.
From 1 November 2025 onward, that fee stopped applying to new residents. It was replaced with two different contributions: the Hotelling Contribution and the Non-Clinical Care Contribution.
2A. The Hotelling Contribution (New from 1 November 2025)
This contribution helps cover hotel-style services such as meals, cleaning and laundry.
- Maximum: $22.15 per day
- Indexed twice yearly
2B. Non-Clinical Care Contribution (Also new from 1 November 2025)
This contribution helps cover personal support, such as help with showering, mobility or lifestyle activities.
- Maximum: $101.16/day
- Means tested
- Lifetime cap or 4-year limit applies
3. Higher Everyday Living Fee (HELF)
Before the reforms this was called an Additional Service Fee. This fee is optional and depends entirely on the Aged Care home. It covers things like:
- Upgraded meal choices
- A glass of wine or beer with meals
- A streaming services or newspapers
Living expenses — the personal extras
Some personal costs, such as clothing, hairdressing, private health insurance or spending money for café visits, remain separate from fees. These depend completely on each resident’s lifestyle.
What hasn’t changed
- The government continues to fully fund all clinical and nursing care.
- The treatment of the family home for means testing.
- The Basic Daily Fee continues for everyone.
- Residents already in care before 1 November 2025 keep their existing arrangements unless they opt into the new system.
The reforms that came into effect on 1 November 2025 brought significant changes, which is why a deep understanding of the new rules is so important.
Yet, navigating Aged Care doesn’t have to be stressful or overwhelming. With the right advice, you can make decisions that support your loved one’s wellbeing and protect your family’s financial position.
If you’d like help understanding how these rules apply to your situation, our specialist advisers are always ready to support you with clarity and care.
*Cost up-to-date as at 25/02/2026
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.