Aged care reforms: changes to residential aged care

Updated on 30 June 2025

The Australian Parliament passed the Aged Care Bill which means that after Royal Assent the new Aged Care Act will commence on 1 November 2025. With an ageing population and unsustainable aged care system, the reform follows recommendations from the Aged Care Taskforce to build a system that can better meet future needs. At its heart, the reform will see more support provided to older Australians no matter their situation and a new funding model that will support much needed growth in the aged care sector.

Read a breakdown of the proposed changes below.

Please note: the details of the act are yet to be finalised.

In this article:

• Residential aged care - Changes to contributions
• Residential aged care - Changes to accommodation costs
• Wesley Mission Queensland customers
• Get more information about the upcoming reform

Residential aged care changes

The reform changes below apply only to residents entering care from 1 November 2025. It means for people in residential aged care on 30 October 2025, their contributions will not change, as per the government’s ‘no worse off’. Costs will be the same - or less - after the reforms. 

Changes to contributions

• A means-tested contribution for services will be introduced:

o In the current scheme, only accommodation costs are means-tested
o The amount will be reindexed every six months, in line with inflation.
o This new approach to assessing payments ensures that people with higher incomes contribute more towards the cost of their care.

• Clinical care will be 100% subsidised. This includes Personal Care, as it is considered a clinical service when delivered in an aged care home (unlike Support at Home program).
  
  
• Residents will contribute only to Hotelling Supplement (cleaning and laundry) and daily accommodation payments (DAP).
  
  
• The government's threshold is $238,000 for assets and $95,400 for income. Residents who exceed these amounts will contribute 7.8% of their assets above the threshold or 50% of their income over the threshold (or a combination of both), up to a daily limit of $101.16.
  
  
• A lifetime cap of $130,000 on contributions will be introduced. This includes what you pay for both home care services and residential aged care. Individuals will stop making any payments when they reach the cap, or after 4 years in residential care, whichever occurs first.

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• Room prices cap will rise from November 2025:

o Providers can charge up to $750,000 for a room (an increase from the current $550,000 cap). This amount will be indexed over time.
o The cap is set on the Refundable Accommodation Deposits (RADs), which is the maximum "market price" an aged care home can charge without government approval.

• A retention fee will be introduced, set at 2% of the person’s RAD* (a refundable up-front payment) per year, up to a maximum of 10%.

o This fee will be deducted monthly by the residential aged care provider.  The fee is not accumulative. If the person moves to another aged care home under the new scheme, the new provider will also deduct 2% annually, up to 10% of the paid amount.

* RAD (Refundable Accommodation Deposit) is a lump-sum payment that residents may pay when entering residential aged care in Australia. It covers the cost of accommodation in the aged care facility. The RAD is currently fully refundable when the resident leaves the facility or passes away, minus any agreed deductions. From July 2025, in the new Age Care Act, a retention fee applies.

• The Basic Daily Fee (BDF) will not change. Everyone will pay the BDF, which is set at 85% of the age pension.
  
• If you move from home care to an aged care home on or after November 1, 2025, the changes to accommodation payments will apply, but you will have the choice of staying on the existing contribution arrangements or moving to the new ones.

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• Aged care residents (nursing homes): the new contributions and accommodation arrangements will only apply to new entrants to residential aged care from 1 November 2025. Everyone in residential care on 30 October 2025 will maintain their arrangements until leaving care.
  
• Existing Home Care Package clients: as per the Government’s ‘no worse off’ principle, from 1 November 2025 you will move to the new Support at Home program and keep your level of funding plus any unspent funds.
  
  
• New Home Care Package clients: tthere’s no need to wait for the new system. You can start a conversation with us today by calling 1800 448 448 or click here to enquiry online.

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• New Aged Care Act

https://www.health.gov.au/our-work/aged-care-act

• About the aged care reforms

https://www.health.gov.au/our-work/aged-care-reforms/about
https://agedcareengagement.health.gov.au/reforms

• About the Single Assessment System for aged care

https://www.health.gov.au/our-work/single-assessment-system-for-aged-care/about

• Residential care contributions

https://www.health.gov.au/resources/publications/response-to-the-aged-care-taskforce-residential-care-contributions

• Government resources fo0r public and providers

https://www.health.gov.au/our-work/aged-care-reforms/resources