Nov 22, 2024

Aged care reforms: changes to residential aged care

Tags: Residential Aged Care, Aged care reforms

Aged care reform - residential aged care changes graphic

Updated on 25 November 2024

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 (initially July 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.

If you do not currently receive aged care services, give us a call on 1800 448 448 or enquire online. Let us help you find the support and care you're looking for.

Please note: the details of the act are yet to be finalised and below information is based on the draft act currently before parliament.

In this article:

Residential aged care changes

A new means-tested services contribution will be introduced, indexed twice a year, in line with inflation.

o The new means testing only applies for residents entering care from 1 July 2025.

o Clinical care will be 100% subsidised (Personal Care is considered clinical in residential aged care). Residents will only contribute to Hotelling Supplement (cleaning and laundry) and daily accommodation payments (DAP).

o All clinical care will be fully subsidised by the government, such as nursing.

o Residents who exceed the Government’s threshold will contribute 7.8% of assets over $238,000 or 50% of income over $95,400 (or a combination of both), up to a daily limit of $101.16.

o A lifetime cap on contributions will be introduced, including both Support at Home and residential aged care contributions. Individuals will stop making any payments when they reach $130,000 in total contributions, or after 4 years in residential care, whichever occurs first.

o Contributions made in Support at Home before they enter residential aged care will count towards the $130,000 lifetime cap.

Room prices cap will rise from $550,000 to $750,000 from 1 November 2025 (initially July 2025), also indexed over time. 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* per year, up to a maximum of 10%. Residential aged care providers will deduct this fee monthly.

* RAD 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. In the new Age Care Act, there will be a 10% exit fee on RAD.

The Basic Daily Fee (BDF) will not change. Everyone will pay the BDF, which is set at 85% of the age pension.
For people in residential aged care on 30 June 2025, their contributions will not change, as per the government’s ‘no worse off’. Costs will be the same - or less - after the reforms.
If you move from home care to an aged care home after 1 November 2025 (initially July), 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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Wesley Mission Queensland customers

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 (initially July 2025). Everyone in residential care on 30 June 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 (initially July 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: there’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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