Planning Ahead for Aged Care: Why Early Conversations Matter

As we grow older, many of us find ourselves reflecting on the care and support we received in our early years – and for some, this brings a natural desire to offer that same care in return. While it isn’t a topic most families enjoy discussing, aged care is becoming an increasingly important issue that we need to prepare for, both financially and emotionally. 

Thanks to better healthcare and healthier lifestyles, Australians are living longer and enjoying retirement more. As people age, many will eventually need some level of support. Understandably, most prefer to stay in their own homes for as long as possible. This is not only a personal choice, it’s also influenced by how complex and varied the costs can be in residential aged care, which depend on both a person’s financial situation and the level of care they need. 

With more Australians expected to need aged care in the coming decades, the system is being updated to better meet future needs. From 1 November 2025, the Federal Government will introduce a new Support at Home Program and make changes to how residential aged care is funded. These updates are based on recommendations from the Royal Commission, which found that the current system can be confusing, lacks transparency, and is financially challenging for many aged care providers.

Residential Aged Care Costs Today

Residential aged care is when someone moves into a care facility to receive daily support and medical help. The costs can vary depending on the location, quality of the facility, and level of care needed. Generally, there are three types of fees:

• Basic Daily Fee: covers everyday services like meals, cleaning, and utilities.

• Means-Tested Fee: an extra fee based on your income and assets, helping cover personal and nursing care.

• Accommodation Payment: the cost of your room, which can be paid as a lump sum fully refundable deposit (RAD), a daily fee (DAP), or a mix of both.

The accommodation payment is usually the biggest cost, but there are flexible options for how it can be paid.

Major Changes to Residential Aged Care (from 1 November 2025)

The Government is making big changes to aged care to improve quality and long-term sustainability. While these updates are positive, they may mean higher costs for new residents. Key changes include:

• Higher room price cap: The maximum cost of a room without special approval will rise from $550,000 to $750,000 from 1 January 2025, and will increase over time.

• Retention on lump-sum payments: Facilities will keep 2% per year (up to 5 years) of lump-sum accommodation payments.

• Daily fees will increase: Daily Accommodation Payments (DAPs) will go up twice a year with inflation, instead of staying fixed.

• RADs being phased out: Refundable Accommodation Deposits will gradually be removed by 2035. This means facilities will stop offering RADs as a payment option over time and switch to other funding models.

• New ongoing fees:

• Hotelling Contribution: covers services like meals and laundry; based on income and assets.

• Non-Clinical Care Contribution: covers personal care and lifestyle support; also means-tested.

• Higher Everyday Living Fee: only applies if residents choose higher-quality services.

GOOD TO KNOW 

If you're already living in aged care before 1 November 2025, you’ll stay on the current fee structure and won’t be affected by the new changes - unless you choose to switch to the new system.

Upcoming Changes to Home Care(from 1 November 2025)

Home care allows older Australians to stay in their own homes while receiving support and medical help. From 1 November 2025, the Government will introduce a new Support at Home Program, replacing the current Home Care Packages. The Commonwealth Home Support Program will also be updated from 1 July 2027 or later.

Here's what's changing:

• One easy-to-understand program: combining existing services into a single national system to reduce confusion.

• Tailored budgets: each person will receive funding based on their needs, with more flexibility in how it’s used.

• More choice and control: people can choose and adjust services like cleaning, personal care, transport, or equipment. 

• Clearer pricing: fees will be easier to understand, helping families know what they’re paying for.

• Better coordination: the new system will make it easier to move from home care to residential aged care if needed.

The goal is to help older Australians stay independent for longer, while making sure care providers can continue offering quality services.

Why Planning Ahead Matters

With big changes coming to aged care, it’s important for families to start thinking early about things like cashflow, estate planning, and Centrelink impacts. For example:

• Should a parent sell or keep their home?

• Is it better to pay for aged care with a lump-sum (RAD), daily payments (DAP), or a mix?

• How will new rules affect what’s left in the estate?

These are best discussed before any urgent decisions need to be made.

Starting the Conversation

Talking about aged care can be tough, but starting early helps everyone get comfortable with the idea, have their say, and avoid stress later. In our experience, these conversations are often started by adult children.

Here are some gentle ways to begin:

• Where do you see yourself living as you get older?

• Will your current home still suit you in your 80s or 90s?

• Would you prefer to stay at home with support, or move into a care community?

• If you did move into care, what would you want to happen with your home?

Next Steps

Every family’s financial situation is different, and with aged care costs set to rise from 1 November 2025, it’s a good idea to start planning early. Speaking with a financial adviser can help you understand your options, estimate future costs, and create a plan that works for you and your loved ones.

If you’d like to talk about how these changes might affect your family, feel free to get in touch to arrange a time.