Understanding the new Aged Care Act: What it means for your finances
- John Bartle
- Sep 18
- 4 min read
New Aged Care Act explained
On 1 November 2025, Australia’s new Aged Care Act will take effect, replacing the framework that has guided aged care for decades. The new Act is designed to create a simpler, fairer, and more transparent system centred on the rights and dignity of older Australians.
While much of the reform is about improving quality of care, the changes also carry significant financial impacts. For individuals and families, understanding these reforms is essential for planning ahead - whether you’re still working and preparing for retirement, or already retired and managing your cash flow.
Key financial changes in the new Act
Co-payments for home care
For the first time, older Australians receiving home care will need to contribute towards certain non-clinical services such as help with showering, dressing, and meal preparation.
Full pensioners may pay between 5% and 17.5% of the cost of these services.
Self-funded retirees may contribute up to 80%.
This means aged care will now be a regular expense for many households, making budgeting and cash flow planning more important than ever.
A lifetime limit of $15,000 for home modifications
The reforms introduce a lifetime limit of $15,000 for home modifications, including ramps, stairlifts, and bathroom upgrades. While this may cover essential changes, those with more complex needs may need to draw on personal funds, superannuation, or family contributions.
Understanding aged care home accommodation costs
From 1 November 2025, aged care providers will be allowed to retain 2% per year from a Refundable Accommodation Deposit (RAD) or Refundable Accommodation Contribution (RAC).
These lump sums are often paid upfront when entering residential aged care, and most of the balance is refunded when the resident leaves. Under the new rules, however, a portion will be permanently retained each year.
This makes understanding aged care home accommodation costs a key part of financial planning. Families will need to weigh the pros and cons of paying via a RAD, daily fees, or a mix of both — and consider how these choices affect estate planning and what’s passed on to beneficiaries.
Who pays for accommodation?
Accommodation costs in aged care are means-tested, based on income and assets. As of 20 March 2025:
If you have income below $34,005.40 and assets below $61,500, the Australian Government will pay your accommodation costs.
If you have income above $84,812.52 or assets above $206,663.20, you will need to pay the full cost of your accommodation, negotiated with the aged care home.
If your income and assets fall in between, Services Australia will determine your contribution, with the government paying the rest.
You can estimate your costs using the My Aged Care income and means assessment tool.
Retirement planning: what pre-retirees should be thinking about
For Australians in their 50s, aged care may feel a long way off — but the decisions you make in the decade before retirement can significantly affect how well you manage future care costs.
Here’s what pre-retirees should consider:
Factor aged care into retirement planning. Beyond lifestyle and travel, planning should include potential care costs, particularly new co-payments and accommodation contributions.
Review superannuation strategies. Consider whether your current contributions and investment mix will give you flexibility to meet aged care costs later in life.
Estate and asset planning. With RAD retention and lifetime caps on modifications, now is the time to review how assets will be allocated between living expenses, aged care, and inheritance goals.
Talk with family early. Open conversations about care preferences and financial readiness reduce stress when decisions need to be made quickly.
By planning early, pre-retirees can avoid being caught off guard by aged care costs that may arrive sooner than expected.
Staying financially prepared in retirement
For those already retired, the challenge is different: balancing current income needs with the likelihood of future care expenses. The new system makes this even more important.
Practical steps for retirees include:
Review budgets regularly. Co-payments for home care will introduce new expenses; regular reviews ensure cash flow is sustainable.
Consider funding strategies. Work with a financial adviser to assess whether RADs, daily fees, or a combination best suits your circumstances.
Protect lifestyle essentials. Ensure that paying for aged care won’t mean cutting back on basic needs like food, housing, or utilities.
Use professional advice. Navigating means assessments, government contributions, and accommodation negotiations can be complex — tailored financial advice can help maximise entitlements and reduce stress.
The key is not just to prepare for aged care as a one-off cost, but to build it into ongoing retirement planning, ensuring security and confidence throughout later life.
What this means for families
The new Act doesn’t just affect older Australians — it also affects their families. Adult children often play a key role in supporting parents with means assessments, financial decisions, and navigating accommodation options. Understanding the changes early means families can work together to make decisions that are financially sound and emotionally supportive.
How Aspire2Wealth can help
At Aspire2Wealth, we integrate aged care planning into broader financial strategies, helping clients to:
model the impact of co-payments, RAD retention, and accommodation costs
plan for home modifications within the new $15,000 lifetime cap
align aged care planning with superannuation, pension, and estate strategies
support families in understanding their rights and financial responsibilities.
With the right advice, aged care planning can be managed with clarity, confidence, and care.
Other information to help you plan for the aged care changes
This article provides general information only. For the most up-to-date and detailed guidance on the new Aged Care Act and what it means for older Australians, please refer to the official resources on the Australian Government Department of Health and Aged Care website.
Aspire2 Wealth Advisers Pty Ltd ABN 42 125 897 903 is an authorised representative and credit representative of Charter Financial Planning Limited ABN 35 002 976 294, AFSL and Australian Credit Licence No. 234665.
This website contains information that is general in nature. It does not take into account the objectives, financial situation, or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
Comments