Few financial shocks land harder than the first aged care fee estimate. A family expects the government to cover most of the cost of a nursing home — then discovers that a self-funded retiree can face tens of thousands of dollars a year in means-tested contributions, on top of the room price and basic daily fee. The single biggest driver of that number is usually the one asset most families assume is protected: the home.
Aged care in Australia is means tested, which means what you pay is calculated from your income and assets. The more you have, the more you contribute. And since 1 November 2025, the rules that determine those contributions have changed substantially under the new Aged Care Act — so a lot of the advice still circulating online is now out of date.
This guide explains how the means assessment works, which assets count and how, how the family home is treated, and where the traps sit for families planning ahead.
Two Systems Running Side by Side
The most important thing to understand in 2026 is that there are now two fee systems operating at once, and which one applies to you depends on when you entered care.
The 1 July 2014 fee arrangements (legacy system). If you entered permanent residential aged care between 1 July 2014 and 31 October 2025, these are the July 2014 fee arrangements that apply to people who entered residential aged care after that date but before 1 November 2025 — or if you were approved for a Home Care Package on or before 12 September 2024 and are protected under the “no worse off” principle, you continue to pay a single means-tested care fee on top of the basic daily fee. This 1 July 2014 fee is calculated from your income and assets and is subject to annual and lifetime caps within broader residential aged care fees.
The 1 November 2025 arrangements (new system). If you enter permanent residential aged care from 1 November 2025, the means-tested care fee no longer applies to you. In its place are two new means-tested contributions: the Hotelling Supplement Contribution and the Non-Clinical Care Contribution. The types of income and assets that count, and the treatment of the family home, did not change — but the thresholds, the fee structure and the caps did.
You cannot mix and match. Existing residents can choose to opt in to the new arrangements, but the decision is permanent and many people would pay more under the new system — which is exactly why financial advice matters before making it.
How the Means Assessment Works
Whichever system applies, Services Australia (or DVA) coordinates an income and assets assessment that combines two components:
An income-tested amount, based on your assessable income (including deemed income from financial assets under Centrelink’s deeming rules), and
An amount based on your assets assessment, measured against a series of threshold bands.
These two amounts are added together to produce your means-tested amount — the figure that drives your contributions. Services Australia calculates this amount using the information from that assessment, so it is effectively services australia based. Residents classified as low means do not pay a means-tested fee under the legacy system. Because deemed income flows from your assets, and your assets are also directly assessed, wealth effectively counts twice: once as an asset and once as the income it’s assumed to generate across aged care services. That’s why asset-rich, income-modest retirees are so often surprised by their assessment.
Which Assets Count — and Which Don't
Assessable assets for aged care are broad, and what counts will depend in part on your wider financial circumstances. They generally include:
Bank accounts, term deposits, shares and managed funds
Superannuation and account-based pensions once you’re over Age Pension age
Investment properties and other real estate
The refundable accommodation deposit (RAD) you pay to the aged care provider for your room — this is itself an assessable asset, even if a family member pays it on your behalf
The net value of the former family home, subject to a cap (more on this below)
Some assets are exempt or treated concessionally, and the rules here are nuanced — which is precisely where planning opportunities exist. Getting the composition of your assets right before an assessment can materially change the outcome.
The Family Home: The Trap Everyone Asks About
For most families, the home is both the largest asset and the biggest source of confusion — partly because it’s treated differently for the Age Pension and for aged care.
For aged care means testing, the former home is assessable but only up to a capped value — currently around $210,555 — unless a “protected person” lives in it. So even a home worth well over a million dollars only counts as roughly $210,000 in the aged care means assessment. That cap is one of the most important figures in aged care planning.
A protected person — broadly, a spouse or partner, or a dependent child, or a carer or close relative who meets certain residency conditions — living in the home makes it fully exempt from the aged care means assessment. This is why the question “who else lives in the home?” changes everything.
It’s worth flagging the parallel Centrelink rule, because families constantly conflate the two: for Age Pension purposes, the former home is exempt for two years after you leave it, after which you’re treated as a non-homeowner and the net value becomes assessable (or the net rent is assessed if it’s rented out). The two-year Centrelink exemption and the aged care home cap are separate rules doing different jobs — and decisions about keeping, selling or renting the home ripple through both at once.
Fees Under the New System (Entering Care From 1 November 2025)
If you enter a residential aged care facility from 1 November 2025, your means-tested amount determines two ongoing contributions.
The Hotelling Supplement Contribution (HSC). This is a contribution toward everyday living services — meals, cleaning, laundry, utilities. Under the new Act the government part-funds the hotelling supplement, and residents with sufficient means contribute to it. The Australian Government part-funds residential care and may pay some or all aged care costs for eligible residents through government support. Based on the thresholds for early 2026, the HSC starts to apply once assessable assets exceed roughly $252,000 and reaches its daily cap (around $22 per day) once assets reach approximately $355,000.
The Non-Clinical Care Contribution (NCCC). This covers personal care, while clinical care costs remain government funded, making the distinction between personal and clinical care clear — bathing, mobility assistance, lifestyle activities. It applies once assessable assets exceed roughly $532,000 and reaches its daily cap (around $105 per day) when assets reach approximately $1,023,000. Critically, the NCCC has a lifetime cap of about $137,900 (indexed), or four years of payments, whichever comes first — after which you stop paying it.
The practical takeaway: once a resident’s assessable assets pass roughly $1.023 million (which, with the RAD included, is easier to reach than families expect), resident pays the maximum capped HSC and NCCC — together around $46,500 per year — plus the basic daily fee and any higher everyday living fee, which replaces the previous extra service fees. For the first few years, this can create a genuine cash-flow squeeze, even for wealthy families whose money is tied up rather than liquid.
Financial hardship assistance may be available for people who cannot afford care and accommodation costs, but it does not cover higher everyday living fees, and existing recipients generally do not need to re-apply.
Fees Under the Legacy System (Entered Care Before 1 November 2025)
If you’re on the 1 July 2014 fee arrangements and entered residential aged care before 1 November 2025, you pay a single means-tested care fee in addition to the basic daily fee. The resident pays amount is calculated daily from your means-tested amount and the cost of your care, and it can range from $0 to $370 per day, subject to two caps: an annual cap and a lifetime cap (both indexed each March and September). As of March 2026, the annual cap is $35,910.43 and the lifetime cap is $86,185.23. Once you reach the annual cap, the fee pauses until the next year; once you reach the lifetime cap, you stop paying the means-tested care fee permanently.
Any income-tested care fee you paid while receiving a Home Care Package before entering residential care counts toward these caps — so a parent who’s been on home care for years may already have a head start toward their cap. It’s worth requesting a statement from Services Australia showing what’s already been paid, and after the means assessment they will issue a fee advice letter, with a fee advice letter outlining what fees may apply based on the person’s assessed income and assets.
Accommodation Costs: RAD vs DAP
Separate from the care contributions, most residents in an aged care facility contribute toward their room. You can pay this as:
A Refundable Accommodation Deposit (RAD) — a refundable lump sum (the maximum a provider can charge without approval is around $750,000+), returned when you leave, though from 1 November 2025 providers may retain up to 2% per year for up to five years, or
A Daily Accommodation Payment (DAP) — a non-refundable daily fee equivalent to the interest on the unpaid RAD, calculated using the Maximum Permissible Interest Rate, or
A combination of both.
The basic daily care fee is currently $66.80 per day and is separate from accommodation payments.
Some residents pay the full accommodation costs, while others may only pay an accommodation contribution depending on their means assessment and eligibility for government support.
The RAD-versus-DAP decision has significant flow-on effects, because the RAD counts as an assessable asset in your means assessment — so paying a large RAD can actually increase your means-tested contributions. This is one of the most consequential and least understood trade-offs in aged care funding, and it interacts directly with your Age Pension, your cash flow, and what’s left for your estate.
The Mistakes That Cost Families Most
Assuming the home is safe. It’s capped, not exempt (unless a protected person lives there), and the sell-or-keep decision affects the pension and aged care fees differently.
Paying a large RAD without modelling it. A big refundable deposit reduces liquidity and can push up means-tested fees — sometimes the DAP or a split is better.
Opting in to the new system without advice. The decision is permanent and can cost more; it needs modelling first.
Ignoring the two-year Centrelink window. Selling or renting the home at the wrong time can trigger pension consequences the family didn’t see coming.
Not reporting changes. From 1 November 2025 it’s a legal requirement to report income and asset changes within 28 days — including payment of a RAD.
Forgetting the cash-flow gap. Asset-rich families can still run a deficit in the first few years while contributions are capped but high.
How Money Path Can Help
Aged care is one of the most complex intersections in Australian financial planning — it pulls together means testing, the Age Pension, the family home, the RAD/DAP decision, tax, cash flow and estate planning, all at an emotionally difficult time and usually under time pressure.
At Money Path, we model the whole picture before you commit. We estimate your means-tested amount under both the legacy and new arrangements so you can see the difference in real numbers. We work through the home decision — keep, sell or rent — and show how each option affects both your aged care fees and your Age Pension. We stress-test the RAD versus DAP trade-off against your cash flow and what you want to leave behind. And for families weighing whether to opt in to the new system, we run the comparison so the permanent decision is made with the figures in front of you, not on a hunch.
Most of our clients come to us wanting two things: to make sure Mum or Dad is well cared for, and to avoid paying more than they need to or making an irreversible mistake. Getting advice early and seeking independent financial advice — ideally before entering care, or before paying a deposit — is where the biggest savings and the most peace of mind come from.
If you’re facing an aged care decision for yourself or a parent, talk to the team at Money Path before signing an accommodation agreement or paying a RAD, so you can model annual income, combined income for couples, and assets first. The right structure, decided early, can be worth tens of thousands of dollars.
Frequently Asked Questions
How are aged care fees calculated in 2026? Fees are means tested from your income and assets. Everyone pays a basic daily care fee. Depending on your means assessment, you may also pay accommodation costs (a RAD or DAP for your room) and care contributions. If you entered care before 1 November 2025 you pay a single means-tested care fee; if you entered from 1 November 2025 you pay two new contributions — the Hotelling Supplement Contribution and the Non-Clinical Care Contribution.
Is my home counted in the aged care means test? Yes, but only up to a capped value — currently around $210,555 — not its full market value. If a “protected person” such as a spouse, dependent child, or eligible carer or close relative lives in the home, it’s fully exempt from the aged care means assessment. Note the home is treated differently for the Age Pension, where it’s exempt for two years after you leave.
Does paying a RAD increase my aged care fees? It can. A refundable accommodation deposit counts as an assessable asset in your means assessment — even if a family member pays it — so a large RAD can push up your means-tested contributions. Whether a RAD, a DAP, or a combination is best depends on your full financial position, and it’s worth modelling before deciding.
What are the new aged care fees from 1 November 2025? For people entering permanent residential care from that date, the old means-tested care fee is replaced by two contributions. The Hotelling Supplement Contribution applies once assessable assets exceed roughly $252,000, capped at about $22 per day. The Non-Clinical Care Contribution applies once assets exceed roughly $532,000, capped at about $105 per day, with a lifetime cap of around $137,900 or four years of payments. Clinical care costs are government funded, while resident contributions relate to accommodation and non-clinical services.
Should I opt in to the new fee arrangements? Only after getting advice. Existing residents on the 1 July 2014 arrangements can opt in to the 1 November 2025 system, but the decision is permanent and many people would pay more. It should be modelled against your specific circumstances before you decide.
Are there caps on how much I’ll pay? Yes. Under the legacy system, the means-tested care fee has annual and lifetime caps (both indexed), currently $35,910.43 and $86,185.23. Under the new system, the Non-Clinical Care Contribution has a lifetime cap of around $137,900 or four years of payments, whichever comes first. Accommodation costs and the basic daily fee are not covered by these caps.
Can I reduce my aged care fees legally? Sometimes the composition and structure of your assets can be adjusted in ways that change your means assessment — but this must be done carefully, well before an assessment, and with proper advice, because changes can affect your Age Pension, tax and estate at the same time. There’s no one-size-fits-all answer; it depends on your full financial picture, the income free area for singles, currently $35,313.20, and your broader financial circumstances.
Do I have to report changes to my finances? Yes. From 1 November 2025, residents are legally required to report changes to their (and their partner’s) income and assets — including payment of a RAD — to Services Australia or DVA within 28 days, and updated fee outcomes are services australia based on the revised information received. Keeping your assessment current keeps your fees correct.
This article is general information only and does not take into account your personal circumstances. Aged care fees, thresholds and caps are indexed and change (typically on 20 March and 20 September each year); figures are current as at the date of writing. Always confirm current figures with Services Australia, My Aged Care and the Department of Health, Disability and Ageing, and seek personal financial advice before acting.
