New rules for Aged Care sector start 1 November 2025
- 17 October 2025
- by Adrian D’Mello
- 6-minute read
Did you know, roughly 30% of Australians will live in an Aged Care facility at some point in their lives? Most enter care in their 80s and typically stay for around 2–3 years.
It can be hard for families to navigate both the conversations and the significant costs, but in this article, we cover the key considerations, and the new rules that come into effect on 1 November 2025.
Aged Care is a sensitive topic
At its core, entry into Aged Care is a sensitive and emotional topic both for the elderly person involved and their family.
Adult children will be concerned about how to ensure their parents get the help they need while the parent may feel some resistance or difficulty acknowledging that they need help. Many may not want to leave the family home and move to a strange place, and there is a plethora of opinions and recommendations from well-wishers to navigate.
Uncertainty about the costs and whether there will be sufficient funds to pay for quality care can be another stressor. This is where a Financial Advisor, who is experienced in Aged Care, can help.
The cost of accommodation
As of 1 November 2025, new rules came into effect for those entering Care going forward. For those already in Care, the old rules continue to apply.
You can think about the costs in two parts: The first is the cost of the room, the second is the cost of the care itself.
Firstly, to secure the room itself you need to pay a deposit called a Refundable Accommodation Deposit, commonly known as the RAD.
As the name suggests, when you leave care, this is refunded back to the estate.
Previously, the RAD was capped at $550,000 but that cap has now increased to $750,000.
Also, while in the past the RAD was fully refunded, now Aged Care providers get to keep 2% annually, up to 10% over 5 years. This change was made to incentivise investment in Aged Care to ensure there are enough rooms for our ageing population. The impact of this change is significant because residents paying the maximum RAD of $750,000 could end up losing $75,000 of their deposit.
What if you can’t pay the RAD?
If you don’t have sufficient assets and you are deemed as “low means” by the Department of Aged Care, you are not required to pay the RAD at all.
Alternatively, if have assets that aren’t easily sold and you can’t pay all or some of the RAD upfront, you will be charged interest on the unpaid amount. This is referred to as the Daily Accommodation Payment – or DAP for short.
The interest rate is set by the Department of Aged Care and is currently 7.61%.
With the new rules, as of 1 November 2025 this interest rate will increase twice a year in line with indexation. Previously the rate was set on entry for the duration of the resident’s stay.
There is also the option to pay a combination of both the RAD and the DAP.
The cost of care
Beyond the cost of the room, there are costs associated with the care that’s provided in Aged Care facilities.
- Basic Daily Care Fee. This fee covers things like meals, cleaning, laundry and utilities and is approximately $25,000 a year. If you are on the full Age Pension it works out to be 85% of it.
- Means Tested Fee. This fee is applicable if you are deemed to have the means. There is a yearly cap on this fee of $36,000. Under the old rules, you could have been charged up to $400 per day but now there is a new maximum of $100 per day. A new lifetime cap of $130,000 also applies (this used to be about $85,000), and the fee can only be charged for up to 4 years, so you may not necessarily pay the full $130,000, if you leave the facility within that timeframe.
- Additional Service Fee. This fee is only charged if you choose optional extras like a glass of wine with dinner or a newspaper subscription.
As you can see, the fees can really add up but keep in mind every situation is unique so you may not end up needing to pay all of these fees. Also, remember that if you had to pay for a full time at-home carer, the cost would be substantially more.
Selling the family home
It’s not always the case that you will need to sell the family home to cover the cost of Aged Care. Most people use their investments like superannuation, the sale of shares or an investment property, or cash savings to cover all or some of these costs.
On the odd occasion that the sale of the family home does become a part of the conversation, it’s generally when both members of a couple enter Care.
In these cases, there could even be a silver lining: Once you use assets to pay for the RAD, they are not counted when assessing the level of Age Pension so cash flow might improve.
Strategies to manage the costs
Ther are strategies you can implement to decrease costs or increase your income. A Financial Advisor can give you specific tailored advice, but as general information these are some strategies that may be considered:
- Staggering entry into Aged Care so Mum goes in before Dad or vice versa. The benefit here is that the total RAD deposit amount can be significantly reduced.
- Paying a partial RAD even if you don’t have the full amount. This can save you the 7.61% interest charges (DAP) on the amount you can pay upfront.
- Delaying the sale of the family home and opting pay the DAP interest charges for up to two years can mean benefiting from the Age Pension for two extra years before it stops completely. This is because there is a two-year grace period when the family home is not counted as an asset when calculating the Aged Pension.
- Negotiating a lower RAD as some older facilities may be open to this.
- Being aware of unintended consequences. For example, sometimes well-off children offer to pay the RAD on behalf of their parents but as soon as they do this sum is counted as an asset and can substantially increase the Means Tested Fee the parents have to pay, so decisions need to be made really carefully.
Where to turn for expert help
Entering Aged Care is already a fraught time for families, so getting the right information and planning ahead can help reduce the stress. Turn to a Financial Advisor or a Centrelink Financial Service Officer to help you navigate your unique options.
Contact us
If you have any questions relating to the new rules for Aged Care sector, contact your usual BG Private advisor on +61 3 9810 0700 or
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