The horror! The horror! Paying for residential aged care in Australia

How hard can it be to work out if you can afford a room in aged care? Turns out, it’s really, really hard!

Nov 21, 2025

You may well feel this way after you delve into Australia’s residential aged care market © Edvard Munch

Welcome to Care-full, a practical guide to caring for aging parents. Here, you’ll find my tips about how to juggle your caring responsibilities, where to find support, how to navigate government bureaucracy, and how to keep parents safe at home or find the right care facility for them. And – perhaps, most importantly – you’ll realise that you’re not alone during what’s probably your biggest role (reversal) yet!

Disclaimer: This post does not contain professional or financial advice. Speak to your care provider, government agency representative or a financial adviser specialising in aged care for more information about your or your parents’ situation.

First off, I’ve come across a substack blog this week you might find useful. If, like us, you have parents in Australia and the UK, Victoria Chin’s Carer Mentor: Empathy & Inspiration is worth following. Victoria resigned from her job to help her mother care for her father until he died in 2020. Then Victoria’s mother became ill, and so her caring role has continued. Victoria has lots of practical tips, resources and insights about caring for someone suffering from a chronic illness or a debilitating health condition. She also provides links to and extracts from other substack authors writing about caregiving, which is really helpful.

And, don’t forget to please leave comments on this or any of my other posts. Just click on the purple button below. I’m keen to hear your stories about caring for your parents.

Crunching the numbers

Last week, I wrote about how our family chose a residential aged care home for our mother, which you can read here. Today, I’m grappling with what it costs to enter one of these homes.

I’m a cynic and a sceptic about many things. I think it comes with the territory when you’re a journalist. So, about a year ago when friends suggested I hire a financial advisor to help me work out whether my mother could afford to move into residential aged care, I had my doubts.

For many years, I worked as a financial journalist. I thought, how hard can it be to assess Mum’s financial position? Turns out, it’s really, really hard.

What it costs to move your parents to a nursing home depends on a range of factors: their assets, income and pension status, the part of Australia you are looking at, and the facilities and services you want them to enjoy.

The full cost includes a lump sum deposit on the room your parent will live in, and a number of different fees, including a means tested fee.

There are different ways to pay for that room and those fees, but there are tax, aged pension and inheritance implications.

My mother’s financial situation was not complicated but even so, I could not work it all out on my own. And I was shocked (and this was before prices rose this year) by the room price and the extra fees. And the sad truth is, unless your parents are wealthy, you are calculating how long they will live and whether there will be enough cash to keep paying the daily fees.

What if you have no assets?

Before I go much further, a caveat: most of today’s blog is relevant to people who have some means, such as, they own their own home and have some savings or investments. If your parents aren’t in that position, you can ask the federal government for what’s called financial hardship assistance to cover basic fees and the price of a room in a residential facility. However, the government won’t subsidise any extra services, for example, a choice of meals at dinner time, a glass of wine with meals, or daily outings organised by the home.

You can also apply for financial assistance if, after some time in a nursing home, you run out of money and can’t pay the fees. Another alternative is drawing from the lump sum you pay for the room to help pay the fees - sort of like a reverse mortgage. That isn’t as straight-forward as it sounds and this is where I emphasise how important it is to get independent financial advice, if you can afford it. I’m pretty sure a nursing home can’t throw you out if you run out of money – but don’t take my word for that!

And a quick word about contributing financially to your parents’ residential aged care costs: any money you pay to a home on behalf of your parents will be considered by Centrelink as your parents’ money and will be taken into account when their pension is assessed, that is, Centrelink could cut your parents’ pension.

We are lucky in Australia to have a safety net for our poorest senior citizens, but their choice of aged care homes and services is limited by their financial circumstances. And there are other concerns.

The new aged care act, which came into effect on 1 November 2025, overhauled how older people pay for their care, based on their wealth. The better off a person is financially, the more they have to contribute towards their care accommodation. From an equity point of view, I reckon that’s a good thing. (Anyone who was in aged care before 1 November is exempt from these changes.)

Also, the impost on government finances from our aging population is big and getting bigger. The government estimates that in the next 40 years, the number of people aged over 85 will triple. It says that without the reforms, aged care spending in the budget will more than double as a share of GDP.

But according to Uniting NSW/ACT director for advocacy and external relations, Emma Maiden, there’s a real risk that operators of aged care homes will “cherry-pick” residents based on wealth.

“The danger in the new arrangement lies with older people without means, who may be overlooked by aged care providers under financial pressure because they cannot make accommodation deposits,” Ms Maiden told Aged Care Insite.

So, what does it cost?

Here’s a breakdown of fees and charges.

How do the costs stack up? Image by arielphoto from Pixabay

Refundable accommodation deposit, or RAD: literally a lump sum payment for a room. Prior to the reforms, 100% of that deposit was returned to a resident’s estate if they died or moved out. But under the new aged care act, providers are required to regularly deduct part of each resident’s RAD at a rate of 2% per annum and limited to 5 years. The most that will be lost is 10% of the RAD. For example, if you pay $750,000 for the room you will get at least $675,000 back if your parent dies or moves out.

It’s worth noting that the most a care home can charge for a room (without seeking approval from the Independent Health and Aged Care Pricing Authority) is $750,000 (up from $550,000 before1 January 2025). The government says “Everyone who moves into an aged care home negotiates a room price before moving in”. I’m sorry but that’s the biggest load of BS I have read for a while. In Australia, demand for nursing home rooms far outstrips supply and that isn’t going to change anytime soon. The idea that you can go from one facility to another trying to negotiate the best price for a room is, frankly, an insult.

Also, it doesn’t seem to me to be difficult for facilities to receive government permission to charge more than $750,000. Homes that I considered for Mum had RADs ranging from $750,000 to over $1 million. A home I looked at last year, which had a RAD of $680,000, is now charging $900,000 – that’s a 32% increase for no appreciable difference to the services or rooms. I was gobsmacked and crossed that place off my list.

Part of the key to RAD pricing is a city’s property prices. Live in Sydney and you will pay Sydney property prices for a room in an aged care home. Live in Adelaide, and the prices will be much lower. So, don’t sell an apartment in Adelaide and hope to buy a room in an aged care facility in Sydney!

Basic daily fee: set by the government (currently $65.55 per day or 85% of the aged pension). This fee, paid by all residents including full pensioners, helps to cover daily living costs such as meals, cleaning, laundry, heating and cooling. It was not increased under the reforms.

Hotelling supplement: this is a new fee. It goes towards catering, cleaning and laundry. If you have more than $238,000 in assets, more than $95,400 in income or a combination of the two, you will pay part or all of the hotelling supplement. The most you will pay is $12.55 per day. This fee, which is indexed, was previously covered in full by the government.

Non-clinical care fee: the government picks up the tab for everyone for clinical care, which includes nursing, wound care, medication management, professional therapies and dementia care. However, for non-clinical care, residents have to pay up to $105.30 per day. This charge is for things such as help showering and lifestyle activities organised in the aged care home.

Higher everyday living fee: this replaces what was called the additional services fees under the old regime. Those fees were controversial because often they weren’t actually optional and also because they weren’t transparent. There were lots of complaints about care homes charging for services such as Foxtel even if an elderly person didn’t want Foxtel (or couldn’t work out how to use it), or other services they could not use because of their health and mobility. Now, this charge is negotiated only after a resident has moved into care, (see my earlier comment about ‘negotiation’). It is also indexed to CPI. Homes decide what extra services they will offer but the good news is, if you don’t want these services you don’t have to pay for them.

I know, it’s complicated. There’s so much information to digest that I won’t explain the different ways you can pay for all of this. But you can find a brief explanation about how to do that in a blog written by Danielle Robertson, who runs DR Care Solutions, a company that helps people find in-home aged care support and residential aged care. I’ve a small conflict of interest to declare: I used Danielle’s services to help find a room for Mum, and I’ll be writing a guest article for her later this year. Danielle writes a regular blog about the cost of home care and residential aged care services and government regulations for both, as well as publishing some of her clients’ personal stories. Here’s a link to her blog about what the government’s reforms mean for the cost of residential aged care: ‘Rent and keep’ increases for new aged care residents.

If you choose to go down the residential aged care path find the time to understand how the fees work. Here’s some bedtime reading.

Care-full

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