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Aged care in Australia is not entirely free, but the government subsidises aged care services, and the subsidy amount depends on an individual's financial circumstances. The cost of aged care varies from person to person, with income and assets affecting how much one pays, along with the type of aged care facility and eligibility for government subsidies. There are three main components of residential aged care fees, but not everyone will have to pay all three. The Basic Daily Fee, reviewed each year in March and September, applies to every resident, regardless of their income and assets. The Australian Government also offers a Support at Home program, which is a government-funded program that helps individuals live independently by offering services like nursing care and everyday assistance.
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What You'll Learn
Aged care costs depend on income and assets
Aged care costs in Australia are determined by an individual's income and assets, which are assessed by Services Australia. This is known as a means assessment and is used to calculate the fees an individual will need to pay for their care. The means assessment considers both income and assets, with an individual's home usually being their most valuable asset.
The Australian government subsidises aged care, and the subsidy amount depends on an individual's needs and their means assessment. The government will contribute to accommodation costs for those with low means, with the amount contributed based on income and assets, rather than the agreed room price.
If an individual is assessed as having a low income and assets, they may not need to pay a means-tested care fee or accommodation payment. For example, if an individual's annual income is below the income-free area of $34,005.40 and their assets are below the asset-free threshold of $61,500, the government will pay their accommodation costs and contribute a subsidy towards the cost of their care.
For those with higher incomes and assets, a means-tested care fee may be payable, in addition to the basic daily fee. This fee is calculated based on an individual's income and assets and can change if their financial circumstances change. The maximum fee is 85% of the single basic age pension, and the fee amount changes with the pension rate every March and September.
It is important to note that aged care rates, thresholds, and subsidies change over time, and individuals are encouraged to seek independent financial advice to determine the best way to pay for their care.
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Government subsidies and support
The Australian government subsidises aged care, and the amount of subsidy one receives depends on their needs. The government is committed to ensuring that aged care is accessible to all Australians. While aged care services are not entirely free, the government subsidises aged care to the tune of around $65,000 each year for each permanent aged care home resident.
The cost of aged care varies from person to person. Income, assets, the type of aged care facility, and eligibility for government subsidies all influence the cost of aged care. The government provides subsidies and support to those who cannot afford the necessary fees. Services Australia or the Department of Veterans' Affairs (DVA) conducts a means test to determine eligibility for government assistance. If you are receiving a means-tested pension from Centrelink or DVA, you may not need to complete the income and assets test.
The government offers the Financial Hardship Assistance program for those who cannot afford the fees for residential aged care. To be eligible for this program, you must have completed an Income and Assets Assessment, have assets worth less than $41,496 (excluding unrealisable assets), and not have gifted more than $10,000 in the previous 12 months or $30,000 in the previous 5 years.
The government also provides free financial information through Services Australia's Financial Information Service (FIS). My Aged Care offers links to organisations, services, and tools that can provide financial guidance, advice, and support. The Support at Home program is another government-funded program that helps individuals live independently by offering services such as nursing care and everyday assistance.
Additionally, temporary respite care in a residential aged care home is heavily subsidised by the government and is not means-tested. Residents can claim up to 63 days per year, making it a useful resource while arranging long-term plans.
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Basic daily fee and means-tested care fee
The Australian Government subsidises aged care homes across Australia to provide affordable, accessible care. The subsidy amount for you depends on your needs. Residential care subsidies and supplements are paid directly to your aged care home. The amount the government contributes is based on an assessment of your ongoing care needs once you have entered care. If your means assessment shows you have less capacity to pay, the government will contribute more.
There are a number of costs associated with permanent care in an aged care home. The basic daily fee is payable by everyone in residential care. It covers basic living costs such as food and laundry and is not means-tested. The fee is set at 85% of the single person rate of the basic age pension. The government updates it on 20 March and 20 September each year in line with increases to the age pension. Based on current rates, the maximum basic daily fee is $63.82 per day, or $23,294.30 per year. This fee can be directly transferred from your pension.
The means-tested care fee is a contribution that some residents pay toward their cost of care. It is paid in addition to the basic daily fee. This fee is different for everyone and is paid by those whose income and assets are above a certain amount. It is calculated by Services Australia based on a means assessment. The means-tested care fee is a contribution towards the cost of personal and clinical care. The maximum means-tested care fee changes with indexation and is regularly updated. Your means-tested care fee will be between $0 and $407.33 per day.
If you can’t afford your aged care home costs for reasons beyond your control, you can ask to be considered for financial hardship assistance. Depending on your situation, you may apply for financial hardship assistance with your basic daily fee, means-tested care fee, and/or accommodation costs.
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Accommodation costs and contributions
The cost of aged care in Australia varies from person to person. The Australian government subsidises aged care, and the subsidy amount for you depends on your needs. The government is committed to ensuring that aged care is accessible to all Australians.
To determine the cost of aged care, an Income and Assets Assessment is conducted by My Aged Care. This assessment evaluates how much you can afford to pay towards your residential aged care costs. If your income and assets are under a certain amount, the government will pay more towards (or even all of) your personal care and accommodation costs. The government will pay supplements to government-approved aged care providers on behalf of each resident.
The Basic Daily Fee, which covers day-to-day living costs in the care home, applies to every resident, regardless of their assets and income. The fee is 85% of the single basic age pension and is reviewed each year in March and September by the Department of Health and Aged Care. The Australian Government funds providers to keep costs affordable, so you won't be asked to cover the full cost of services. You will make a contribution to your provider—if you can afford it—for as long as you receive services.
If your income and assets are above a certain amount, you will pay a means-tested care fee. This fee is in addition to the basic daily fee and is different for everyone. Services Australia will advise you of the amount payable in a fee advice letter. Annual and lifetime caps limit how much a person can pay in means-tested care fees. Once a resident reaches the annual cap, their means-tested care fee is reduced to zero, and they start paying the fee again on the next anniversary of the date they first entered aged care. Once a resident reaches the lifetime cap, the government pays the full cost of their care, and the resident pays no more means-tested care fees.
If you cannot afford the necessary fees, there is help available through the Financial Hardship Assistance program. You can also receive free financial information through Services Australia's Financial Information Service.
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Additional and extra service fees
The Australian Government subsidises aged care, and the subsidy amount for you depends on your needs. The Australian Government subsidises Home Care Packages, and the subsidy differs depending on your package level. The Aged Care Quality and Safety Commission (ACQSC) may receive information about additional service offerings and additional service fees.
The maximum fee is 85% of the single basic age pension. The fee amount changes with the pension rate every March and September. The Department of Veterans' Affairs may pay the basic daily fee for former Prisoners of War (POWs) and Victoria Cross (VC) recipients. The means-tested care fee is a contribution that some residents pay toward their cost of care. It is paid in addition to the basic daily fee. This fee is different for everyone.
The cost of a room in a residential aged care facility can be paid via a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two. The average RAD in Australia is about $470,000, but prices can vary greatly depending on location and facility. The income-tested care fee is an extra contribution that some people pay, as determined through an income assessment. This fee is different for everyone. It’s based on your individual income, including your pension. However, full pensioners and people with an income of up to $34,005.40 do not pay an income-tested care fee.
If you can’t afford your home care costs for reasons beyond your control, you can ask to be considered for financial hardship assistance. Depending on your situation, you may apply for financial hardship assistance with your basic daily fee and/or income-tested care fee. If you are eligible, the Australian Government will pay some or all of your aged care costs. You can’t receive financial hardship assistance for additional service fees or extra service fees.
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Frequently asked questions
Aged care services in Australia are not entirely free. However, the Australian government subsidises aged care services, and the subsidy amount depends on individual needs.
The three main components of aged care costs are the Basic Daily Fee, the Means-Tested Care Fee, and the Accommodation Costs. The Basic Daily Fee covers day-to-day living costs in the care home and is applicable to all residents. The Means-Tested Care Fee is payable if an individual's income and assets are above a certain amount. Accommodation Costs are payable to cover the cost of accommodation in an aged care home.
The Australian government conducts an Income and Assets Assessment to evaluate how much an individual can afford to pay towards their aged care costs. If your income and assets are below a certain threshold, the government will pay a larger portion or even all of your aged care fees.
