Cost of aged care

  Government support  
  Your former home

Aged care is not cheap. But when you think about it you are paying for somewhere to live, your meals, electricity and a number of people to look after you around the clock. The good news is that a lot of the cost is paid by the government. You only pay a portion of the cost of your care. The more you have in assets or income, the more you may be asked to pay.

Did you know?

The cost to look after someone in residential aged care could be as high as $107,562 per year. The Government pays a significant portion of this amount with resident contributions dependent on income and assets.

What fees will I pay?

The fees you will pay are divided into four categories as shown in the diagram below.

What fees will i pay?


How much you pay will depend upon which residential service (facility) you move into, how much income you have and the value of your assets and the services you take up. The rules for calculating fees are set by the government.

An accommodation payment is paid for the right to live in the residential service for life. This helps cover the cost of your room, amenities and maintenance. The basic daily care fee and means-tested fees pay for your cost of care.

The additional services fees are only payable if you elect to take additional services, such as choice of meals, daily newspaper etc. These services may be offered as a package attached to the room (extra-services fees) or may be available as an optional package that you can choose to take up. The additional fees are set by the service provider as a set daily rate. These fees are becoming more common so it is important to check your resident agreement carefully to ensure you understand what you are paying for and whether you have a choice to stop paying.

What are the current fees?

If you moved into residential care before 1 July 2014 you need to look at the rates you are currently paying and any special rules that apply for you. This is because you will be assessed under the old rules unless you move services and choose to have the new rules applied befoer you make the move.

If you are moving into aged care now, the table below is a guide to the current fees (current to 19 September 2017).

Accommodation payment

Quoted by the service provider as a lump sum (called a refundable accommodation deposit – RAD) and the equivalent daily fee (called a daily accommodation payment – DAP).

The rates published on websites are the maximum the service can charge. In some cases they may be willing to negotiate a lower amount.

Daily care fee

$49.07 per day for all residents

Means-tested care fee

The lower of:

  • Your cost of care (up to $245.62 per day)
  • An amount calculated based on your combined income and assets
  • The capped amount of $26,381 per year or $63,313 over your lifetime (both indexed)

Additional service fee

  • This fee is set by the service. Typically ranges from $20-$120 per day.

How much is the accommodation payment?

Unfortunately there is no easy answer to this question as each residential service is able to set its fee based on commercial factors. These factors include local property prices, building costs, standard of accommodation, room type and market demand.

The first thing to know is that you can check the service’s website or the government’s website to see the price listing for each residential service. This will help you to work out if you can afford to move into that service.

The second thing to know is that these prices are not absolutely fixed. The service provider cannot charge you more than the published amount but in some cases, if you cannot afford the published rate the provider may be willing to negotiate a lower rate for you (or you may qualify for government concessions to reduce the amount you need to pay).

When checking the price listing for rooms you may find that each residential service has a range of prices depending on the type of room and quality of accommodation. For example, a single room with a private bathroom may require a higher accommodation payment than a single room with a shared bathroom.

Aged Care Lifetime Expectations


While you need to ensure that you can afford to pay the requested payment and still have resources left to meet living expenses you should not just look for the cheapest price. You need to think about location, standard of accommodation, lifestyle, access to amenities and privacy issues. This is not unlike the decisions you make when buying property or staying at a hotel.

It is not uncommon to see accommodation payments of $250,000 - $550,000 across Australia but higher prices can also be expected. The average accomodation payment is just under $400,000.

Alice's accommodation payment

A residential aged care service recently built 20 new rooms to expand its service. The accommodation payment is set at $200,000 for the older rooms and $300,000-$400,000 for newer rooms (depending on size of the room).

Alice is keen to move into the service and checked the website for price ranges. She was offered the choice of a new room with her own bathroom for $380,000 or an older room with a shared bathroom for $200,000. She checked her finances and sought financial planning advice with her family and decided to accept the newer room.

Alice will now have 28 days after moving into the service to decide whether to pay the $380,000 as a lump sum (RAD) or convert it to the daily fee (DAP).

When do I have to pay the accommodation payment?

You don’t have to make the payment before you move in. You just need to agree on how much is payable and sign the Resident Agreement, although some services may ask for deposits to process your application, although some services seem to indicate that deposits are payable.

The Resident Agreement will specify the accommodation payment as both a lump sum (called a refundable accommodation deposit – RAD) and the equivalent daily accommodation payment (DAP).

The conversion of the RAD into a DAP is based on an interest rate set by the government. This interest rate may change each quarter so the comparisons will adjust each time the rate changes but once you sign the Resident Agreement, the rate applied to you is fixed at the current rate.

From the date you are admitted as a permanent resident you will start paying the full DAP. If you choose to pay all or some as a RAD, this will reduce the DAP accordingly. You will have 28 days after moving into care to decide how you want to pay for the accommodation. This gives you time to seek advice on how to structure your investments to meet cashflow and protect your estate.

 Example: Alice's choice

Alice has agreed to pay an accommodation payment of $380,000 for her room. At the time she enters care the interest rate for accommodation is 5.78% per annum. This is now her fixed rate.

Therefore, in her Resident Agreement it states that Alice agrees to pay either:

  • A refundable accommodation deposit (RAD) of $380,000, or
  • A daily accommodation payment (DAP) of $60.18 per day ([$380,000 x 5.78%] / 365), or
  • A part RAD with DAP interest on the unpaid portion.

Alice signs the agreement and moves into care. She does not immediately pay any RAD so she will start paying the $60.18 per day for her accommodation in addition to any other care fees.

After seeking advice, she chooses to pay $200,000 as a RAD. When this is paid, her DAP payable reduces to $28.50 per day ([$180,000 x 5.78%] / 365).

Aged Care Lifetime Expectations


Get advice on how to restructure your investments. Strategies may be available to increase your Age Pension or reduce fees as well as to ensure you have enough cashflow.

Will I get my RAD back

If you pay for your accommodation as a refundable accommodation deposit (RAD) this money will be paid back to you (or your estate) when you leave or pass away.

The residential service provider holds the RAD on your behalf. The provider can invest the money to earn interest or use it to buy land or buildings to expand operations or pay for maintenance. If accommodation bonds were agreed before 1 July 2014, the provider was able to deduct and keep a small portion each month for the first 60 months but this does not apply if you move into care after 30 June 2014. The RAD paid is fully refundable unless you choose to have other daily fees deducted from this amount.

In some ways, you can think of the amount you pay as a RAD as being like an interest-free loan to the aged care service which is repayable when you leave. There is no risk with getting your money back as repayment is guaranteed by the Government provided you paid the RAD to a service approved by the Commonwealth Government.

Aged Care Lifetime Expectations


As part of your selection criteria ask the residential service provider to show you evidence of their approval status. This ensures that your RAD is government guaranteed. 

Take extra care if you are considering a service in Victoria or South Australia. Some aged care services in these states are funded and regulated by the State Government and repayment of the RAD is not government guaranteed. Non-government subsidised services are also not guaranteed. 

What if I don’t have the cash to pay the RAD?

If you have assets such as a former home or investment properties and don’t want to sell these assets to pay the refundable accommodation deposit (RAD) (or are waiting to sell) you can choose to pay regular interest payments (daily accommodation payment – DAP) instead of the lump sum RAD.

If you do not pay the RAD the service will invoice you for the DAP each month. It is your choice whether you pay a RAD or the DAP (or a combination). The aged care service provider cannot refuse to accept payment of the DAP and cannot force you to pay a lump sum RAD.


Alice agreed to pay an accommodation payment of $380,000 After moving into care she advises the residential care service provider of her plans to pay the accommodation payment in full as a lump sum RAD.

However she needs to sell her home before she can make this payment. In the interim, until the cash is available, she pays the accommodation payment as a full daily accommodation payment (DAP). She moved into care on 20 April 2017 when the interest rate was set at 5.78% per annum.

Each month, the service provider will invoice Alice for an amount of:

DAP: $380,000 x 5.78% = $21,964/ 12 = $1830.33 per month (equal to $60.18 per day)

If you don’t have sufficient assets and/or income to pay the requested accommodation amounts you should check whether you qualify for concessional treatment as a 'low-means resident'. This is discussed further in the section on 'Government Concessions'.

How much do I pay as ongoing care fees?

Once you have moved in you need to pay part of the ongoing cost of your care. The government pays the rest. The rules for how much you pay are set by the government and are the same regardless of which aged care service you are living in.

The fees are generally charged monthly and the aged care service provider will generally ask to directly debit your bank account.

Basic daily care fee

The daily care fee is set by the government at 85 per cent of the annual single basic Age Pension (not including supplements). It will increase each 20 September and 20 March in line with Age Pension changes.

This fee is paid by all residents.

Means-tested daily care fee (MTF)

If you have higher levels of combined income and assets (over a specified threshold) you will also pay a means-tested fee. This effectively means that you pay a higher share of the cost of your care and the government pays less.

This fee is calculated by either Department of Human Services (DHS) or Veterans’ Affairs (DVA) after you move into care. You will need to submit a combined income and assets form so that they can calculate your fee. You should keep your DHS/DVA records up to date.

You will pay the calculated fee for each day of care. But once you have paid $26,380.51 (indexed) of means-tested fee this fee reduces to zero for the rest of that year. It reduces permanently to zero once you have paid $63,313.28 (indexed) in total while you have been in care.

Aged Care Lifetime Expectations


The lifetime limit also includes any income-tested home care fee you paid for home care packages commenced after 30 June 2014.

When determining the annual cap, your year usually starts on the date you moved into care. But if you were receiving a home care package before moving into care, the year starts from the date your home care package commenced.

Extra and additional services fees

These fees are only payable if you agree to pay for additional services. These services will depend on the offer made available by the residential care service but may include:

Choice of meals or better quality food
Glass of wine/beer with meals
Daily newspaper
Access to services, such as podiatry services
Other items.

These fees may be packaged into your residential agreement (i.e. extra services fees) or they may be optional (i.e. additional services fees). This is outlined below.

Extra services fees (ESF)

If you choose to accept an extra-service place, you will need to pay a daily ESF to the aged care provider. This is because these services are offered as a non-optional package with the room offered, so if you agree to take that room, you must also pay for the associated package of services.

The ESF is in addition to the entry fees, basic daily care fee and means-tested fee. The ESF is payable even if you do not use the extra services provided in the package. You cannot opt out of the ESF so if the fee is unaffordable, you may need to select another service or room that you can afford.

The ESF is quoted as a set daily fee and does not depend on your financial means.

Additional service fees (ASF)

More and more commonly, the aged care service provider may offer an optional range of services for an ASF.

Generally, access to the services (and therefore payment of the fee) should be optional and you should be able to choose to take up or not at any time during your stay.

However, many service providers are offering these services as non-negotiable packages that every resident must elect to accept to pay for. You cannot be asked to pay additional fees for any services that:

you do not receive a benefit for, or
are paid for by another fee or charge (e.g. acommodation, basic daily care fees or extra services)

The ASF are set by the residential service provider as a daily rate. Details of the services and the fees payable will be outlines in the Resident Agreement privided by the service provider. Details in the Resident Agreement should be checked carefully to determine:

what fee is payable
how it can be adjusted
whether you have a choice to pay the fee
what services are provided 

What are some tips and the traps to avoid?

Check websites for the published accommodation payments – Some residential services may charge the same rate for all rooms while others may charge different rates for different room types. Tip: when putting your name on the waiting list check the price range and determine whether it is affordable for you.
Review your full finances – Don’t implement strategies just to reduce fees. Tip: seek professional advice to review all implications.
Don’t hide assets - If you can’t pay the accommodation payment requested by the residential service (because you claim not to have enough assets) you may not be offered a place. Trap: hiding assets may mean that you lose the opportunity to move into the residential service that you want.

Did you know?

Respite care may provide short-term temporary stays in reseidential care.

If you are accessing respite care you cannot be asked to pay an accommodation payment. The only fee you will pay is the standard daily care fee – currently $49.07 per day (to 19 September 2017).

The government subsidises the rest of the cost if you hold an ACAT/ACAS approval and have not exceeded 63 days of respite care in the financial year (extensions up to 21 days can be applied for).

Veterans’ Affairs may pay all respite care fees for a client who holds the Gold Concession Card for the first 28 days of care in any financial year. No fees are charged during respite stays for former prisoners of war.

This article is prepared by the strategy specialists at Aged Care Steps, a company supporting financial planning advisers who provide planning advice for aged care. To find a professional adviser who specialises in aged care advice go to and click on the Find an Adviser link.

Disclaimer: This is general advice and does not take into account your particular circumstances or objectives. Before taking any action you should seek personal financial planning, taxation or legal advice and refer to the relevant Product Disclosure Statement before investing in any product. Aged Care Steps Pty Ltd ABN 42 156 656 843, AFSL 486723, registered tax (financial) advisers 25581502.

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