Aged care funding changes

With 16 per cent of Australians over 65 years, and this figure expected to jump to 23 per cent by 2050, now is the time to make changes to ensure we have an aged care system which is sustainable, accessible and affordable for the consumer. A series of reforms over the coming years will be aimed at doing just that. Some have been introduced already and the next round, scheduled for 1 July 2014, will include new rules for income-tested care fees, greater transparency on aged care costs, means testing for residential care costs and more choice in where and how a consumer can receive care. These changes generally do not apply to anyone who has already entered residential care, or undertaken a Home Care Package before 1 July 2014.

Charges for Home Care Packages
From 1 July 2014, the rules for income-tested care fees are being strengthened so that people who have the financial capacity to pay will be asked to contribute to the costs of their care. Any Home Care Packages commenced after 1 July 2014 may be subject to one or both of the following costs:

  • a basic daily fee which is equivalent to 17.5 per cent of the single basic Age Pension ($133.98 per fortnight based on current pension rates)
  • an income-tested fee if your income is over $24,731.20 (single person threshold, March 2014 rates)


There are caps on how much you have to pay in income-tested fees and once you have reached the following caps, the Australian Government will pay your share direct to the provider:

  • $5000 per annum for part pensioners
  • $10,000 per annum for self-funded retirees
  • $60,000 lifetime limit


If you think you may be liable to pay towards your Home Care Package, you can call MyAgedCare on 1800 200 422, or from 1 July you can visit the website, to receive help with estimating the fees and charges payable. You will need to have details of all your income and financial information to hand.

Transparency on residential aged care costs
To simplify the selection of a residential aged care facility and to give consumers a better idea of costs involved, the MyAgedCare website lists the maximum accommodation price which a provider may charge for each type of room and a clear description of accommodation features and standards. This information will also need to be clearly stated in any documentation, including their own website, provided by the aged care facility.

Means-tested residential care fees
The Department of Human Services will undertake an assessment of a consumer’s assets and income for new entrants to residential aged care on or after 1 July 2014. This assessment will be used to calculate how much the Australian Government will pay to providers as a subsidy, the amount a resident will be asked to pay as a means- tested care fee and whether the resident will receive any financial assistance towards their accommodation costs. The basic daily fee can also be asked to pay a basic daily fee equivalent to 85 per cent of the single basic Age Pension.

There is an annual limit of $25,000 on how much residents can be asked to pay as a means tested care fee, with the Australian Government paying the fees for the remainder of the year once the limit is reached. A lifetime limit of $60,000 also applies, and again, the Australian Government will pay the fees directly to the provider once this limit is reached.

Choice of how to pay for accommodation and services
Recognising that everyone’s financial situation is different, new arrangements on how payments for accommodation are made will be in place for those entering care after 1 July 2014. New residents have 28 days after entering to decide to pay a refundable accommodation deposit, a daily accommodation payment or a combination of both.

Removal of low and high care distinction in residential care
To provide consumers with greater choice, the distinction between low and high care will be removed, meaning there will no longer be different rules for each level of care. While consumers will have the choice of services (subject to availability), the funding for care services will be subject to an assessment of each person’s care needs under the Aged Care Funding Instrument.


Department of Social Services

YOURLifeChoices aged care explained

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