Aged Care Cost Changes 2025: What Families Need to Know
As we approach 1 July 2025, significant reforms to Australia’s aged care sector are set to reshape the cost and delivery of aged care services. These changes aim to enhance the quality of care, increase transparency, and provide more choice for families navigating aged care options. However, they also bring financial implications that families need to prepare for.
Whether you’re planning for yourself or a loved one, understanding the key cost changes and government reforms is essential to making informed decisions and protecting your financial future.
Key Changes to Aged Care Costs in 2025
The aged care reforms will introduce several cost changes designed to balance affordability and quality care. Here are the most impactful changes:
1. Room Price Caps for Residential Care
From 1 January 2025, the cap on refundable accommodation deposits (RADs) will rise from $550,000 to $750,000. While this provides greater flexibility for providers, it may lead to higher accommodation costs for families. For those choosing the daily accommodation payment (DAP) instead of a lump sum RAD, fees will also become indexed, potentially increasing over time.
2. New Rules for RAD Refunds
Currently, RADs are fully refundable when you leave care. However, starting 1 July 2025, up to 10% of the RAD may be retained by the provider. This adjustment makes it essential for families to carefully evaluate payment options before entering care.
3. Increases in Daily Living and Care Costs
The contribution to daily living expenses, such as food and utilities, could rise by up to $12.55 per day for some residents. Additionally, care costs—covering services like mobility assistance and entertainment—may increase by $10 per day, with the lifetime cap rising from $80,000 to $130,000. These changes highlight the importance of financial planning for long-term affordability.
Support at Home Program
For home care recipients, the new Support at Home Program will combine existing care packages into 10 levels, providing tailored support based on individual needs. While clinical care remains fully subsidised by the government, contributions for services like cleaning and gardening will increase, and a means-testing system will include both income and assets.
Who Will Be Most Affected?
The reforms will have the greatest impact on self-funded retirees and some part-pensioners, who may face higher out-of-pocket costs due to the revised means-testing framework. For families relying on government subsidies, understanding eligibility criteria and the financial impact of these changes will be key to minimising expenses.
Government Subsidies Remain Crucial
Despite the cost increases, aged care remains heavily subsidised by the government. For example:
- 73% of residential care costs and 89% of home care costs will continue to be covered for eligible individuals.
- The family home remains partially exempt from financial assessments if a spouse or protected person lives there.
Families should explore all available government support options to alleviate financial pressures.
How to Prepare for the Changes
1. Financial Planning
Planning ahead is critical to managing aged care costs. Understanding the new fee structures and exploring payment options like RADs or DAPs can help families make informed choices. Consult with an accountant or financial advisor to assess your budget and eligibility for subsidies.
2. Early Engagement with Care Providers
Start the process early by speaking with aged care providers to understand their pricing models and quality standards. Transparent communication will help you compare options and avoid unexpected costs.
3. Tax Planning
While tax incentives for aged care were not confirmed in recent reforms, early planning can still help families maximise their financial resources. Consult a tax accountant to explore deductions related to aged care expenses and retirement planning.
4. Seek Professional Financial Advice
Engaging with local accountants who specialise in aged care planning can make a significant difference. Their knowledge of local laws, government programs, and means-testing rules can provide clarity and actionable strategies.
How Hall Browns Accountants Can Help
Hall Browns Accountants play a crucial role in helping families navigate the financial complexities of aged care reforms. Our expertise includes:
- Identifying cost-saving opportunities through subsidies and deductions.
- Preparing detailed financial plans to cover rising aged care expenses.
- Advising on RADs, DAPs, and the best payment structures for your situation.
FAQs
1. What are the key changes to aged care costs in 2025?
From rising room price caps to increased daily living costs, the new rules will reshape the affordability of aged care. RAD refunds will also change, with up to 10% retention by providers.
2. Will the family home be assessed differently under the new rules?
No, the family home remains partially exempt from financial assessments if a spouse or protected person resides there.
3. What is the Support at Home Program?
This program will replace current home care packages with 10 levels of tailored care, ensuring better alignment with individual needs. However, contributions will increase and be subject to means-testing.
4. How can I plan for aged care costs?
Start early by consulting with financial advisors to understand the reforms and create a customised financial plan.
Conclusion
The aged care reforms of 2025 present both challenges and opportunities for families. By staying informed and proactively planning, families can manage these changes effectively.
Brisbane accountants, Hall Browns offer invaluable support, helping families secure their financial future and navigate the complexities of aged care with confidence.