The aged care system in Australia is expensive, unfair and difficult to navigate. Even more concerning is that significant changes to the cost of aged care begin from November 1, 2025, which overall will increase fees for most Australians.
Keep in mind that if you or a family member is already in permanent aged care, there will no changes, but if you are considering care, November 1, 2025 is an important date.
The major change relates to the Refundable Accommodation Deposit (RAD). Historically, this is a lump cost to secure accommodation with the amount varying between aged care homes, ranging from a few hundred thousand dollars, up to several million dollars. The higher quality home, location and services, the higher the RAD.
The resident is asked to pay the amount when they enter care, and it is ‘refunded’ when they leave, either through death or moving to a different aged care home.
So, what is the big change?
The RAD is longer entirely refundable and the aged care home will ‘retain’ 2% of the RAD for each year the person remains a resident. They will continue to deduct 2% per year for 5 years, by which time, 10% will be retained. From the 6th year onwards, no further amounts are retained.
A typical Sydney RAD is $1,000,000 which means if a person enters care after November 1, 2025 and remains for at least 5 years, their RAD refund will reduce by 10%, or $100,000 and the person would receive a refund of only $900,000.
If they enter care before November 1, 2025, they are refunded 100%.
There are further increases, which come in the form of higher fee ‘caps’. In the past, once a person had paid a certain amount of fees, they were no longer payable. The structure of the rule remains the same, but those caps are now higher, meaning a person pays more across their lifetime.
The changes represent a significant amount for most people, and the higher the RAD and the longer the person remains in care, the more fees they will pay.
I would never suggest transitioning a person into aged care before their needs reach that point, but if you anticipate that you or a family member will require aged care in the short term, I would encourage you be aware of these changes, reach out and I can help you understand how this impacts your decision making and the impact on their financial situation.
