Combining Home Care and Residential Care Planning After the November 2025 Changes

Introduction: Planning Beyond a Single Stage of Aged Care

As Australia transitions into a reformed aged care system in November 2025, many families and retirees are now faced with a new planning imperative — not just how to fund either home care or residential care, but how to combine the two in a seamless, financially sustainable care journey.

With the Support at Home Program replacing Home Care Packages (HCPs) and Commonwealth Home Support Programme (CHSP), and new reforms in residential aged care taking hold — including AN-ACC, mandatory care minutes, and transparent pricing — the aged care journey is becoming more structured, more transparent, and arguably more complex.

This article explores how to strategically plan for both home care and residential care, recognising that most older Australians will use both systems during their ageing journey. From funding models and timing transitions to Centrelink implications and estate planning, we unpack the new aged care ecosystem from a financial adviser’s perspective.

Combining Home Care and Residential Care Planning

The Aged Care Continuum: A Shift from Static to Dynamic Planning

Historically, aged care planning was often reactive. A fall, a diagnosis, or a sudden decline would trigger a rushed transition into residential care. But with longer life expectancies, increased access to home-based services, and structured funding models, planning must now:

• Anticipate progression from low-level to high-level care
• Combine in-home support with eventual residential care options
• Address financial sustainability across care settings, not just entry costs

Clients are no longer making a single care decision — they are navigating a care continuum, often over a 5–15 year period.

Key Structural Changes from November 2025

Understanding how the systems are changing is vital. Here’s a high-level comparison of pre- and post-reform frameworks:

Element	Before November 2025	After November 2025
Home Care	CHSP, HCP, STRC	Support at Home Program
Residential Care	ACFI, inconsistent staffing	AN-ACC funding, care minutes, transparency
Funding Source	Multiple, fragmented	Unified and assessed by My Aged Care
Budgeting	Fixed levels or block funding	Needs-based, individualised budgets
Flexibility	Limited transitions	Seamless transition from home to residential care

The 2025 reforms are designed to integrate care stages, not silo them. But this places greater responsibility on families to financially plan transitions in advance.

Planning for Flexibility: Why One Care Type Is Rarely Enough

More than 70% of older Australians express a desire to age in place. Yet, over half will eventually enter residential aged care. This means:

• Home care is often the first step, not the final plan
• Residential care remains a likely outcome — even if delayed
• Dual planning is essential to avoid financial and emotional stress

The new model allows greater alignment between systems, but strategic decisions must still be made about timing, funding, and structure.

The Support at Home Program: What to Know When Starting the Care Journey

Under the Support at Home Program (starting November 2025):

• Older Australians are assigned a needs-based individualised budget
• Services are drawn from an approved list with capped prices
• Co-payments are standardised, but income-assessed
• No unspent funds are accrued — budgets are “use it or lose it”

Financial Planning Tip:

Home care should be used proactively to delay functional decline. Families must avoid the “underspend trap” by underutilising care in fear of “saving it” — this is no longer viable post-2025.

Transition Triggers: When Home Care Is No Longer Enough

There are clear signs when home care ceases to be effective or efficient:

• Rapidly increasing care hours (e.g. over 4–6 hours per day)
• Rising falls risk or overnight support requirements
• Carer burnout or family conflict
• Difficulty coordinating multiple providers

At this point, residential care may not just be appropriate — it may be more cost-effective, especially when factoring in carer strain and out-of-pocket gaps.

Financial Planning Across the Care Spectrum: What Changes Post-2025

With new systems come new rules for how care is funded:

Consideration	Home Care	Residential Care
Budget Model	Individualised funding (Support at Home)	Facility receives AN-ACC funding
Fees	Standardised co-payments, means-tested	Basic Daily Care Fee, Means-Tested Care Fee, RAD/DAP
Service Limits	Flexible within budget	Defined by care classification
Asset Impact	May affect Age Pension	Directly affects accommodation payments
Transition	Seamless via My Aged Care	Requires new financial assessment

Aged care planning must now account for changing means testing, varying cash flow models, and different estate impacts.

Strategic Use of Assets: Structuring for Dual-Stage Care

For many clients, their home and superannuation are their two biggest assets. Structuring them wisely means:

Retaining the Family Home:

• Useful to avoid asset assessment for up to 2 years in residential care (if not rented)
• Can be rented to generate income for DAP payments (but may affect Age Pension)

Downsizing or Selling:

• May free up capital to pay a RAD
• Proceeds could increase means-tested fees unless carefully managed
• Might impact Centrelink assets test

Superannuation and Pensions:

• Account-based pensions can be used to fund co-payments
• Consider income drawdown strategy aligned to Support at Home fees first, then higher residential care costs later

Timing Is Critical: Why Early Planning Pays Off

Early aged care planning allows for:

• More choice in facilities (residential beds are in high demand)
• Better asset preservation strategies
• Avoidance of panic-driven decisions that lead to poor financial outcomes

Delaying residential care planning until a crisis can result in:

• Selling the home in haste
• Missing opportunities to reduce fees
• Rushed legal decisions (e.g. POA, guardianship)

Coordinating Legal, Financial, and Care Advice

Planning across both care settings involves:

• Aged care financial advisers – modelling costs, RADs, pension impacts
• Solicitors – drafting Powers of Attorney, reviewing family agreements, managing estates
• Care coordinators – advising on care transitions, provider negotiations
• Accountants – managing tax implications of home sale, super drawdowns, gifting

The 2025 reforms increase the need for cross-disciplinary collaboration.

Impact on Family Agreements and Informal Carers

The Support at Home program encourages informal care but does not formally compensate carers (unlike NDIS models).

However, families who provide:

• Accommodation
• Financial support
• Day-to-day assistance

…should consider formal family care agreements, which:

• Avoid future estate disputes
• Provide legal protection for carer contributions
• Can be disclosed during means testing if payments are made

Residential care may also alter expectations — especially if family members assumed the loved one would age at home.

Income Support Considerations: Pension Strategy Across Care Settings

Home Care Phase:

• Low impact on the Age Pension unless assets/income are reassessed
• Co-payment obligations can reduce Age Pension cash surplus

Residential Care Phase:

• Age Pension may be impacted by asset increases (e.g. sale of home)
• DAPs are not deductible — they must be funded from post-tax income
• RADs are exempt from pension assets test

Strategy:

• Consider keeping RAD high to maintain Age Pension
• Use super income streams to smooth co-payment obligations
• Avoid large gifts or asset transfers which may trigger Centrelink gifting rules

Tax Considerations When Moving Between Care Types

Transitions between home care and residential care often involve:

• Sale of the home – CGT-exempt if principal residence, but may create Centrelink issues
• Rental of the home – assess impact on Age Pension and aged care fees
• Drawdown of investments – consider tax on dividends/capital gains when funding RAD or DAP

Financial advisers should coordinate with tax advisers to:

• Time asset disposals
• Use tax-free super withdrawals effectively
• Avoid unintended taxable events

Funding Options for RADs and Ongoing Residential Care Costs

Common options for funding a RAD or ongoing DAP include:

• Selling or mortgaging the family home
• Using term deposits or managed funds
• Drawing down superannuation accounts
• Family contributions (beware of gifting rules)

Each method has pros and cons in terms of:

• Pension impact
• Estate value
• Liquidity
• Taxation

Post-2025, with pricing transparency and increased consumer choice, families must evaluate true cost vs. quality when choosing to pay a high RAD.

Estate Planning: Balancing Liquidity, Equity, and Intentions

The journey from home to residential care raises several estate planning questions:

• Should the RAD be repaid to a specific beneficiary?
• How will jointly held property be managed if one partner enters care?
• What if the primary carer passes first?

Legal strategies should include:

• Testamentary trusts (for family care protection)
• Review of enduring powers of attorney and guardianship
• Binding nominations for superannuation
• Clear instructions for executor on care costs and asset release

Planning for the Unknown: Scenario Modelling in the New Aged Care Era

The 2025 reforms demand scenario-based financial planning across both care settings. Models should include:

• Best-case: Long home care use, minimal residential care, high RAD refund
• Expected-case: 3–5 years of home care, 2–4 years of residential care
• Worst-case: High-care residential admission early, DAP costs exceeding cash flow

Modelling should account for:

• Changing care needs and re-assessments
• Variable co-payment levels
• Asset drawdowns and portfolio longevity

Conclusion: Integrating Home and Residential Care Strategy Is Now Essential

The 2025 aged care reforms have created a more unified and transparent system — but one that requires greater financial literacy and long-term strategic thinking.

No longer can families afford to plan for home care alone or leave residential care as a reactive decision. The smartest approach is proactive dual-stage planning, integrating:

• Early engagement with financial advisers
• Scenario modelling
• Timely legal structuring
• Coordinated care and funding plans

Done well, this ensures dignity, choice, affordability, and asset protection across every stage of care.