Introduction: The Financial Shape of Residential Aged Care Is Changing

From November 2025, the Australian residential aged care system will enter a new phase — one designed to increase accountability, deliver higher quality care, and reshape how funding flows through the system. As a result, the financial landscape for aged care residents and their families will also shift, sometimes in subtle but meaningful ways.

For current and future residents, the reforms present new rules, cost structures, and strategic opportunities. For family members helping a loved one transition into care, or for financial advisers supporting ageing clients, understanding these changes is essential.

In this article, we provide a comprehensive guide to the key changes coming to residential aged care in 2025, what they mean from a financial planning perspective, and how to best prepare.

The Financial Shape of Residential Aged Care

Why Is Residential Aged Care Being Reformed?

The Royal Commission into Aged Care Quality and Safety found systemic issues in residential care delivery — insufficient staffing, poor transparency, underfunding, and inconsistent consumer protections.

The government’s response is built on three key reform areas:

• New funding model (AN-ACC – Australian National Aged Care Classification)
• Mandatory care minutes and improved workforce standards
• Stronger financial oversight and consumer pricing transparency

While the intent is to raise care quality, these reforms bring financial implications for both providers and residents.

A Snapshot of Residential Aged Care in 2025

By late 2025, the aged care system will look different in several key ways:

Area	Current Model	Post-Nov 2025 Model
Funding Tool	ACFI (now phased out)	AN-ACC
Fees	Basic Daily Care Fee, Means-Tested Care Fee, Accommodation Fee	Same fees, but new pricing transparency and care expectations
Care Requirements	No minimum care standards	Mandatory care minutes based on resident classification
Staffing	Variable ratios	Mandatory nursing coverage 24/7 (for most facilities)
Transparency	Voluntary pricing	Standardised comparison tools and published pricing

The changes are designed to improve resident experience, but they also shift cost pressures — potentially influencing future fee levels, RAD pricing, and service availability.

The Australian National Aged Care Classification (AN-ACC): A New Funding Model

The AN-ACC funding tool classifies residents into care funding categories based on assessed needs. This replaces the older and less transparent ACFI system.

Key Features:

• 13 resident classification levels (AN-ACC Classes 1–13)
• Funding linked to care complexity
• Facility-level loading based on geographic and operational characteristics
• Separate funding for respite and palliative care

Financial Implications for Residents:

• Funding classification doesn’t affect resident fees directly, but it does influence the financial viability of accepting higher-needs residents
• Providers may prioritise certain profiles due to profitability, impacting wait times or placement availability
• Families may need to navigate assessments strategically if a loved one’s needs are borderline

Accommodation Payments: RADs, DAPs and What’s Likely to Change

Accommodation costs are paid in one of three ways:

• RAD – Refundable Accommodation Deposit (lump sum)
• DAP – Daily Accommodation Payment (rental-style interest fee)
• Combination – Part RAD, part DAP

As of 2025, the method for calculating maximum permissible interest rates (MPIR) and consumer access to pricing information is under review.

Financial Shifts to Watch:

• MPIR volatility: Rising interest rates increase the DAP and reduce the viability of choosing rental-style payments
• Price transparency pressures: More facilities may reduce RADs to remain competitive
• Provider pricing reforms: All providers must clearly publish room types, amenities, and costs — making comparisons easier

Families must understand the true cost difference between lump sum and daily payments, and how that affects estate planning and asset retention.

Care Minutes and Staffing Requirements: Hidden Financial Effects

From 1 October 2023 (with full rollout by 2025), aged care homes must meet mandatory care minute requirements per resident per day, including:

• 200 minutes per day on average
• At least 44 of those minutes by a registered nurse
• 24/7 on-site nursing in most cases

Financial Impacts:

• Providers may increase fees to cover higher staffing costs
• Facilities failing to meet standards may face compliance penalties — or exit the market, reducing supply
• High-cost labour markets (rural/regional areas) may see service reduction or consolidation

For residents, this means:

• Potential increases in Additional Services Fees
• Less price flexibility for low-care residents
• Need to factor in care inflation in long-term affordability planning

The Basic Daily Care Fee: Still a Foundation, But Under Pressure

The Basic Daily Care Fee (currently $61.96 per day as of October 2025) is paid by all residents and is indexed in line with the Age Pension.

Though unchanged structurally, this fee may increasingly:

• Be bundled with “hotel services” like meals, cleaning, laundry
• Rise in real terms as providers bundle extras into required packages
• Be used to cross-subsidise staffing under financial pressure

Residents on the full Age Pension typically have this amount covered via their pension — but self-funded retirees should model cash flow impacts over 5–10 years of residence.

Means-Tested Care Fees: The Cost of Complexity

This fee is calculated based on:

• Assessable income and assets
• Centrelink income-tested rules
• Capped annually (currently $32,718.57/year) and over lifetime (currently $78,524.69)

Key Considerations:

• Complex structures (trusts, companies, jointly owned assets) can unintentionally raise this fee
• Asset revaluation or sale of the family home may trigger increased fees
• Couples must consider the effect of one partner entering care on joint entitlements

This is a critical area where strategic financial advice before admission can save tens of thousands of dollars over the resident’s lifetime.

Additional Services and Extra Service Fees: What’s Changing

Additional and extra services offer upgraded meals, wine, outings, larger rooms, etc. Fees are negotiated and not regulated by government caps.

Under the 2025 reforms:

• These must be fully disclosed in a standardised format
• Facilities can no longer bundle non-optional extras without consent
• Residents must be able to opt out of discretionary services

Financial Risk:

Some families unknowingly agree to packages costing $20–50/day extra. Post-2025, expect:

• More scrutiny of contracts
• Tighter rules around consent
• Improved value-for-money comparisons

Pricing Transparency Reforms: Real Choice, or Just Complexity?

From November 2025, aged care homes must publish:

• Room descriptions and pricing
• Service inclusions
• Care minute delivery performance
• Resident experience metrics

This will allow families to compare facilities through My Aged Care and third-party tools.

Financial Strategy:

• Families can negotiate with greater confidence
• Providers must justifiably price premium services
• Greater transparency could drive a “race to the middle” in pricing, affecting value and quality

Changes to ACAT and Admission Pathways

The Aged Care Assessment Team (ACAT) continues to assess eligibility, but with a streamlined digital interface via My Aged Care.

Expect:

• Shorter delays in approvals
• Integrated home and residential care assessments
• Potential reassessments if needs change mid-care

Families must monitor approval dates, as delays in assessment can impact when a resident can enter a facility — especially if their care needs increase rapidly.

Estate Planning and the RAD Refund

The Refundable Accommodation Deposit (RAD) is returned to the estate upon death, less any agreed fees.

Key changes and reminders:

• RADs remain government guaranteed
• Providers must return RADs within 14 days (subject to probate)
• New requirements around how RADs are invested and managed

Financially, families should:

• Keep legal records up to date (probate delays RAD refund)
• Ensure Executor and POA documents are in place
• Consider the estate liquidity risk of tying funds into a RAD

 

Tax, Gifting, and Home Ownership Considerations

Residential care entry often triggers the sale or gifting of assets. Key 2025 considerations:

• Family home: Exempt for 2 years if not occupied by a protected person
• Gifting rules: Excessive gifting can increase care fees
• Capital gains tax: Not payable on main residence, but tax may apply on investment properties
• Impact on pension: Gifting or selling can reduce Age Pension entitlements

This is a high-risk area without advice. Complex intergenerational financial moves should be made with full understanding of their consequences.

Residential Respite and Short-Term Care: What’s New?

The new model also affects short-term residential care, such as:

• Respite care (planned or emergency)
• Transition care
• Palliative care

Respite will be integrated into Support at Home budgets, while other short-term options will align more with AN-ACC and residential funding structures.

Families must plan:

• Timing of care episodes (e.g., post-hospital respite)
• Costs of short stays
• Availability and pre-booking procedures

Financially, respite stays often do not require RADs, but care fees may still apply — often with less notice or opportunity for financial structuring.

Preparing Financially for Residential Care in 2025 and Beyond

With more complexity, greater transparency, and rising care standards, preparation is more critical than ever.

Aged care financial planning should now include:

• Entry strategy – funding RAD vs DAP
• Means testing – optimal structuring of assessable assets
• Cash flow modelling – projecting care costs for 3–10 years
• Home strategy – retain, rent, sell, or transfer?
• Estate and tax planning – ensure liquidity and fairness

Conclusion: Navigating the Residential Aged Care Reforms with Confidence

The residential aged care reforms coming in November 2025 aim to build a more equitable and sustainable system. But for families and retirees, the system will feel more regulated, transparent, and financially structured — and this presents both challenges and opportunities.

Understanding the new rules, planning early, and seeking qualified financial advice are the best ways to:

• Protect family wealth
• Ensure affordability
• Maximise care options
• Avoid financial surprises

Next Steps for Families and Advisers

• Review your or your loved one’s aged care readiness
• Seek an aged care financial advice consultation before committing to a facility
• Reassess your estate and asset structure in light of AN-ACC and new fee pressures
• Compare facilities using the new pricing tools launching in late 2025

Are you preparing for residential aged care in 2025?
Our experienced aged care financial advisers can help you make informed, strategic decisions that protect your lifestyle and legacy.

Reach out for a confidential discussion about your options, rights, and the best way to structure care for you or your loved one.