Upcoming Aged Care Changes from 1 July 2025
Significant changes to the cost of residential aged care will take effect from 1 July 2025. These changes are part of a broader overhaul that includes updates to care standards. For many entering aged care after this date, the cost will increase — especially for those with higher levels of income and assets.
Here’s a summary of the key changes and what they may mean for you or your loved ones.
Changes to Accommodation Payments
Two key updates will affect accommodation costs:
- Partial retention of the Refundable Accommodation Deposit (RAD)
- Indexation of the Daily Accommodation Payment (DAP)
- Refundable Accommodation Deposit (RAD)
Residents will continue to pay for accommodation via a lump sum (RAD), a daily payment (DAP), or a combination of both. However, from 1 July 2025:
- Providers will be allowed to retain 2% per annum of the RAD balance,
- This retention will be calculated daily and deducted monthly
- The deduction applies for up to five years
Example:
A resident pays a RAD of $1,000,000
- 2% per year = $20,000
- Over five years = $100,000 retained by the facility
- Daily Accommodation Payment (DAP)
- The DAP remains a non-refundable daily payment calculated based on the unpaid RAD amount and the Maximum Permissible Interest Rate (MPIR).
- From 1 July 2025, DAP will be indexed twice per year, in line with the Consumer Price Index (CPI).
Changes to Ongoing Care Fees
Two major new contributions will replace or supplement current care fees:
- Non-Clinical Care Contribution (NCCC)
- Hotelling Supplement Contribution (HSC)
- Non-Clinical Care Contribution (NCCC)
This replaces the current Means-Tested Care Fee.
- Covers services like lifestyle activities, social engagement, and administration
- Means-tested, based on income and assets
- Daily cap of $101.61
- Lifetime cap of $130,000 or four years (whichever comes first)
- Hotelling Supplement Contribution (HSC)
This is a new fee to cover hotel-style services such as meals, laundry, and cleaning.
- Also means-tested
- Daily cap of $12.55
- Individuals with greater financial capacity will pay more
Note: The means-testing for both the NCCC and HSC will use the same income and asset assessment as the current Means-Tested Care Fee.
What’s Not Changing?
Some elements of the aged care system remain unchanged:
- Accommodation Fees: Continue to be paid as a RAD, a DAP, or a combination
- Basic Daily Fee: This fee covers essential services like meals and laundry. It is currently $63.82 per day and applies to all residents.
Case Study: Mary’s Aged Care Costs Before and After the Changes
Mary, aged 85, is a single Age Pensioner entering residential aged care.
- She has sold her home and paid a $550,000 RAD
- She has $700,000 in the bank
- Her Age Pension is reduced to $19,302 p.a. due to the asset test
Here’s a comparison of her first-year costs before and after 1 July 2025:
| Fee Type | Pre-1 July 2025 | Post-1 July 2025 |
| Basic Daily Fee | $23,203 | $23,203 |
| Hotelling Supplement Contribution (HSC) | Not applicable | $4,581 |
| Means-Tested Care / NCCC | $18,035 | $36,923 |
| RAD Retention (for the first year only) | $0 | $11,000 |
| Total (Year 1) | $41,238 | $75,707 |
Final Thoughts
The upcoming changes will significantly increase aged care costs for many Australians, particularly those with substantial assets. Planning ahead — and understanding how these changes may affect you or your family — is now more important than ever.
If you’re unsure how the reforms might impact your situation, speak to a financial adviser or aged care specialist.