Attwood Marshall Lawyers Wills & Estates Senior Associate and Accredited Aged Care Professional, Larisa Kapur, discusses the expected changes to government-funded aged care services and home care that she’s keeping an eye on as the new legislation is finally rolled out.
The new Aged Care Act took effect on 1 November 2025, bringing the most significant reforms to aged care regulation in decades. While the reforms include sweeping changes to the rights of residents and the obligations of providers, one area that will have immediate and substantial financial implications is the restructure of accommodation payment schemes and fee structures.
A new fee framework
Originally set to commence in July 2024, and then July 2025, the government pushed the start date of the new Aged Care Act back one more time to 1 November 2025.
Older Australians have waited a long time for the stronger protections promised under the new Act, including improved complaints processes, enforceable rights to quality care and clearer standards of oversight for service providers.
Central to the new legislative framework is a rights-based framework, with a formal “statement of rights” that providers must align their agreements and practices with.
The Act defines “high-quality care” as care that is kind, compassionate, respectful and tailored to each resident’s individual needs, with strong emphasis on privacy, communication and the right to advocacy and social connection.
One of the government’s main goals with these new reforms is to simplify and standardise charges, making the system easier to understand and facilitating better comparison of facilities. Fee increases will also be far more tightly regulated.
While clinical care remains fully government-funded, the new fee system requires those with higher means to contribute more toward non-clinical costs, addressing funding pressures on providers.
The RAD retention scheme: a critical change
For individuals entering aged care from 1 November 2025, perhaps the most consequential financial change relates to Refundable Accommodation Deposits (RADs).
Under the new legislation, aged care providers will deduct a retention amount of up to 2 per cent per year from RADs paid, applied over a maximum period of five years.
This is a fundamental departure from the previous model, under which RADs were refunded in full when a resident left care or died (subject to agreed deductions).
For budgeting and exit planning, clients and their families should factor in a 10 per cent potential retention when evaluating the actual cost of aged care, particularly for those considering their long-term care.
DAP indexation: a rising cost over time
For those residents who choose to pay a Daily Accommodation Payment (DAP) instead of a lump sum RAD, it’s important to know that DAPs will now be indexed in line with the Consumer Price Index (CPI), with adjustments occurring twice a year in March and September.
Families need to consider the reality of a variable rate and how changes in the CPI will impact cash flow planning.
Other fee structure changes
Non-clinical care contribution
This new fee funds the delivery of non-clinical services such as bathing, mobility assistance and lifestyle activities. This will replace the means-tested care fee, and residents’ contributions will be calculated based on a person’s income and assets. The contribution will have a daily cap of $101.16 and will cease after 4 years or when the total paid reaches $130,000, whichever comes first.
Hotelling supplement
From 1 November 2025, residents who can afford it will need to contribute towards some or all of the hotelling supplement, which helps providers cover the cost of services like catering, cleaning and gardening.
Previously, the government paid the supplement for all residents. Now, the government will only pay in full for those who cannot afford to contribute. The supplement will be capped at a daily rate of $12.55.
The main idea behind the change is that residents with higher financial means should contribute more substantially to the true cost of their accommodation and lifestyle choices.
Fee categories apply
Aged care fee arrangements from 1 November 2025 will include grandfathering provisions, so residents already in care before this date will generally continue under existing rules unless they move to a new service or opt into the new system.
Different fee structures and rules apply depending on whether you entered permanent residential care or received approval for a home care package before or after key dates in 2024-2025.
In your aged care agreements, there should be clear descriptions of:
- All services – what is included/excluded, their frequency and who provides them,
- Pricing and all fees or charges,
- Variation or termination processes,
- Complaints pathways,
- Privacy protections, and
- Incident and restrictive practices safeguards.
The agreements should also explain how the provider upholds the Statement of Rights in practice. Providers will be monitored through the government’s new Registration Model and placed in categories that determine their obligations.
Support at Home Program
From 1 November 2025, anyone who was previously receiving a Home Care Package will move to the new Support at Home Program.
Support at Home aims to boost access to services, products, equipment and home modifications so that older Australians can stay in their own home and maintain their independence for longer.
Like residential fees, the Support at Home Program operates on a means-tested basis.
All existing Home Care Package recipients should have automatically transitioned to the Support at Home Program on 1 November 2025.
The Department of Health, Disability & Ageing will have issued notification letters to all participants outlining their financial contributions for independence support and everyday living services, the treatment of any unspent funds accumulated to October 31, and what to expect during the transition.
The Grandfathering Provisions
Critically, these letters will also identify grandfathering eligibility (i.e. the “no-worse-off principle”).
Individuals who were receiving or had approval for a Home Care Package on 12 September 2024 qualify for grandfathering protection when the new rules commence.
This status provides two significant financial advantages:
- For Support at Home services: Contributions to independence and everyday living services are capped at 25 per cent of service costs, compared to the standard contribution rate of up to 80 per cent for non-grandfathered participants (this is different from the cost of clinical services, like nursing, which are fully government-funded).
- For future residential care: If transitioning to residential aged care any time from 1 November 2025, grandfathered individuals will be assessed under the previous framework for living and care fees (unless they opt into the new rules), though new accommodation cost rules will still apply.
This grandfathering status has lasting implications for immediate home care costs as well as future residential care planning. Services Australia is expected to issue follow-up correspondence after 1 November 2025, confirming each client’s specific contribution rates under the new program.
Attwood Marshall Lawyers – helping individuals navigate the aged care sector with confidence
With in-depth knowledge of the aged care sector, Attwood Marshall Lawyers is one of the few law firms with three Accredited Aged Care Professionals ready to provide up-to-date and trusted advice to the elderly and their families when making important decisions about aged care.
Whether you’re considering retirement living options, navigating aged care agreements, or need to revise your estate plan as you transition to care, we’re here to help.
To explore your options, please get in touch with our Aged Care and Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call 1800 621 071.
