In short

The Aged Care Act 2024 reshaped residential care fees from 1 November 2025. Residents who entered care before that date continue under the prior means-tested care fee (MTCF) framework, with an annual cap of $35,910 and lifetime cap of $86,185. New entrants face two new means-tested contributions. The basic daily fee ($66.80/day as at 20 March 2026) applies to all residents. The Age Pension continues to be paid throughout care.

The Aged Care Act 2024 introduced the most significant overhaul of Australia's aged care funding framework in a generation. The new Act commenced on 1 July 2025, replacing the Aged Care Act 1997 and bringing with it a revised fee structure, new obligations for aged care providers, and further changes that took effect from 1 November 2025. For retirees and their families, understanding the new framework — and how it differs from the Age Pension rules they may already know — is essential planning.

The Age Pension continues to be paid while a recipient is in residential aged care. There is no portability issue or special rule that suspends the pension upon entering care. What changes is how aged care fees interact with that income, and how the means assessment for aged care differs — often significantly — from the income and assets tests used to calculate the Age Pension itself.

How does the family home differ between the Age Pension and aged care means assessments?

The most important practical difference between the two systems concerns the family home. Under the Age Pension assets test, a recipient's principal home is excluded from assessment entirely, regardless of its value. The aged care means assessment treats the home differently: its value is included in the assessment up to a cap of $214,884 (as at 20 March 2026; My Aged Care, https://www.myagedcare.gov.au/means-assessments-residential-aged-care) — or the net market value of the home if lower. So a $2,500,000 family home counts as $214,884 in the aged care means assessment, while a $180,000 home counts at its actual $180,000 value.

This cap applies UNLESS a "protected person" is living there. A protected person is generally defined as: a spouse or partner; a dependent child; a carer who has lived in the home for at least two years before the resident's entry into care AND is eligible to receive an income support payment (e.g. Carer Payment); or a close relative who has lived in the home for at least five years before the resident's entry into care AND is eligible for an income support payment (e.g. Age Pension, JobSeeker, Disability Support Pension) (Core Value, https://www.corevalue.com.au/protected-person-aged-care/, current as at 5 May 2026). When a protected person is present, the home is fully exempt from the aged care means assessment.

When the last protected person leaves — because the surviving partner also enters care, or a partner passes away while the other is in residential care — the home's capped value enters the calculation. For many families, this transition point is when aged care fees increase substantially.

What is the basic daily fee for residential aged care?

Every resident pays a basic daily fee, which is set by the government and applies regardless of financial means. The basic daily fee is fixed at 85% of the single basic Age Pension rate and is updated each March and September alongside pension indexation. As at 20 March 2026, the basic daily fee is $66.80 per day (approximately $24,382 per year) (Department of Health, Disability and Ageing, https://www.health.gov.au/our-work/residential-aged-care/charging/basic-daily-fee). The fee is intended to cover daily living costs in the facility — meals, cleaning, laundry, heating and cooling.

How does the means-tested care fee work for pre-November 2025 entrants?

Residents who entered permanent residential care before 1 November 2025 continue to operate under the prior framework. They pay a means-tested care fee (MTCF) calculated based on their income and assets. The MTCF is subject to two caps that prevent it from accumulating without limit:

  • Annual cap: $35,910.43 per year (as at 20 March 2026; Services Australia, https://www.servicesaustralia.gov.au/annual-and-lifetime-caps-for-your-aged-care-costs)
  • Lifetime cap: $86,185.23 (across the entire time in aged care)

Once a resident reaches the annual cap in any care-anniversary year, their MTCF drops to zero for the remainder of that year. Once they reach the lifetime cap, the MTCF stops entirely. Both caps are indexed each March and September in line with wages growth and CPI movements.

What replaced the means-tested care fee for residents who entered care from 1 November 2025?

For anyone entering permanent residential care from 1 November 2025, the means-tested care fee no longer applies. Two new means-tested contributions have been introduced under the Aged Care Act 2024 reforms (My Aged Care, https://www.myagedcare.gov.au/changes-aged-care-fees-annual-and-lifetime-caps). The detailed parameters of the two new contributions are set in regulations made under the new Act and apply differently depending on the resident's income and asset position. Because the rules differ between pre- and post-November 2025 entrants, the date a resident moved into permanent care is the critical first question when modelling fees — the framework that applies depends on it.

How do RAD and DAP work under the new aged care framework?

The accommodation cost component — the choice between a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination — continues under the post-reform framework, with material changes effective 1 November 2025 (Services Australia, https://www.servicesaustralia.gov.au/residential-care). From that date, providers are required to retain a percentage of the lump sum accommodation payment (RAD) in certain circumstances, and indexation applies to some Daily Accommodation Payments.

The choice between RAD and DAP has always had Age Pension consequences and continues to do so. A paid RAD is exempt from the Age Pension assets test — the same capital held as cash or investments would be assessed under the standard income and assets tests. Residents with sufficient assets to pay a RAD may find that doing so reduces their assessable assets for Age Pension purposes, increasing the pension they receive. The financial calculus depends on the asset position, the RAD amount, prevailing investment returns, and how much Age Pension entitlement is at stake. (See the companion article on RAD vs DAP for the detailed mechanics.)

What is the Support at Home program and how do participant contributions work?

Outside of residential care, the home care landscape has also changed substantially. The Australian Government's Support at Home program replaced the prior Home Care Packages framework from 1 July 2025 (My Aged Care, https://www.myagedcare.gov.au/changes-contributions-while-accessing-support-home). The new program operates differently from its predecessor in eligibility, funding levels, and participant contributions.

There are eight ongoing service classifications, ranging from Classification 1 at $10,731 per year up to Classification 8 at $78,106 per year (Department of Health, Disability and Ageing, https://www.health.gov.au/our-work/support-at-home/charging-for-support-at-home-services/support-at-home-participant-contributions). The system divides services into three categories with different participant contribution structures:

  • Clinical Support Services (nursing, allied health, physiotherapy): no participant contribution. The Government fully funds these.
  • Independence Services (personal care, assistive technology): participant contributions of 5–50% depending on pension status. Full pensioners contribute at the lower end; self-funded retirees at the higher end.
  • Everyday Living Services (domestic assistance, gardening, transport): participant contributions of 17.5–80% with self-funded retirees not eligible for a Commonwealth Seniors Health Card paying the maximum rate.

A lifetime contribution cap of $135,318.69 (as at November 2025, indexed annually) applies across all aged care services combined. Once a participant reaches the lifetime cap they make no further contributions to non-clinical services.

A planned change worth noting: from 1 October 2026, the Australian Government will fully fund personal care services within Support at Home — meaning participants approved for personal care will access it at no out-of-pocket cost from that date.

Existing Home Care Package recipients who were on a package as at 30 June 2025 are subject to transition arrangements under the new program. Anyone currently receiving home care, or planning to access it, should seek current information directly from My Aged Care because the program is genuinely different from the Home Care Package model that many retirees were assessed for, and the numbers people encountered under the old framework may not carry across.

What does the new aged care framework look like applied to real examples?

Consider Norma, 82, single, who enters permanent residential care on 15 January 2026. She owns her home (net market value $760,000), holds $390,000 in financial assets, and receives the Age Pension at the part-pension rate. Under the post-1 November 2025 framework:

  • Her basic daily fee is $66.80/day = ~$24,382/year (set by the basic Age Pension rate at 85%).
  • Her family home enters the aged care means assessment at the cap of $214,884 (because no protected person remains — she lived alone). Her home does NOT affect her Age Pension assets test.
  • She faces the two new post-1 November 2025 contributions in lieu of the prior means-tested care fee — calculated against her income and asset position; her financial advisor will model the specific quantum.
  • If she pays a RAD funded from selling her home, the RAD value is exempt from the Age Pension assets test. The proceeds of sale — if held as cash before being paid as RAD — are subject to the standard sale-of-home exemption rules under DSS Guide 4.6.3.70 (typically 24 months, extendable to 36).
  • A lifetime contribution cap of $135,318.69 caps her total non-clinical contributions across all aged care services.

A second example for context. Consider Greg and Helen, both 79, married. Greg enters permanent residential care; Helen continues to live in their family home. Because Helen is a protected person (spouse, in residence), the family home is fully exempt from Greg's aged care means assessment. Greg pays the basic daily fee plus the two new contributions calculated on his and Helen's combined income and assets (with deductions for Helen's continued home occupancy). Should Helen later move into care herself or pass away, Greg's assessment will be re-done with the home now valued at the $214,884 cap — frequently the trigger for a meaningful fee increase. Pre-planning this transition point is one of the most valuable conversations a family can have.

How should families approach aged care financial planning?

Given the extent of these reforms, aged care financial planning is one area where general information reaches its limits quickly. The fee rules, means assessment parameters, and accommodation payment mechanics interact with an individual's specific asset position, pension entitlement, and family circumstances in ways that require case-specific modelling. A licensed financial adviser with specialist aged care experience — often holding the Accredited Aged Care Professional (ACAP) designation — is the right starting point for anyone facing these decisions. The choices made at the point of entering care are largely irreversible, which is why the conversation is worth having before it becomes urgent.

Sources

Key takeaways

  • The Aged Care Act 2024 commenced on 1 July 2025 and introduced a new residential aged care fee structure, with further changes from 1 November 2025. The date a person entered permanent residential care — before or after 1 November 2025 — determines which fee framework applies and is the critical first question when modelling aged care costs.
  • The basic daily fee applies to all residential aged care residents regardless of financial means. It is set at 85% of the single basic Age Pension rate and updated each March and September. As at 20 March 2026, the basic daily fee is $66.80 per day (approximately $24,382 per year).
  • The family home is treated differently under the Age Pension assets test and the aged care means assessment. Under the Age Pension assets test, the principal home is fully exempt. Under the aged care means assessment, the home value is included up to a cap of $214,884 (as at 20 March 2026) — unless a protected person (spouse, dependent child, or eligible carer or close relative) is living there, in which case the home is fully exempt.
  • For residents who entered care before 1 November 2025, the means-tested care fee (MTCF) applies, subject to an annual cap of $35,910.43 and a lifetime cap of $86,185.23 (as at 20 March 2026). Both caps are indexed each March and September. Once a resident reaches either cap, the MTCF stops for that period or permanently.
  • The Support at Home program replaced Home Care Packages from 1 July 2025. It has eight service classifications ranging from $10,731 to $78,106 per year and a combined lifetime cap of $135,318.69 on non-clinical contributions. From 1 October 2026, the government will fully fund personal care services within the program.

Frequently asked questions

Does the Age Pension stop when you go into aged care?

No. The Age Pension continues to be paid while a recipient is in residential aged care. There is no suspension or special rule that stops the pension on entry to care. What changes is how aged care fees interact with pension income and how the aged care means assessment differs from the Age Pension means test — the two systems run in parallel with different rules.

What is the basic daily fee for aged care in 2026?

The basic daily fee is set at 85% of the single basic Age Pension rate and is updated each March and September alongside pension indexation. As at 20 March 2026, the basic daily fee is $66.80 per day, which is approximately $24,382 per year. Every residential aged care resident pays this fee regardless of their income or assets.

How is the family home assessed for aged care fees?

For aged care fee purposes, the family home value is included in the means assessment up to a cap of $214,884 (as at 20 March 2026). However, if a protected person — a spouse, dependent child, or eligible carer or close relative meeting specific conditions — is living in the home, the home is fully exempt from the aged care means assessment. When the last protected person leaves, the capped value enters the calculation and fees often increase substantially.

What changed for aged care fees from 1 November 2025?

From 1 November 2025, the prior means-tested care fee (MTCF) framework no longer applies to new residents. Two new means-tested contributions were introduced under the Aged Care Act 2024 reforms. Existing residents who entered care before 1 November 2025 continue under the MTCF framework with annual ($35,910.43) and lifetime ($86,185.23) caps, both indexed each March and September.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.