What an aged care room costs where you live — and the part of the price you never get back

If you have just been quoted a room price, the first question is almost always the same: is that normal?

There is no easy answer, because accommodation prices in residential aged care vary more by location than almost any other cost in retirement. The same standard of care, the same level of clinical support, the same daily fees — and an accommodation price that can differ by hundreds of thousands of dollars depending on which side of a city boundary the home sits on.

That variation is worth understanding on its own. But there is a second point, newer and much less well known, that changes what the comparison actually means. For people who entered care under the arrangements that began on 1 November 2025, a portion of what they pay is not refundable at all. And because that portion is calculated as a percentage, the more expensive room permanently consumes more of the family's capital — not just temporarily ties up more of it.

Why location moves the price so much

The accommodation payment is not a payment for care. Care is funded separately, through government subsidies and the means-tested contributions residents make toward it. The accommodation payment pays for the building — the land it sits on, the cost of constructing and maintaining it, and the features of the particular room.

Once you see it that way, the geography makes sense. An aged care home in an inner capital-city suburb sits on land that might cost ten times what the equivalent block costs in a regional centre. The building has to recover that. A newer home with single rooms, ensuites and courtyard access recovers more than an older one with shared facilities. And in areas where several homes compete for the same residents, prices tend to sit lower than in areas where there is effectively one option.

None of this is a signal about care quality. A lower-priced room in a regional town is not a lesser room in any clinical sense — it is a room on cheaper land. Quality is measured through the star ratings and the regulatory framework, not the price list.

How wide is the spread, really?

Wide. As an illustration, one commercial aged care directory published a snapshot in June 2026, drawn from its own sample of around 110 providers, showing median room prices of roughly $719,000 in Sydney against roughly $490,000 in Brisbane — a gap of about $230,000 for what may be a very similar room. Across its full sample the range ran from around $325,000 at the bottom to over $1.4 million at the top.

Treat those figures as an indication of the shape of the market, not as official statistics. They are one private dataset's snapshot at one point in time, not a government publication. The authoritative source for any individual home is My Aged Care, where providers are required to publish their room prices, and where you can compare homes in a specific area directly (My Aged Care, https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs).

But the order of magnitude is the useful part. A quoted price is not meaningfully "high" or "low" in the abstract. It is high or low relative to other homes in the same area, and that is the only comparison worth making.

The part you never get back

Here is what most families are not told when they compare prices.

Where a resident pays a refundable accommodation deposit — a RAD, or a refundable accommodation contribution for residents whose means assessment puts them in that category — the provider deducts a retention amount from it. This is not something a particular home has decided to do to you. The rate is set in legislation, and the Department of Health, Disability and Ageing describes the mechanics precisely (https://www.health.gov.au/our-work/residential-aged-care/charging/rad-and-rac-retention).

The retention is calculated daily at a rate of 2% per annum of the refundable deposit, and it is limited to five years, with that five-year period beginning on the day the deposit is first paid. After five years in care, no further retention can be deducted. It must be taken at least once in each three-month period but not more than once in any one-month period, so a family will typically see it appear as a quarterly or monthly line on the statement. The amounts deducted are not refundable — they do not come back to the resident on departure, and they do not come back to the estate. Each deduction also reduces the maximum deposit the provider is permitted to hold.

So the word "refundable" now needs a footnote. Over a full five-year stay, close to 10% of the deposit is permanently gone — a shade under, in fact, because each deduction shrinks the balance the next one is calculated on.

Whether the retention rule applies to you at all

This is the question to settle before doing any of the arithmetic, and it is the part the general commentary tends to skip.

Retention applies to residents who contribute to their accommodation costs through a RAD or a refundable accommodation contribution, who entered an aged care home on or after 1 November 2025, and who are on the 1 November 2025 fee arrangements when they enter (Department of Health, Disability and Ageing, https://www.health.gov.au/our-work/residential-aged-care/charging/rad-and-rac-retention).

If your parent moved permanently into an aged care home on or before 31 October 2025, they are covered by what the Government calls the "no worse off" principle: their existing resident fees and accommodation costs stay the same for as long as they remain in care, unless they opt in to the 1 November 2025 arrangements (My Aged Care, https://www.myagedcare.gov.au/aged-care-costs-if-you-entered-care-between-2014-and-2025). Retention does not apply to a resident who was under the pre-1 July 2014 accommodation arrangements as at 31 October 2025, and it does not apply to a resident on the 1 July 2014 arrangements who pays a RAD or contribution — even if that deposit is actually paid after 1 November 2025.

The protection is durable, but it is not unconditional in every circumstance. For someone who moved in between 1 July 2014 and 31 October 2025, the accommodation reforms — retention and the daily payment indexation described below — begin to apply if they move to a new service after opting into the 1 November 2025 arrangements, or if they return to care following a break of more than 28 days. Opting in is a deliberate act, done on a form lodged by the provider with Services Australia. If a move between homes is on the table, that is the moment to ask the question in writing rather than after the fact. Our article on what changed under the new Aged Care Act sets out the wider reform.

If you pay daily instead, the price moves

The other half of the accommodation decision is that any published RAD can be paid as a daily accommodation payment instead, or as a combination of the two, with the conversion made using a government-set interest rate published quarterly — the maximum permissible interest rate, or MPIR, which is 8.43% for the quarter from 1 July 2026 to 30 September 2026 (Department of Health, Disability and Ageing, https://www.health.gov.au/resources/publications/base-interest-rate-bir-and-maximum-permissible-interest-rate-mpir-for-residential-aged-care). The rate that matters for an accommodation payment is the one current on the day the room price was agreed, not the one current today. That choice deserves its own analysis — see RAD or DAP: which way to pay.

What is newer, and what the quote will not tell you, is that daily accommodation payments are now indexed. For the same cohort — residents who entered on or after 1 November 2025 and are on the new arrangements — the provider indexes the daily payment twice a year, on 20 March and 20 September, in line with movements in the Consumer Price Index. The first such indexation took effect on 20 March 2026. Indexation does not apply to daily accommodation contributions, which are what part-means residents pay (Department of Health, Disability and Ageing, https://www.health.gov.au/our-work/residential-aged-care/charging/dap-indexation).

That matters for the comparison, because it means the lump sum and the daily payment are no longer two ways of paying the same fixed price. One is eroded by retention; the other rises with inflation. Which of those is the better exposure depends on how long someone is likely to be in care and where the money would otherwise sit — which is precisely why it is a question for a conversation, not a rule of thumb.

Worked strategy examples

Margaret, 84, single, entering a Sydney home in March 2026. Margaret sold her home in Sydney's inner west and moved into a residential aged care home a short drive from her son. She entered after 1 November 2025 and is on the current fee arrangements, and her means assessment puts her in the full-cost category. The room is priced at $719,000, close to the illustrative Sydney median above (June 2026), and she pays it as a lump-sum RAD.

Retention at 2% per annum takes roughly $14,400 in the first year. If Margaret lives in care for the full five years the rule runs, something in the order of $70,000 of that deposit is permanently consumed — it will not be refunded to her and it will not reach her estate. If she is in care for two and a half years, the exposure is roughly half that, around $35,000, because retention stops the day she leaves. Her family also pays the basic daily fee of $66.80 a day (as at 20 March 2026, indexed each 20 March and 20 September) and any means-tested care fee, neither of which is affected by which room she chose. On these facts, treating the accommodation decision as a decision about roughly $70,000 of permanently spent capital — rather than purely about $719,000 of tied-up capital — is generally the more accurate frame.

Robert, 88, in a regional Victorian home since June 2025, whose family wants him closer. Robert moved in before 1 November 2025 and paid a RAD of $420,000. He is covered by the no worse off principle, so no retention is being deducted from his deposit at all, and nothing about his accommodation cost is being indexed. His daughter now lives in Melbourne and has found a home near her, quoted at $690,000.

The obvious cost of the move is the extra capital: $270,000 more locked up in a larger deposit, which is returned. The cost nobody mentions is that if the move is made after opting into the 1 November 2025 arrangements, Robert's protection ends and the reforms begin to apply to him. Retention at 2% per annum on a $690,000 deposit is roughly $13,800 a year, and something in the order of $66,000 across a full five years — none of which he would pay by staying where he is. On these facts, the move is not a $270,000 decision but closer to a $270,000-plus-$66,000 decision, and the sensible step is to establish in writing, with the provider and Services Australia, exactly which arrangements would apply after the move before anything is signed.

Neither example says the move or the expensive room is wrong. Proximity to family is worth a great deal, and so is a room someone will actually be happy in. The point is that the location premium has a permanent component that nobody puts on the quote.

What the published price actually means

Three things are worth knowing before you treat a published number as your number.

It is a ceiling, not a bill. The published price is what a resident with sufficient means pays. Your actual accommodation cost is determined by your means assessment, and depending on where you land you may pay the full amount, a partial contribution, or nothing at all with the government paying on your behalf.

There is also a regulated maximum. A provider can only charge above a prescribed maximum accommodation payment amount if it has approval from the Independent Health and Aged Care Pricing Authority (IHACPA, https://www.ihacpa.gov.au/aged-care/refundable-accommodation-deposits). That maximum rose from $550,000 to $750,000 on 1 January 2025 and is indexed each 1 July in line with the Consumer Price Index. It was $758,627 from 1 July 2025, and from 1 July 2026 it is $789,686 (Department of Health, Disability and Ageing, https://www.health.gov.au/our-work/residential-aged-care/charging/maximum-accommodation-payment-amounts). A price above the ceiling is not automatically a red flag; it means the home has been through an approval process.

And the ceiling is not the whole story of what you will pay. For the mechanics of reading and comparing a quoted price in detail, our article on comparing RAD prices covers that ground more thoroughly than this one does.

How to sanity-check a number you have been quoted

Start by comparing within the area rather than across the country. Pull up several homes within a sensible radius on My Aged Care and look at the spread — a price that is high nationally may be entirely ordinary locally, and the reverse is just as true. Then ask what the price actually buys: room size, ensuite, outlook, single versus shared, the age of the building. Providers publish prices by room type for a reason, and the reason is that the room types are genuinely different. It is also worth asking whether the price is negotiable, because it sometimes is, particularly where a home has vacancies.

Then do the two pieces of arithmetic that the quote will not do for you. Establish first whether the retention rule applies at all, using the entry date and fee arrangements above. If it does, work out 2% of the deposit per year for up to five years, on every option you are comparing and not just the one you are leaning toward. Finally, keep the accommodation price separate from the ongoing fees in your head — the basic daily fee and any means-tested care fee are separate continuing costs and do not change according to which room is chosen — and resist using price as a proxy for quality. Star ratings, staffing levels and your own visit tell you far more than a number does.

If the deposit is going to come from the family home, the decision about whether to keep, rent or sell it interacts with all of this, as does funding a RAD from home equity. For what actually flows back to the estate, and when, see our article on the RAD refund after a resident dies. And the financial comparison is only half the exercise — choosing a home properly involves a great deal that no price list captures.

The point

Where someone enters residential aged care can change the accommodation price by several hundred thousand dollars, for reasons that are mostly about land values and almost nothing to do with the standard of care.

Most families understand that the deposit is a large sum tied up for the duration. Far fewer understand that, for anyone who entered care from 1 November 2025, a defined slice of it — 2% a year, for up to five years — is not tied up at all, but spent. And because it is a percentage, the postcode decision carries a permanent cost that scales with the price. That does not make the expensive room the wrong room. It makes it a decision worth pricing properly before you sign.

Sources

• Department of Health, Disability and Ageing — refundable accommodation deposit and contribution (RAD and RAC) retention
• Department of Health, Disability and Ageing — daily accommodation payment (DAP) indexation
• My Aged Care — aged care costs if you entered care between 2014 and 2025
• Department of Health, Disability and Ageing — fee and accommodation arrangements for residential aged care
• My Aged Care — understanding aged care home accommodation costs
• Department of Health, Disability and Ageing — published prices and maximum accommodation payment amounts
• Department of Health, Disability and Ageing — base interest rate (BIR) and maximum permissible interest rate (MPIR) for residential aged care
• IHACPA — refundable accommodation deposits
• Illustrative city median room prices — third-party commercial aged care directory, self-described sample of approximately 110 providers, page-dated 11 June 2026 (not an official statistic; used only to illustrate the magnitude of geographic variation)