Making Decisions
Understanding Aged Care Costs
When you take your first steps in aged care planning, it often brings a lot of questions. As well as common concerns about wellbeing and comfort, many families quietly wonder how it will work financially.
If this is new to you, you aren’t alone. Most people have never needed to learn about aged care costs before, so the system often feels overwhelming and complicated at first.
We can help you understand the process and where to go to access the right information on aged care costs in Australia.
Whilst we recommend you seek independent financial advice, a clearer understanding can take away any uncertainty you have, giving you full confidence to approach every decision calmly.
What Are Aged Care Costs?
In Australia, aged care is funded through a shared contribution between the individual and the Australian Government. Rather than a single payment, the total amount is made up of several parts. How much a person contributes depends on:
- the type of care they need
- their income and assets, assessed by Services Australia
- the services they choose
Government funding covers a large portion of the cost of care. After an aged care assessment, Services Australia completes a financial assessment to find out if a personal contribution applies.
Southern Cross Care does not assess finances and cannot advise you on payment choices, but we can help you understand the steps to take to find the right solution for your individual circumstances.
Understanding Aged Care Accommodation Costs
Accommodation payments relate to the room a person lives in within a residential aged care home. Across the aged care system, there are a few different payment arrangements so there’s something that’s achievable for you:
- Refundable Accommodation Deposit (RAD): This is a lump sum paid when first starting out in care that is refunded when the resident leaves the home, subject to any outstanding fees and any retained amounts. We retain 2% of the RAD per year (for up to five years, to a maximum of 10%). This amount will not be refunded, but the remaining RAD will be refunded to the resident or their family…
- Daily Accommodation Payment (DAP): Here, there is no lump sum. It is a recurring payment that accrues daily and is payable fortnightly, instead of needing to provide a large upfront payment.
- Combination payment: For some, the best aged care option is to pay a combination of RAD and DAP. The DAP will decrease because some money has been paid upfront with the RAD payment.
After the government’s means assessment, some residents may qualify for accommodation assistance or reduced payments depending on eligibility.
Are There Daily Fees or Living Contributions?
All residents pay a basic daily fee. This goes towards the everyday living expenses within your new home. It helps cover:
- meals and refreshments
- laundry and cleaning
- utilities such as electricity and water
- general household services
The basic daily fee is set nationally and applies to everyone in residential aged care.
What Is The Hotelling Contribution?
People who can afford to will contribute more by way of the hotelling contribution. This is a means-tested daily amount that helps cover everyday living costs such as meals, cleaning, laundry and shared services. If payable, the amount is determined through an income and assets assessment.
What Is The Non-Clinical Care Contribution?
If a person is assessed as paying the maximum hotelling contribution, they may also be required to pay a non clinical care contribution. This contribution helps to fund personal and social care supports. Clinical nursing care continues to be fully funded by the Government and is not charged to you.
If you are unsure how these contributions apply to you, My Aged Care and Services Australia will explain your individual situation in detail.
What Are The Higher Everyday Living Services?
These are optional fees for some services and supplies such as hairdressing and beauty services, newspaper deliveries, private internet, private telephone, private pay TV in your suite, optional therapy services and pharmaceuticals not included in your standard daily living and care arrangements.
Residents may choose to receive higher-level everyday living services beyond the standard living and care services that are already included in the fees above, and may be offered an optional Higher Everyday Living Fee (HELF). Choosing not to pay the HELF does not affect a person’s eligibility to move into or remain living in the home.
Is Government Subsidies or Support Available?
The Australian Government funds a significant part of aged care so you can continue to live life with respect, dignity and purpose. Any subsidies are paid directly to providers to reduce the amount individuals need to contribute.
Services Australia will look at your financial circumstances and determine if any further contributions and support is necessary. If paying for care would cause serious hardship, government hardship provisions may also be available.
We cannot provide financial advice, but we can help you understand who to contact and what steps come next as you make this transition. With Southern Cross Car, you never have to navigate the process alone.
Finding the Right Care Option for You
Costs change depending on the type of support you need and want. You may want residential aged care which includes everything from accommodation to clinical support. Or, you may feel more comfortable staying in your own home while receiving assistance for example.
Other factors that may influence costs include:
- level of care required
- location
- provider
- optional services chosen
Short-term respite care is different again and is usually charged as a daily fee for a limited stay.
Managing the Cost of Your Aged Care
Planning early makes every decision easier. Use the My Aged Care fee estimator to get a better understanding of your potential aged care costs. Prepare your documents for the financial review in advance and make sure they’re all accurate and up to date. This can include income statements, asset details and bank information.
At this stage, many families may choose to speak with a financial adviser or aged care specialist. Professional guidance can take the stress out of your aged care finances, giving you the clearest path to living the life you want to.
Common Pitfalls to Avoid
Ensure you have checked your subsidy eligibility before committing to payment arrangements to avoid unnecessary expense. It’s always best to wait for financial assessment results before moving forward.
Any optional services will also add to your total costs if they are not reviewed carefully. That’s why it’s important to ask what’s included and what isn’t.
Start Making Plans for the Future
Many families breathe a sigh of relief simply by getting the right information early.
We recommend seeking independent financial advice, and we can be there to support you through the care journey to make the transition easier.
Frequently Asked Questions
How much does aged care cost in Australia?
Costs vary depending on accommodation payments, daily fees and financial assessment outcomes. There are also government subsidies that can help for some residents.
What are aged care accommodation costs?
These are payments that go towards your room in residential care. They can be paid as a lump sum, a daily payment or as a combination of both – choose the plan that’s right for you.
What is a basic daily fee in residential aged care?
This is a standard daily contribution that covers meals, utilities, laundry and general living services.
How do means-tested fees affect my aged care costs?
They are additional contributions based on income and assets. Some residents will not pay them, and caps limit the total payable.
Can the government help reduce aged care costs?
Yes. Subsidies and financial hardship assistance may reduce or remove certain payments depending on eligibility.
How do I choose between RAD, DAP or a combination payment?
The choice depends on personal finances and preferences. Many families seek financial advice before deciding.
What happens if I cannot afford aged care services?
Financial hardship assistance may be available. Care is not refused because of financial difficulty.
How can I estimate my aged care costs before entering care?
Use the My Aged Care fee estimator and complete a financial assessment to receive an accurate indication of contributions.