Residential aged care in Australia is paid for in three layers: a basic daily fee that everyone pays, means-tested contributions towards everyday living and non-clinical care, and an accommodation payment for the room (a refundable lump sum, a daily payment, or a mix). Since the Aged Care Act 2024 commenced on 1 November 2025, the fee rules for new residents have changed significantly. For families, the harder questions are usually whether to sell the home, who signs, who funds the deposit, and where it goes when a parent dies.
The new Aged Care Act: what changed on 1 November 2025
The Commonwealth Aged Care Act 2024 commenced on 1 November 2025, replacing the Aged Care Act 1997. The changes that matter most to families are:
- Old and new arrangements run side by side. People who entered residential care on or before 31 October 2025 generally keep their existing fee arrangements under a “no worse off” principle, unless they choose to opt in to the new arrangements (a choice that cannot be reversed). People who were receiving, or approved for, a Home Care Package on or before 12 September 2024 generally remain on the old arrangements if they later move into residential care.
- New contributions. For people entering care from 1 November 2025, the old means-tested care fee is replaced by a hotelling contribution and a non-clinical care contribution.
- Deposit retention. Providers retain 2% a year of a new resident’s refundable deposit, for up to five years.
- Registered supporters. Representatives registered with My Aged Care became “registered supporters” on 1 November 2025. A supporter helps the older person understand and communicate their choices, but does not make decisions for them and does not replace an enduring power of attorney.
Step one: the aged care needs assessment
Entry to government-funded aged care is through My Aged Care. The usual sequence is to register, apply for a needs assessment, be assessed by an assessment organisation, and then approach particular homes once residential care is approved.
The needs assessment decides whether a person can enter care, not what they pay. Fees depend on a separate aged care means assessment by Services Australia (or the Department of Veterans’ Affairs). Lodge it early. Without a completed means assessment the home can charge the maximum hotelling and non-clinical care contributions, and the resident cannot receive government accommodation assistance.
How residential aged care fees work (entry from 1 November 2025)
| Fee | Who pays | Key points |
|---|
| Basic daily fee | All residents | 85% of the single basic Age Pension, indexed on 20 March and 20 September. The rate published for mid-2026 was in the order of $67 a day. |
| Hotelling contribution | Residents whose income or assets exceed set thresholds | Contributes to meals, cleaning and laundry. Capped daily (around $22 a day in mid-2026); Services Australia advises each resident’s amount. |
| Non-clinical care contribution | Residents who pay the full hotelling contribution and have higher means | Contributes to personal care such as bathing and mobility help. Capped daily, and stops once total contributions reach a lifetime cap (published at about $137,900 in mid-2026, indexed) or after four years of contributions, whichever comes first. Support at Home contributions count towards the cap. |
| Accommodation (RAD / DAP) | In full, in part, or government-funded, depending on the means assessment | See below. |
| Higher everyday living fee | Only residents who choose it | Replaces extra service fees; agreed after entry, never a condition of entry; 28-day cooling-off. |
Amounts are indexed and shown only as a guide. Check the current figures on My Aged Care and the fee advice letter from Services Australia. For couples, half of their combined non-pension income and assets is assessed to each, regardless of whose name they are in.
RAD or DAP: paying for the room
Each home publishes its room prices, usually as both a refundable accommodation deposit (RAD) and an equivalent daily accommodation payment (DAP), converted using the maximum permissible interest rate (MPIR). A provider needs prior approval to charge a room price above a government-set maximum (set at $789,686 from 1 July 2026).
- RAD: a lump sum refunded when the resident leaves or dies. For residents on the new arrangements, the provider retains 2% a year, calculated daily, for a maximum of five years. Retained amounts are not refunded.
- DAP: a daily payment that is not refunded. Under the new arrangements it is indexed on 20 March and 20 September.
- A combination: part deposit, part daily payment. This is common.
Under the new arrangements the room price must be agreed in writing in the accommodation agreement before entry. There is no fixed deadline to choose how to pay: the DAP applies until a lump sum is paid in full, and a lump sum can be paid or topped up at any time. One trap: a RAD counts as the resident’s asset for the aged care means assessment, which can increase the hotelling and non-clinical care contributions, while for the Age Pension assets test a RAD is generally exempt. The two systems treat the same money differently.
The family home: sell, rent or keep?
How the home is assessed for aged care fees
- If a “protected person” still lives there, the home is not counted. Protected persons include a partner, a dependent child, and a carer or close relative who has lived there for at least two years (carer) or five years (close relative) before the parent entered care and who is eligible for an income support payment at that time.
- Otherwise, the home is counted, but only up to a capped value (about $215,000 as published for mid-2026, indexed).
Age Pension effects
For a pensioner entering care, the former home is generally exempt from the pension assets test for two years (with special timing where a partner remains), after which it becomes an assessable asset. Rent from the former home is generally assessed as income for both the pension and the aged care means assessment, apart from limited transitional rules for people who entered care years ago. Sale proceeds become financial assets subject to deeming. Services Australia must be told within 14 days if the home is rented or sold.
Tax and state taxes
- Capital gains tax: after moving out, a person can generally keep treating the former home as their main residence for up to six years if it is rented out, or indefinitely if it is not, provided no other property is treated as their main residence. A foreign resident for tax purposes generally cannot claim the main residence exemption. Different rules apply if the home is sold by the estate or beneficiaries after death.
- Land tax: Victoria has temporary absence provisions for owners who move into care, but whether the exemption continues, particularly if the home is rented, depends on the conditions. Confirm with the State Revenue Office. A vacant home may also raise vacant residential land tax issues.
There is no standard answer. Weigh how the deposit will be funded, pension and fee effects, CGT, land tax, upkeep and the parent’s Will. If the Will leaves “my home” to one child and the home is sold during the parent’s lifetime, that gift may fail (adeem), changing what each child receives. Review the Will before any sale, and obtain tax advice from an accountant or tax adviser, as the right answer depends on the facts.
Who signs the aged care agreement, and the guarantor problem
The resident agreement and accommodation agreement should be entered into by the parent. If the parent no longer has capacity for the decision, they should be signed by someone with legal authority: an attorney under an enduring power of attorney, or an administrator or guardian appointed by the Victorian Civil and Administrative Tribunal (VCAT).
- An attorney should sign expressly “as attorney for” the parent, so that the obligation falls on the parent’s assets.
- Be cautious about any clause asking a child to sign in their personal capacity, to guarantee payment, or to accept responsibility as a “family member”. That may expose you personally for unpaid fees. Ask for the documents in advance rather than signing on admission day.
- A registered supporter has no power to make decisions or to sign binding contracts on the parent’s behalf in that capacity.
Victoria: enduring powers of attorney and medical treatment decision makers
- Enduring power of attorney: can cover financial matters (selling the home, paying the deposit, signing agreements) and personal matters (including where the parent lives and what support services they receive). It continues after the parent loses capacity, but must be made while the parent still has capacity.
- Medical treatment decision maker: makes medical treatment decisions if the parent cannot, and works alongside any advance care directive.
If a parent’s cognition has declined and these documents were never made, the family may have to apply to VCAT for an administrator or guardian. That is slower, more public and often contentious, so act while the parent can still decide.
Parents on parent visas, or without the Age Pension
Many parents in Chinese-Australian families arrived later in life on parent visas or spent long periods overseas, and may not meet the Age Pension residence requirement (generally 10 years of Australian residence, including at least five continuous years, subject to exceptions such as international social security agreements).
- Not qualifying for the pension does not by itself prevent entry to aged care. Eligibility turns mainly on assessed care needs, and the Act does not exclude all non-citizens and non-permanent residents, but check the position with My Aged Care before relying on it.
- Without a pension, more of the cost is generally self-funded: the basic daily fee, any contributions, and the accommodation payment.
- The means assessment generally takes overseas income and assets into account, for example property, bank deposits or rent in China, Hong Kong, Taiwan, Singapore or Malaysia. These must be declared accurately, with supporting documents and translations where needed.
Who pays the RAD? Siblings, loans and fairness
A RAD can run to hundreds of thousands of dollars. Where a parent lacks the cash, one child often pays it, or siblings share it. The legal point families miss is that the deposit belongs to the parent. On death it is refunded to the parent’s estate and passes under the Will or the intestacy rules. It does not automatically go back to the child who paid it.
- If the money is a loan, record it in a written loan agreement signed by the parent: the amount, whether interest is payable, and when it is repaid (for example, from the RAD refund before the estate is distributed).
- If it is a gift, record that too, so siblings cannot later dispute it.
- A child who funds the deposit may also be the parent’s attorney. Keep accounts and avoid any conflict between the parent’s interests and your own.
- The arrangement affects the means assessment and the eventual estate, so review the parent’s Will at the same time.
Unrecorded contributions of this kind are a common source of disputes between siblings in estate administration.
When a parent dies: the RAD refund and the estate
The provider must refund the deposit balance (less authorised deductions and any retention) within 14 days after it sights probate, letters of administration or other satisfactory evidence of who is entitled to the refund. Interest at the base interest rate runs from the day after death to the end of the refund period, and at the higher MPIR if the refund is paid late.
In practice the RAD is often the largest liquid asset in the estate, and most providers will ask for a grant before refunding. See Do I need probate? Once refunded, the executor deals with it under the Will, including repaying any documented loan from a child; the executor duties checklist sets out the steps.
Warning signs of elder abuse
Large transactions and declining capacity around the move into care create a risk of financial abuse. Warning signs include:
- a family member suddenly pressing for changes to the Will, power of attorney or property title;
- unexplained large transfers or withdrawals from the parent’s accounts;
- other relatives or friends being prevented from visiting or calling;
- aged care fees falling into arrears when the parent should have sufficient funds;
- the parent appearing fearful, withdrawn or unable to say where their money has gone.
In Victoria, Seniors Rights Victoria runs an elder abuse helpline on 1300 368 821 (interpreters through TIS on 131 450). In an emergency call 000. An attorney’s conduct can be reviewed by VCAT.
Checklist before moving a parent into aged care
- Register with My Aged Care and complete the needs assessment.
- Lodge the means assessment with Services Australia early, declaring overseas income and assets.
- Confirm the parent has an enduring power of attorney (financial and personal) and a medical treatment decision maker; if they still have capacity, make them now.
- Review the parent’s Will against the plans for the home, the RAD and any family contributions.
- Compare room prices, RAD/DAP combinations and optional fees across several homes.
- Read the resident and accommodation agreements before entry, especially the signing capacity and any guarantee clauses.
- Get tax advice before selling, renting or holding the home (CGT, land tax, pension effects).
- Document any sibling contribution as a loan or a gift.
- Keep proof of the RAD payment and a note of the refund terms and provider contact.
- Agree in writing between siblings on cost-sharing and visiting arrangements.
Common mistakes
- Assuming the RAD is refunded in full. Retention (2% a year for up to five years under the new arrangements) and fees drawn from the deposit are not refunded.
- Assuming the child who paid owns the refund. The refund goes to the estate unless there is a clear loan arrangement.
- Signing without authority. Being the eldest child, or a registered supporter, gives no power to sign contracts or deal with a parent’s property.
- Selling the home without checking the Will. A specific gift of the home may fail.
How we can assist
We assist families before and after a parent moves into care: preparing enduring powers of attorney and medical treatment decision maker appointments, reviewing aged care agreements for signing and guarantee issues, documenting family loans or gifts, reviewing and updating Wills, and, after death, obtaining probate, recovering the RAD refund and mediating disagreements between siblings. On means assessment calculations and tax, we work alongside the family’s financial planner or accountant.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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