Aged care overhaul to shift more costs to self-funded retirees
The Albanese government has introduced an overhaul of the aged care funding system, requiring wealthier retirees and part-pensioners to contribute more based on their assets. Self-funded retirees receiving home care will pay up to 80% of everyday living costs and 50% of independence costs like transport. The reforms aim to make the system more financially sustainable while maintaining essential services. Despite an upfront $5.6 billion investment, aged care remains a major budget pressure, but these changes are expected to moderate its share of GDP.
Key Changes to Aged Care Reform
The Albanese government has announced significant changes to aged care. Here’s what you need to know:
How Much Will I Pay to Live in a Nursing Home?
Costs Divided into 3 Parts:
- Basic Daily Fee: Stays at $63.57/day (85% of the Age Pension).
- Care Fee: New non-clinical care contribution capped at $101.16/day.
- Accommodation Fees: Paid as a daily accommodation payment (DAP) or a bond (RAD).
What’s New?
- The hotel supplement of $12.55/day is now means-tested for those with more than $238,000 in assets or income over $95,400.
- The government will fully fund clinical care (services like nursing, physiotherapy).
- Non-clinical care includes help with showering, feeding, and dressing, and residents will start contributing if they have more than $502,981 in assets or income over $131,279.
What About Accommodation Costs?
- No changes for pensioners/part-pensioners—government continues to cover these costs.
- Daily Accommodation Payment will now be indexed twice to reflect rising costs.
- Refundable Accommodation Deposits (RAD): Providers can now take 2% per year for five years to maintain facilities.
- Bond Maximum: Increases from $550,000 to $750,000, indexed with inflation starting July 1, 2024.
- An independent review will phase out bonds entirely by 2035.
What Does This All Mean for Costs?
- For a self-funded retiree with $1.6M home and $500K assets, the contribution rises from $49,400 (35.6%) to $66,800 (44.8%).
- For a part pensioner with a $1.1M home and $350K assets, the contribution increases from $31,300 (22.6%) to $36,000 (25.7%).
Costs for Home Care
Full Pensioners:
- 17.5% of everyday living costs (meal prep, cleaning, gardening).
- 5% of independence costs (showering, medications).
Part Pensioners & Commonwealth Seniors Health Card Holders:
- 17.5% to 80% for everyday living.
- 5% to 50% for independence.
Self-Funded Retirees:
- 80% for everyday living.
- 50% for independence.
The government will pay the full cost of clinical care.
Will I Have to Sell My Family Home?
No. The family home remains protected—only the first $206,039 of its value is assessable for means testing.
If You’re Already in Aged Care
No-worse-off principle: If you’re in care before June 30, 2024, you won’t pay more under the new rules.
Lifetime Cap
A lifetime contribution cap of $130,000 applies, covering both home care and residential care.
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