Changes to Aged Care Fees on 1 November 2025

What It Could Mean for Your Retirement

From 1 November 2025, major changes to aged care fees come into effect. These adjustments will impact how residents pay for accommodation, the introduction of new contributions, and what eventually flows back to families through estate planning.

Key Changes

Refundable Accommodation Deposits (RADs) and Contributions (RACs):

• From 1 November, retention amounts will be deducted from RADs/RACs.
• Example: around 2% per year for up to 5 years, capped at 10%.
• The amount refunded to you or your estate will be less than what was paid in.

Daily Accommodation Payments (DAPs):

• DAPs remain linked to the Maximum Permissible Interest Rate (MPIR).
• The big change is that amounts will now be indexed, so costs may rise over time.

New Ongoing Fees:

• A Hotelling Supplement Contribution (HSC) will apply to everyday living costs like meals and laundry.
• A Non-Clinical Care Contribution (NCCC) will cover services such as administration and general support.
• These are means-tested, so the more assets and income you have, the more you may pay.

Estate Impact:

• RADs were previously refunded in full. Under the new rules, refunds will be reduced by retention amounts.
• This reduces the overall value flowing to your estate.
• Interest paid on late refunds remains taxable to the estate.

Why This Matters for Your Retirement and Estate

Cashflow:

• New contributions (HSC/NCCC) will increase ongoing costs.
• Choosing between a lump sum RAD or daily DAP becomes even more important.

Estate Planning:

• Families who were expecting the full RAD refunded will now see less returned.
• Liquidity for heirs may be reduced.

Tax Considerations:

• Refunds of RADs are not taxable, but interest on late repayments is.
• Funding DAPs by selling investments could trigger capital gains tax.

Example: How the New Rules Change Outcomes

Scenario:

• Room price: $550,000
• Option to pay RAD in full or DAP based on an MPIR of 7.61%

Entering in October (Before the Change)

• Pay a RAD of $550,000
• No retention. The estate gets the full $550,000 back
• Ongoing fees based on the old structure

Entering in November (After the Change)

• Pay a RAD of $550,000
• Retention of 2% per year for up to 5 years → $55,000 reduction
• Estate refund = $495,000
• Additional HSC and NCCC apply, raising yearly living costs

Key Take Aways

• Entering aged care before 1 November generally preserves more of your estate, as RADs are fully refundable and new contributions don’t apply.
• Entering after 1 November may mean higher ongoing costs, reduced refunds, and more impact on estate planning.
• Every family’s situation is different & the right choice depends on your assets, income, and care needs.

Aged care is already one of the biggest financial decisions in retirement. With new fees and rules starting 1 November 2025, planning becomes more important. The mix of RADs, DAPs, ongoing fees, and estate considerations could change your family’s position by tens of thousands of dollars.

Need Advice? Let’s Talk.

Talk to the accountants and professionals at Cashflow Financial to model your options and protect your retirement plan. The right advice now can save you money, reduce stress, and make sure your estate plan stays on track.