Surprising Truths About Aged Care That Every Aussie Should Know

Surprising Truths About Aged Care Costs You Need to Know Now

Navigating aged care costs is one of the most stressful financial challenges a family can face. The system is complex, the stakes are high, and it's easy to feel like you're just along for the ride. But you have more control than you think.

My goal today is to hand you five critical levers you can pull to manage your financial outcomes in aged care. We’ll cut through the fog and focus on the most impactful truths about the fee system, especially the new rules that came into effect from 1 November 2025. Understanding these points will empower you to ask the right questions and make confident decisions.

1. Your 'Lump Sum' Accommodation Payment Isn't Just Sitting There

When you move into aged care, you can pay for your room with a lump sum. This is called a Refundable Accommodation Deposit (RAD), or a Refundable Accommodation Contribution (RAC) if you're receiving government assistance. Many people think of this as a simple bond that gets returned when you leave, but the reality is more complex.

First, that big lump sum is considered an asset. This means it's counted in your means assessment (the government's evaluation of your income and assets to determine what you can afford to pay). Because of this, the size of your RAD can directly affect other ongoing fees, such as the hotelling contribution (for daily living costs like meals and laundry), the non-clinical care contribution (for personal care), and even the means tested care fee. This is a crucial strategic point, because how you pay for your room directly impacts the size of the other ongoing fees we'll discuss later.

Second, for anyone who entered care on or after 1 November 2025, that "refundable" deposit isn't fully refundable. Under a rule called RAD/RAC retention, the provider deducts and keeps a small amount (calculated at 2% per annum) from your lump sum for up to five years. This amount is not returned to you.

This creates a core financial planning trade-off. Paying a large RAD reduces or eliminates your daily accommodation payment (which, as we'll see, rises over time). However, it also increases your assessable assets, which can lead to higher ongoing contributions for your care.

2. You Can (and Should) Haggle on the Room Price

Every aged care home must publish the maximum price for its rooms. What many families don't realise is that this is a starting point, not a final price tag. It's the most they are allowed to charge, but it is not set in stone.

My advice here is simple: always negotiate. Before you sign any accommodation agreement, you have the power to negotiate a lower price with the provider. This is one of the most significant and frequently missed opportunities to manage the overall cost of care. Don't be afraid to have that conversation; it could save you a substantial amount of money over the long term.

3. That 'Daily Payment' Might Not Be Fixed for Life

If you choose not to pay a lump sum for your room, you can pay a rental-style daily fee instead. This is called a Daily Accommodation Payment (DAP), or a Daily Accommodation Contribution (DAC) if you receive government assistance. Many assume this daily rate will be fixed for life, making it easy to budget for.

However, for anyone who entered care on or after 1 November 2025, this daily payment is subject to DAP indexing. This means the amount you pay will increase in March and September each year, which can catch people by surprise and impact long-term budgets. It’s important to note that this indexation does not apply to the Daily Accommodation Contributions (DAC) paid by residents who receive government help.

4. The Rulebook Was Rewritten in Late 2025

On 1 November 2025, the new Aged Care Act came into effect, fundamentally changing how residents contribute to their costs. This is critical to understand because it means that advice from friends or family whose loved ones entered care even a few years ago might now be completely outdated.

The new Act aims to make residents with greater means contribute more to their daily living and personal care. Your fees are now made up of several parts. Everyone pays a Basic Daily Fee for services like meals and utilities. On top of that, you may need to pay new fees like a hotelling contribution and a non-clinical care contribution, both of which are determined by your means assessment.

Protections are in place for people who were already in care before this date. The ‘no worse off’ principle means their existing fee arrangements generally stayed the same. So, when you hear about someone else's experience, the first question to ask is when they entered care.

5. 'Optional Extras' Are Now Safer and More Transparent

In the past, paying for optional services like premium meals or special activities could be a bit of a grey area. The new system provides much clearer rules and better protection for residents under what's now called the Higher Everyday Living Fee (HELF).

Unlike the old arrangements, the HELF system comes with important consumer safeguards. The agreement must be reviewed with you annually; you cannot be charged for a service you are unable to use, and most importantly, you have a 28-day period to change your mind and cancel the agreement after signing. This is a positive change that gives residents and their families more control and peace of mind.

Taking Control of the Conversation

The aged care system is complex, but it's not unmanageable. Understanding these truths means you can strategically structure your accommodation payment, confidently negotiate the price, and accurately budget for the long term. This is how you move from being a passenger to the driver in your aged care journey.

Now that you know what to look for, what's the first question you'll ask your potential aged care provider?

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Sean Sullivan is an Authorised Representative of Vivid Financial Planning Pty Ltd, and holds an Australian Financial Services License #478937.

The information on this Website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate for your needs and, where appropriate, seek professional advice from a financial adviser.