Understand aged care costs in Australia, including daily fees, accommodation and funding choices, so your family can plan early with greater confidence.
A move into aged care is rarely just a financial decision. It can follow a hospital stay, a gradual change in health, or the realisation that managing alone at home is becoming too difficult. At that point, understanding aged care costs can help you make choices with less pressure and more confidence – while protecting the independence and dignity of the person receiving care.
For many Australian families, the first surprise is that there is no single price for aged care. What you may pay depends on the type of care, your income and assets, the home you choose, and the services you want included. Knowing how the pieces fit together gives you time to consider your options rather than feeling forced into a decision.
If someone needs ongoing residential aged care, their costs usually fall into three broad areas: everyday living expenses, care costs, and accommodation. Some homes may also charge for optional extras, such as upgraded rooms, entertainment packages or additional lifestyle services.
The basic daily fee contributes to meals, cleaning, laundry, heating, cooling and day-to-day services. Most residents pay this fee, and it is generally linked to the Age Pension. The amount can change over time, so it is wise to confirm the current rate when comparing homes.
Some residents also pay a means-tested care fee. This contribution is based on an assessment of income and assets, usually undertaken through Services Australia or the Department of Veterans’ Affairs.
Not everyone pays this fee, and safeguards apply, including annual and lifetime caps. Still, the assessment can have a meaningful effect on cash flow. It is worth completing it early and checking that the information used reflects your circumstances accurately, particularly after a recent change in health, relationship status or investments.
Accommodation is often the largest and most discussed part of the bill. Depending on financial circumstances, the Australian Government may help with some or all of the accommodation cost. If you are required to contribute, a residential aged care home may offer several payment methods.
A refundable accommodation deposit, commonly called a RAD, is a lump sum. A daily accommodation payment, or DAP, is paid over time. You may also choose a combination of the two. A RAD is generally refundable when the resident leaves care, less amounts permitted under the agreement, while a DAP is an ongoing payment and is not refunded.
The right structure depends on your available savings, income, investments and plans for the family home. A large lump sum may reduce or remove a daily accommodation payment, but using too much cash can leave little flexibility for medical needs, personal spending or a spouse still living independently.
It is easy to focus on the major fees and overlook the smaller regular costs. These can include hairdressing, pharmacy items, continence products not covered by the home, clothing, telephone or mobile charges, transport, and optional extra services.
Ask each home for a clear written schedule of all charges. A room that looks less expensive at first may not be the better value once optional service packages and personal costs are included.
For older Australians, the family home is often both a place of security and the largest part of their wealth. Whether it is counted in an aged care means assessment can depend on individual circumstances, including whether a spouse or protected person continues living there.
This is where broad assumptions can be costly. Selling the home may appear to be the straightforward way to pay a RAD, but it can change pension entitlements, investment income, estate plans and the options available to a spouse. Holding onto the home can preserve choice and familiarity, but it may mean finding another way to fund accommodation and ongoing fees.
There is no universally right answer. The key is to look beyond the first payment and consider how each choice affects your position over the years ahead. A decision that works well for a short stay may not suit someone entering permanent care.
The strongest plans are built before a crisis. Even if you or a parent is living well at home, a simple conversation about preferences, finances and possible care needs can make an enormous difference later.
Start by working out what care is needed now. Help at home, respite care and permanent residential care have different costs and funding pathways. If residential care is being considered, obtain an aged care assessment and request fee estimates from more than one home in the preferred area.
Then bring together a realistic picture of finances: savings, superannuation, investments, pension income, property, debts and regular household expenses. Include the costs of maintaining the home if a partner remains there. This information is not just for forms – it is the foundation for deciding whether a lump sum, daily payment or a mix of both feels sustainable.
It can also help to write down the non-financial priorities. Is staying close to family essential? Does the person value a particular community, garden, faith service or social program? Financial decisions should support a good quality of life, not override it.
For homeowners aged 60 and over, home equity may provide another source of funding when savings alone are not enough or when selling the home is not the preferred option. A reverse mortgage or household loan can allow eligible homeowners to access some of the value in their property without making regular repayments, subject to the loan terms.
The funds may be used towards a RAD, daily care payments, home modifications, medical expenses or other retirement needs. Depending on the arrangement, the borrower can retain ownership of the home and continue living there for as long as they meet the loan conditions. This can be particularly valuable where one partner moves into care while the other wishes to stay in the family home.
However, releasing equity is a significant long-term decision, not a quick fix. Interest is commonly added to the loan balance, which means the amount owed can increase over time and reduce the equity available later. It may affect Age Pension outcomes, the estate left to family, and future choices if care needs change.
That is why clear, independent financial and legal guidance matters. Ask for projections that show how the loan could grow over different timeframes, what happens if the property is sold, and how much equity may remain under conservative property-value assumptions. You should also understand consumer protections, including the no negative equity guarantee available on eligible reverse mortgages.
Golden Years Finance helps older homeowners consider these questions patiently, with a focus on choice rather than pressure. The aim is not simply to find funds, but to help you decide whether home equity fits comfortably within your wider retirement plan.
Before signing an agreement, make sure you understand the full cost of the room and how it will be paid. Ask whether the quoted accommodation amount is refundable, how a daily payment is calculated, and what happens if you pay part of the amount upfront.
You should also ask what is included in the basic service, which extras are optional, how fees may change, and how much notice is required if the resident leaves. If a family member is helping with decisions, ensure the person entering care remains involved wherever possible. Their wishes matter.
If the finances feel complicated, do not treat that as a reason to decide faster. It is a reason to slow down, gather the right information and seek specialist advice. A well-considered plan can preserve more than money – it can preserve options at a time when choice matters most.
