Aged Care Reforms: What You Need to Know in 2026
In response to ongoing challenges in the aged care sector. The Australian Government has proposed significant changes to residential aged care costs. These changes take effect from 1 November 2025.
The reforms, based on recommendations from the Aged Care Taskforce Report, are designed to ensure the sustainability of the aged care system, which has seen increasing government expenditure and provider losses in recent years.
Key Changes to Residential Aged Care
Resident Contributions to Aged Care Costs:
- While the government will continue subsidizing residential care, residents with higher means (assets and income) will see increased contributions. Notably, half of all new residents entering care after 1 November 2025 are not expected to pay more under the new system.
- The Basic Daily Fee (BDF) remains unchanged, payable by all residents.
- Introduction of a Hoteling Supplement, which will require residents with assets over $238,000 and/or income above $95,400 to contribute toward accommodation costs.
- The current means-tested fee (MTF)will be replaced by the Non-Clinical Care Contribution (NCCC), which will be capped at $130,000 or four years in care, ensuring long-term affordability.
Aged Care Accommodation Costs:
- From 1 November 2025, the Refundable Accommodation Deposit (RAD) cap will increase from $550,000 to $750,000, indexed to CPI.
- Introducing A retention fee of 2% per year (calculated daily) for RADs, capped at five years.
- Indexing Daily Accommodation Payments (DAP) twice per year in line with inflation starting from 1 November 2025.
Sector Readiness and Additional Changes:
- The government plans to review the sector’s readiness to phase out RADs by 2035.
- Introduction of a supported decision-maker to assist aged care recipients in making decisions about their care.
- restricting Entry into aged care to those aged 65 and over, with some exceptions.
Impact on Clients Already in Aged Care
For clients already in residential aged care by 30 October 2025, the “no worse off” principle applies, meaning their care costs will not increase unless they switch facilities or leave care.
Additional Support and Resources
Changes shown below of pre and post entry on 1st November 2025.
Aged Care Reform Client Profile for Example
- Age: 85 years
- Home value: $1,000,000
- Financial assets: $500,000
- Assume entry into permanent residential aged care.
Summary Table of Aged Care Reforms
| Fee Type | Pre 1 Nov 2025 | Post 1 Nov 2025 |
| Basic Daily Fee | ~$23,203/year | ~$23,203/year |
| Hoteling Supplement | $0 (paid by Government) | Resident pays means tested contribution ~ $4,500+ |
| Non-Clinical Care Cost / MTCF | Means Tested Care Fee ~ $18,000/year | Non-Clinical Care Contribution ~ $36,000+/year (lifetime cap $130k) |
| Accommodation Fees | RAD or daily payment, no retention | RAD with 2% retention per year (up to 5 years) |
| Clinical Care Costs | Part resident contribution | Fully Government funded |
What the Aged Care reforms means practically
For an 85-year-old with $1M home and $500k financial assets entering aged care before 1 November 2025, fees will be lower overall compared to entering care after that date.
After 1 November, the client will face new contributions for Hoteling and Non-Clinical Care adding thousands annually, though the government covers clinical care fully.
The combined effect likely means a notably higher and more complex fee structure post 1 November 2025 Aged Care Refroms, with potential lifetime caps easing costs if the client stays long term.
The government continues to release resources and case studies to help residents and advisers understand the new rules which can be found here Case studies: residential care (health.gov.au).
For further advice or clarification book a strategy call at https://amgentwealth.com.au/contact/ to ensure the best planning for your care or that of your loved ones under the upcoming changes.
Ben Waite