Understanding Aged Care Fees and Charges

Moving into an aged care facility can be daunting for both the older person and their family members. There are a number of things to consider before making this decision, one of which is the cost. The costs associated with moving into an aged care home will vary based on the type of place you move into, the level of care that you need and your personal financial situation. An assessment of your income and assets (means assessment) will be conducted in order to calculate how much you can afford to pay.

Many care homes are at least partially government-subsidised, and the government also enforces limits on how much you can be asked to pay. It might be a good idea to speak with a financial advisor to help you choose the best option when moving into an aged care home.

The Main Costs of an Aged Care Home

There are four main types of fees associated with living in an aged care home. How much you will have to pay will vary depending on the service/facility you choose as well as the results of your income assessment. The four main costs are:

  • Basic daily fee
  • Means-tested care fee
  • Accommodation costs
  • Fees for additional services

Basic Daily Fee

All residents pay the basic daily fee and it applies for every day that you are a resident, including days when you might stay overnight somewhere else. This fee helps to cover essential living costs like meals, laundry, cleaning, facilities management, power and phone usage.

This fee is set at 85% of the single Age Pension decided by the Government. The Age Pension is indexed twice a year, on the 20th March and 20th September, so the maximum basic daily fee is adjusted accordingly each time. The basic daily fee is paid directly to your aged care home.

Means-Tested Care Fee

The means-tested care fee (also known as the income tested care fee) is an extra contribution that only some people will have to pay, based on the assessment of your income and assets (means assessment). The fee varies based on how much you can afford and will also be different depending on whether you’re single or part of a couple. If you are a part of a couple, the fee will be based on half of your combined income and assets, regardless of who owns what.

You will usually have to complete your means assessment before you have entered the aged care home, but you can enter beforehand if you don’t have time to wait. If you do need to pay a means-tested care fee, this amount is not fixed and may change over time. You may wish to calculate an estimate of your means-tested care fee when deciding on the service that’s right for you.

There are annual and lifetime caps on the means-tested care fee and once you have reached these caps you will not be required to pay more.  These caps will also be readjusted twice a year when the Age Pension is indexed. If you were receiving a home care package before entering into an aged care home and paying an income-tested fee, then those extra contributions will count towards your annual and lifetime caps.

Accommodation Costs

The accommodation cost will be set by each individual aged care home and the amount you have to pay will vary based on a number of factors. The price of your room will depend on the location of the facility, the size and type of room, whether it’s a single or shared room and the facilities that the home provides. The amount you have to pay, like the means-tested care fee, will also depend on your eligibility for government help.

The government may pay part or all of your accommodation costs depending on the assessment of your income and assets as well as the cost of the room itself. The maximum amount that the government will cover is $55 per day, so if the daily accommodation cost is greater than this, the resident will have to cover the difference.

Aged Care Accommodation Payment

The accommodation payment will be quoted by an aged care provider as both an RAD (refundable accommodation payment) and a DAP (daily accommodation payment).

Refundable Accommodation Deposit (RAD)

When you enter into an aged care home, you will be given the option of whether to pay for your accommodation as a fully refundable lump sum (RAD) or as a daily payment. You can also pay a combination of both if you wish.

The price of the RAD in comparison to the DAP is based on an interest rate set by the government. You will be given 28 days to decide how you want to pay for your accommodation upon admission to the facility.

When you leave or pass away, the full amount that you paid for the RAD will be refunded to you.

Daily Accommodation Payment (DAP)

If you choose to pay the daily accommodation payment, you will have to pay this directly to the aged care home every day that you are a resident there, including days when you don’t stay overnight. 

Your DAP will also vary depending on the type of room you choose at the facility you go to. Private rooms and rooms with better facilities may require a higher DAP.

Combination Costs

You can pay a combination of the RAD and the DAP if that suits you. If you pay the full RAD upfront, your DAP will be reduced to zero. If you choose to pay part of the RAD upfront, the DAP will be reduced accordingly. For example, if you pay 50% of the RAD upfront, you will only have to pay 50% of the DAP.

Drawdown Payment

You may be able to draw down on the RAD to pay other aged care costs such as your basic daily fee or your means-tested care fee. You may also be able to draw down on the RAD to cover the remaining costs of the DAP, if you paid a partial RAD to begin with. However, if you do this you may be required to top up the lump sum to bring it back up to the initial amount that you paid.

You may wish to seek financial advice when deciding how you would like to pay for your accommodation.

Fees for Additional Services

There may be additional costs associated with the choices you make about the services provided to you. For example, you may wish to pay for extras such as internet, a television, beauty services like massages or a hairdresser, a greater selection of meals or facilities like a gym or pool. Additional fees might also be required for things like dry cleaning and special events.

Fees for additional services are set by the aged care home itself and not subsidised by the government. You may be able to pick and choose what services you would like or you may only have the option of a package.

How do I find out how much I need to pay?

It’s important to consider costs when you’re in the process of deciding which aged care home is right for you. It may be helpful to get an estimate in order to factor in how your personal financial situation will affect your fees.

You can use the fee estimator to get an idea of your basic costs as well as whether or not you might be eligible for government assistance. You can also use the find a provider tool to check accommodation costs and see what extra services are offered.

You will usually need to have means assessment to be able to calculate your actual costs.

What if I can’t afford the aged care costs?

If you are unable to cover the costs of your aged care services then you can apply for financial hardship assistance. This is assessed on an individual basis. If you are assessed to be eligible then the Australian Government will cover some or all of your costs. However, regardless of whether or not you receive financial hardship assistance, the Government does not subsidise the cost of extra service fees or additional service fees.

Can I seek financial assistance?

Yes, it’s recommended that you seek financial advice before making a decision. Some payment methods may affect your pension and if you are in a couple your fees could be affected by your partner.

You may want to contact the Financial Information Service (FIS) for more information.


How are aged care fees calculated?

Most aged care providers can offer the option of government-subsidised care. Your eligibility for this will be based on an assessment of your income and assets, called a means assessment.

Some providers may be more expensive than others, depending on the range and type of services they offer.

Your total costs will therefore depend largely on what provider you choose as well as how much of your care will be covered by the government.

How do I know which aged care costs I have to pay?

The fees you have to pay will depend on the type of care you need. The two main types of Residential Aged Care are respite and permanent.

Respite Care

Respite care is a short-term stay at an aged care home that is usually needed to give at-home carers a break. Up to 63 days of care in a financial year can be subsidised by the Australian government. Residents in respite care usually only need to pay the basic daily care fee, unless the facility also requires an extra services fee as a standard.

Permanent Care

Permanent care is recommended for those who are no longer able to look after themselves on their own. It includes accommodation and round the clock care and support. The fees vary depending on the facility and the older person’s income and assets.

Supported Resident

If the older person has assets below the value of $51,500 (as of March 2022) then they are deemed a supported resident and will not have to pay accommodation costs. They will still have to pay the basic daily care fee as well as any extra services fee.

Partially Supported Resident

If the older person has assets of a value between $51,500 and $175,239.20 then they are a partially supported resident. A partially supported resident may still receive government subsidisation for accommodation but will need to pay the basic daily fee as well as any extra services fee.

RAD Payer

If the older person has assets of a value greater than $175,239.20 then they are considered an RAD payer. This means they will have to pay the basic daily care fee, the means tested care fee, the accommodation payment and any extra services fee that may apply.

What should we do with the family home?

The decision as to whether you should sell or rent out the family home should be discussed with a financial advisor. Selling your home may impact your calculated aged care costs.

Can we negotiate aged care fees?

Some aged care fees are negotiable while others are not. For example, accommodation costs can often be negotiated with aged care facilities and the payment method can also be more flexible. However, basic daily care fees and means tested care fees are not negotiable. Extra services fees and additional services fees may also be negotiable depending on the policy of the facility.

Jun 15, 2022