The Aged Care Act 2024 (Cth) commenced on 1 November 2025 and introduced the most significant changes to Australia’s aged care system in over 30 years. If you or a family member are considering entering residential aged care — or are already in care — this post explains what has changed and what it means financially.
Who Does This Affect?
The new rules apply to anyone who enters permanent residential aged care on or after 1 November 2025. If you were already in care before that date, the “not worse off” rule applies — more on that below.
The Four Costs of Residential Aged Care Under the New Rules
Under the new system, residents on the 1 November 2025 fee arrangements may pay up to four types of fees:
- Basic Daily Fee
- Hotelling Contribution
- Non-Clinical Care Contribution (NCCC)
- Accommodation costs (RAD, DAP or a combination)
1. Basic Daily Fee
Everyone pays this — regardless of income or assets. It covers everyday living services including meals, laundry and cleaning. The current rate is $65.55 per day (approximately $23,926 per year). This fee is indexed regularly.
2. The Hotelling Contribution — New from 1 November 2025
This is a new means-tested fee that replaces part of what was previously covered by the basic daily fee alone. It is a contribution toward the cost of daily living services in the facility — catering, cleaning, gardening and shared amenities.
Whether you pay it — and how much — depends on your income and assets. The current maximum is $22.15 per day. There is no annual or lifetime cap on this fee, which means it continues for the entire duration of a resident’s stay.
Example: Margaret is a single retiree entering care in December 2025. She has assessable assets of $450,000 and a modest income. She will be assessed for the hotelling contribution. Depending on her means assessment, she may pay anywhere from nothing up to $22.15 per day in addition to the basic daily fee.
Residents whose income and assets are below the relevant thresholds pay nothing — the Government covers the hotelling supplement in full for those residents.
3. Non-Clinical Care Contribution (NCCC) — New from 1 November 2025
This fee replaces the old means-tested care fee and covers the cost of personal care — bathing, mobility assistance and lifestyle activities. Clinical care (nursing and medical services) is now fully funded by the Government — residents no longer pay for it directly.
The NCCC is means-tested and only applies to residents who are already paying the full hotelling contribution. The current maximum is $105.30 per day, with a lifetime cap of $135,318.69 or four years in care — whichever comes first. Once the lifetime cap is reached, no further NCCC is payable.
4. Accommodation Costs — RAD, DAP and the New Retention Rules
Accommodation costs cover the resident’s room. They can be paid as:
- A Refundable Accommodation Deposit (RAD) — an upfront lump sum, refunded when the resident leaves care (subject to retention — see below)
- A Daily Accommodation Payment (DAP) — a non-refundable daily fee
- A combination of both
The maximum room price has increased to $750,000 under the new rules.
The RAD Retention — A Major Change
Previously, the RAD was refunded in full when a resident left care. Under the new rules, providers can now retain 2% of the RAD balance per year, for a maximum of five years — capped at 10% total. The retention is calculated daily and deducted monthly.
Example: Frank pays a $500,000 RAD in December 2025. After five years in care, the provider will have retained up to $50,000 — 10% of $500,000. Frank or his estate will receive $450,000 on departure from care, not $500,000.
For a $750,000 RAD, the maximum retention over five years is $75,000.
This change means the RAD is no longer a fully refundable deposit. It is a material term of the accommodation agreement and needs to be clearly understood before it is signed. The retention rate, how it is calculated, and when it is deducted should all be confirmed in the agreement.
The DAP option may suit some residents better — particularly those who may not remain in care for many years. However, the DAP is now indexed to CPI twice a year (in March and September), so it will increase over time and the long-term cost should be carefully considered before choosing this option.
The “Not Worse Off” Rule — Protection for Existing Residents
If you were already in permanent residential aged care on or before 31 October 2025, the new fee arrangements do not apply to you. Your existing fee arrangements continue for the entirety of your stay — you will not be moved to the new system unless you choose to opt in.
This protection also applies to:
- Anyone who was receiving a Home Care Package as at 12 September 2024
- Anyone who had been assessed as eligible for a Home Care Package and was on the National Priority System as at 12 September 2024
There is one important nuance. If an existing resident moves to a different aged care facility after 31 October 2025, they may be required to transition to the new fee arrangements for accommodation costs. The transition rules are complex — getting advice before making any move between facilities is strongly recommended.
The Accommodation Agreement — Read It Before You Sign
Before a resident moves into an aged care facility, they are required to sign an accommodation agreement. This is a legally binding contract and the terms matter. Under the new rules, the agreement must set out:
- The agreed room price
- Whether accommodation is being paid as a RAD, DAP or combination
- The RAD retention rate and how it will be calculated and deducted
- The hotelling contribution and NCCC amounts applicable to that resident
- Any higher everyday living fee arrangements (the optional fee that replaces the former extra service fee)
A higher everyday living fee — which covers a higher standard of services above the standard offering — cannot be agreed to or charged before the resident has entered care. It cannot be used as a condition of entry or to secure a room. If a provider attempts to require payment of this fee before entry, that is a breach of the Act.
Families are often under pressure at the point of entry — a loved one needs care urgently, a room has become available, and the paperwork is placed in front of them quickly. Taking the time to have the agreement reviewed, and explained in simple terms before signing, can identify terms that are inconsistent with the Act, fees that have been incorrectly calculated, or conditions that should not be there and mean an fully informed decision can be made.
At Armour-Craig Legal we review aged care accommodation agreements and provide advice to residents and their families before they sign. If you would like assistance contact Fleur Craig on (03) 5636 4986 or fleur@armourcraiglegal.com.au.