Aged Care Fees and Costs Explained

The 2 aged care costs to remember |   The 3 types of care fees (and what they do)  |   3 ways you can pay for accommodation in aged care

Updated 1st March 2024  |   |  4 minute read

Written by Jesse Gramenz Reviewed by Michelle Mitri 

We're going to be honest: aged care finances can get really, really complicated. But conquer the basics and you'll put yourself on the path to feeling in control of what can be a very stressful time. Let's get started.

The first part of understanding aged care costs, is that everyone is different. 

You can’t compare your experience to a friend’s or vice versa. This is because the cost of your care depends on, not only how much care you need, but also your income and assets (aged care financial support is means tested)

Because of this, to work out how much care is going to cost, you need:

1. An ACAT assessment – to work out the level of care you need
2.  A financial assessment from Services Australia (Centrelink)– to work out how much you need to contribute to the cost of your care and how much the government will

If you are missing either of these documents, our friendly team can point you in the right direction and assist completing them.

Important note: Even if you don’t have a home or assets, you can still be eligible to access aged care. St Vincent's recommends doing both an ACAT assessment and a financial assessment so you can get the clearest idea of what kind of financial support you can receive.

> Print this guide (with an extra calculation page)

The 2 aged care costs to remember

Care Fees

These are used to pay for your day to day living costs

Accommodation Payments

These cover the cost of your home

How much do I pay of each?

What you pay in care fees and accommodation payments will depend on your income and assets and the value of the home you’re purchasing.

You can get an estimate of the types of fees you can expect to pay from My Aged Care.

The 3 types of Care Fees and what they do

Basic Daily Care Fee

Everyone pays a basic daily care fee

The Basic Daily Care Fee is used to pay for your day to day services like meals, laundry, in-house activities. No matter your income and assets, you will pay a Basic Daily Care Fee

Means-Tested Care Fee

Some pay an additional means-tested care fee.

The Means- Tested Care Fee is an additional co-contribution you may get asked to pay based on your assets and income that the facility collects on behalf of the Government.

Additional Services Fee

Some pay an additional services fee.

The Additional Services Fee is fee which you pay for personalised services. The availability of this will depend upon your chosen home.

3 ways you can pay for accommodation

The amount each person pays for their accommodation depends on:

1. The negotiated price of the room

2. How much financial support the government provides (this is determined by an income and assets assessment)

The below ways of paying for accommodation typically apply to people who are contributing to the cost of their accommodation. But this will depend on the outcome of the income and assets assessment mentioned earlier.

1. Refundable Accommodation Deposit (RAD)

A one off lump sum accommodation payment that is fully refundable at the end of your stay, less any amounts you have agreed to have deducted.

The refund is guaranteed by the Australian Government within 14 days.

Read on:

• See examples of room costs and RADs with our Sydney aged care homes

Average cost of aged care accommodation in Australia

An average RAD (Refundable Accommodation Deposit) cost in Australia is around $470k. But the prices of RAD differ for a few different reasons.

Prices for aged care homes can feel a lot like houses on the property market. Photo from St Vincent's Care Bronte

Factors that affect the price of an aged care home

• Suburb (Is it central? Low or high socio-economic?)
• Condition and newness of the home
• Any special care features or custom improvements (ie. is it dementia specific?)
• Room size
• Location within the building (does the room have a view or balcony?)

If you start to think about finding an aged care home as similar to finding a new home on the property market, a lot of these factors will feel familiar and make more sense.

The biggest different that you might see between the traditional property market and aged care is some of the accommodation features related to care itself.

2. Daily Accommodation Payment (DAP)

The accommodation cost converted into a daily payment, which is charged periodically at the maximum permissible interest rate (MPIR) set by the Australian Government. (The MPIR will change but is locked in upon admission)

If I pay a DAP do I get that money back like a RAD?

No. You don't get a refund on DAP payments.

Why would I pay a DAP?

This is where it can get complicated. Here's a couple different scenarios where a DAP can be helpful.

1. You may not be able to afford the RAD outright

It can be a big investment to move into aged care and some people might not be able to sell the family home or they may not have a family home or other assets to sell to afford the RAD.

2. You may not need aged care for a very long time

If you or a loved one are either only staying in aged care for a short time, or are nearing the end of your life and needing aged care for palliative care, you may find that it isn't worth putting together a large sum of money for a RAD and opt for a daily payment instead.

3. It might be a better option financially

Paying a RAD usually means selling the family home or other investments. During the time that the RAD is with the aged care provider it will not be making any money. Some people would rather pay the DAP and keep the asset (and any money that asset makes) rather than sell their investments to pay for a RAD.

There are other exemptions from the government to consider as well. For example, selling a major asset like the family home could also increase your aged care fees. Because of something called a 'the home exemption cap', the government only counts up to $197,735.20 of your house as an asset.  But it's important to note this is just one example and may not necessarily apply to your situation.

Please note: There are many different ways to pay for aged care. Every person's financial situation is different and this guide should only be taken as very general advice. We advise everyone, if they can, to seek independant financial advice to make sure you're fully informed of the financial decisions you're making.

3. Combination payment (RAD+DAP)

The final way to pay for accommodation is through a combination of a Refundable Accommodation Payment (RAD) and a Daily Accommodation Payment (DAP).

You can choose the RAD amount and an aged care provider will calculate the remaining cost as a DAP.

As an example, this can be a good option for avoiding selling the family home, while still getting a refund at the end of an aged care stay.

Moving into care

You have 28 days (from the day you enter care) to choose your payment method. In the interim, you are required to pay a Daily Accommodation Payment (DAP).

Parting thoughts

Aged care costs can be incredibly complicated. But understand the basics, write things out and get all of your assessments done and you'll be well on your way to choosing the right home that works for you and your budget.