Aged Care Fee Reforms from 1 November 2025: What Advisers and Clients Need to Know

The Australian aged care system is set for one of its most significant structural changes in decades, with new residential aged care fee arrangements coming into effect on 1 November 2025. Originally planned for 1 July 2025, the reforms have been delayed to allow providers, regulators, and advisers more time to prepare.

For clients considering residential aged care, the timing of their entry could have a substantial financial impact. This was a key message delivered at the recent Akumin PD Day, where industry experts discussed the new framework and the potential consequences for residents and their families.

From Means-Tested Care Fee to New Contribution Model

Under the current system, residents in aged care may be required to pay:

• Accommodation payments – either as a Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP), determined by their means.
• Basic daily fee – payable by all residents, currently $63.82 per day, indexed half-yearly.
• Means-tested care fee – payable by residents with the financial capacity, subject to annual and lifetime caps.
• Extra or additional service fees – for facilities offering premium services or accommodation.

From 1 November 2025, new entrants will see changes to this structure. The means-tested care fee will be replaced with two separate contributions:

1. Hotelling Supplement Contribution (HSC) – covering accommodation-related hospitality services such as meals, cleaning, and laundry.

2. Non-Clinical Care Contribution (NCCC) – covering personal care services like assistance with bathing, dressing, and mobility.

Both contributions will be means-tested and subject to caps. Extra and additional service fees will continue, determined by the facility’s offerings. The basic daily fee will remain in place for all residents.

Grandfathering Arrangements

One of the most important distinctions for advisers to note is that existing residents and those who enter care before 1 November 2025 will generally remain under the current fee arrangements unless they choose to transition to the new model.

This “grandfathering” provision provides a potential planning opportunity: entering care before the reforms take effect may lock in lower fees for some clients. However, for others, the new system’s means testing and caps may result in more favourable outcomes.

Impact Scenarios and Timing Considerations

The Akumin PD Day panel highlighted that the decision on when to enter care should be guided by individual financial modelling. For example:

• Clients with higher means may find the current system more advantageous, especially where the means-tested care fee is less than the combined HSC and NCCC under the new rules.
• Clients with lower means may be unaffected, as they will continue to pay only the basic daily fee and may qualify for full or partial government support for accommodation and care costs.
• Asset-rich but income-poor clients may need to carefully consider the trade-off between paying a lump sum RAD versus a higher ongoing DAP, especially in light of the new fee structure.

Given the complexity of the formulas and the number of moving parts — including caps, exemptions, and indexation — the panel emphasised that aged care planning is a specialised advice area that requires a deep understanding of both policy and client circumstances.

Adviser Challenges in the New Landscape

For financial advisers, the reforms introduce several new considerations:

• Scenario Modelling – comparing pre- and post-November fee structures for clients with varying asset and income profiles.
• Asset Strategy – assessing whether to retain or sell the family home, and the impact on means testing.
• Funding Approach – determining the optimal mix of RAD and DAP, considering cash flow, estate planning, and government benefits.
• Investment Alignment – ensuring sufficient income generation to meet ongoing fees while preserving capital where appropriate.

The Akumin PD Day discussion reinforced that aged care planning often intersects with estate planning, tax strategy, and social security considerations, making it an area where collaboration between advisers, paraplanners, and aged care specialists is essential.

Why Specialist Support Matters

While aged care is a growing area of client need, not every adviser specialises in it. The rules are complex, the stakes are high, and the potential for costly errors is real. Modelling the differences between the current and upcoming systems requires not just technical proficiency, but also the ability to translate those numbers into a clear, client-friendly strategy.

This is where specialist paraplanning support can make a tangible difference. At Mutual Plans, the aged care paraplanning team works alongside advisers to:

• Model multiple aged care entry scenarios, both before and after 1 November 2025.
• Prepare clear strategy papers comparing fee structures and identifying the optimal timing for entry.
• Integrate aged care planning with broader retirement, estate, and investment strategies.

By leveraging specialist expertise, advisers can ensure that their clients make fully informed decisions about one of life’s most important — and often most expensive — transitions.

The upcoming aged care fee reforms mark a major shift in how residential care is funded in Australia. For clients, the timing of entry into care could result in markedly different financial outcomes. For advisers, this is an opportunity to demonstrate value through informed, strategic guidance.

With the right modelling and expert support, advisers can help clients navigate the complexities of the 1 November 2025 changes — and ensure that they enter aged care with confidence and clarity.