“The most beautiful thing in the world is, of course, the world itself.” — Wallace Stevens
You didn’t expect to be here quite so soon.
Maybe it was a fall, a health scare, or a slow decline that made it undeniable. Maybe your parent has been managing at home for a while, but something has shifted and you’re starting to wonder whether they need more support than the family can provide.
And now you’re trying to understand aged care — the waiting lists, the care levels, the facilities, and somewhere buried in all of that, the question that keeps surfacing:
How are we actually going to pay for this?
If you’re feeling overwhelmed, you’re not alone. The Australian aged care funding system is genuinely complex. But it is navigable — and the decisions you make now can have a significant impact on both your parent’s quality of care and your family’s financial position.
This guide is designed to help you understand the key concepts, so you can have more informed conversations with the right people.
The Two Main Types of Aged Care
Before talking about costs, it helps to understand the two main pathways:
Home care: Your parent remains at home and receives government-subsidised support services — from help with meals and cleaning through to nursing visits and personal care. This is delivered through a Home Care Package, which is assessed by My Aged Care.
Residential aged care: Your parent moves into an aged care facility (often called a nursing home) that provides 24-hour care, accommodation, meals, and support. This is what most families are asking about when the question of funding comes up.
This guide focuses primarily on residential aged care, as that’s where the most significant financial decisions tend to arise.
The Big Number That Surprises Families: The Refundable Accommodation Deposit (RAD)
One of the first things families encounter when exploring residential aged care is something called a Refundable Accommodation Deposit — or RAD.
Think of it like a lump-sum bond paid to the aged care facility in exchange for accommodation. For residents who entered care before 1 November 2025, the RAD was fully refundable. Under the new Aged Care Act (from 1 November 2025), the facility retains 2% of the RAD balance per year for the first five years — a maximum retention of 10%. The remaining balance is refunded when your parent leaves the facility, whether to move elsewhere or upon their death.
RADs vary significantly between facilities and room types, with starting prices typically around $500,000 and rising to well over $1 million in some metropolitan areas. Each facility must publish its RAD prices, and families can access these through the My Aged Care website.
The critical decision: do you pay the RAD as a lump sum, as an ongoing daily fee (called a Daily Accommodation Payment, or DAP), or a combination of both?
- Lump sum RAD: The full amount is paid upfront. No ongoing accommodation charge applies.
- Daily Accommodation Payment (DAP): Instead of paying the lump sum, you pay a daily fee calculated at the Maximum Permissible Interest Rate (MPIR) set by the government. Think of it like paying interest on the RAD rather than paying the principal.
- Combination: Some families pay a partial RAD and pay the DAP on the remainder. This can preserve liquidity while reducing the ongoing daily fee.
Which option makes most sense depends on the assets available, the source of those assets (particularly the family home), investment returns, and the resident’s expected length of stay. There’s no single right answer — it’s a financial modelling question.
The Family Home: What Happens to It?
This is the question at the heart of most aged care conversations.
When your parent moves into residential aged care, their home no longer counts as their primary residence for Centrelink purposes after two years. This can affect their Age Pension entitlements.
Families are often faced with a choice:
- Sell the home and use the proceeds to fund the RAD (or other costs)
- Rent the home and use rental income to cover the DAP and other ongoing fees
- Retain the home (potentially for estate planning purposes) and fund care costs from other assets
Each option has different implications for the Age Pension, the Non-Clinical Care Contribution (NCCC), capital gains tax, and the long-term estate outcome. Getting this decision right is one of the highest-value things a specialist aged care financial adviser can do for a family.
Understanding the Ongoing Fees
Beyond the accommodation deposit, residential aged care involves four main ongoing fees:
- Basic Daily Fee: Set by the government and applies to everyone. It’s currently around 85% of the single Age Pension, reviewed twice a year. As at the time of writing, this is $66.80 per day.
- Hotelling Supplement Contribution (HSC): A contribution towards the non-clinical costs of your parent’s care — things like meals, laundry, and general living costs within the facility. This replaced the old ‘hotel costs’ component under the new Aged Care Act.
- Non-Clinical Care Contribution (NCCC): A means-tested contribution towards the cost of personal and everyday care. This replaced the previous Means-Tested Care Fee under the new Aged Care Act (from 1 November 2025). Not everyone pays this — it depends on a financial assessment by Services Australia. There is a lifetime cap that limits your total exposure.
- Accommodation Costs: The RAD, DAP, or combination as described above. These are negotiated with the facility (within regulated limits).
Some facilities also charge additional services fees for extras like premium dining, activities, or certain amenities. These are optional and facility-specific.
The Means Assessment: What Gets Counted?
Services Australia conducts a financial assessment to determine whether your parent pays a Non-Clinical Care Contribution (NCCC), and how much.
The assessment looks at income (including Age Pension, superannuation income streams, rental income) and assets (including financial assets, super, and — after two years — the former home if it hasn’t been sold or rented to a protected person).
Importantly, some assets and income sources are assessed differently than others, and there are exemptions for certain situations — such as a spouse or carer remaining in the home.
Understanding how your parent’s specific situation will be assessed is essential before making any financial decisions. Moving money around or restructuring assets without advice can have unintended consequences for both the care fee assessment and Centrelink entitlements.
What About My Parent’s Age Pension?
Entry into residential aged care triggers a reassessment of the Age Pension. This can be one of the most confusing parts of the process for families.
Key things to understand:
- The family home is generally exempt from the asset test while your parent is in care, for up to two years
- After two years, the home is assessed unless a protected person (a spouse, carer, or dependent) is living there
- If the RAD is paid from the proceeds of selling the home, the RAD is excluded from the asset test — meaning the Age Pension assessment may not change as dramatically as families fear
Again, the interaction between the RAD, the asset test, and the Age Pension is exactly where specialist advice pays for itself.
How a Specialist Aged Care Financial Adviser Can Help
The aged care system was not designed for easy navigation. It sits at the intersection of healthcare, housing, social security, and financial planning — and it involves decisions that are made under emotional pressure, often with limited time.
An aged care financial specialist can:
- Model different scenarios — RAD vs DAP, selling vs renting the home — so you can make an informed decision
- Help you understand the full cost of care and what to expect over time
- Review Centrelink entitlements and ensure your parent receives what they’re entitled to
- Coordinate with the facility, My Aged Care, and Services Australia on your behalf
- Ensure that financial decisions made now don’t have unintended consequences for the estate
At Creo Wealth, we’ve helped many families navigate this process — often at short notice, when a parent’s situation has changed quickly. We know how stressful it is. We also know that clear, calm guidance makes an enormous difference.
A Note to the Adult Children Reading This
If you’re the one doing the research, making the phone calls, and trying to hold it all together while also holding your family together — we see you.
This is one of life’s harder seasons. You’re trying to do the right thing by your parent while also being realistic about what’s possible. There’s no perfect path through it.
But there is a path. And you don’t have to find it alone.
If you’re navigating aged care funding for a parent, we’d like to help. Book an obligation-free conversation with our team today. Call (02) 9629 1866 or visit creowealth.com.au/contact
This information is general advice. We have not considered your objectives, personal or financial circumstances. You should consider the appropriateness of the advice for your circumstances before making any decision. Creo Wealth Pty Ltd ABN 96 605 894 415 is a Corporate Authorised Representative (No. 1236172) of Matrix Planning Solutions Pty Limited ABN 45 087 470 200, AFS Licence No. 238256.
