Understanding Aged Care Costs
Fees and funding are the most confusing, and most worrying, part of aged care. The good news is that once you understand the building blocks, it’s far less frightening. We make sense of RADs, DAPs, daily fees, means testing and the November 2025 changes, so you know what to expect and how to prepare.
We explain costs in general terms so you understand your options. We’re not financial advisers. For decisions about your own money, we encourage you to talk with your existing financial adviser, or we can introduce you to someone suitable. The means assessment itself is done by Services Australia (or DVA).
What makes up a residential aged care fee
Residential (nursing home) costs are made up of several parts. Clinical care, such as nursing, is funded by the government. What you pay depends on your means assessment, and most amounts are indexed twice a year, in March and September.
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Fee
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What it’s for
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Who pays
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Basic daily fee
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Everyday living: meals, laundry, cleaning
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Everyone pays this fee. Set at 85% of the single basic Age Pension.
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Hotelling contribution
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A contribution toward hotel-type services
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Means-tested, up to a daily cap
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Non-clinical care contribution
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A contribution toward non-clinical care, such as help with daily living
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Means-tested, up to a daily cap. Stops once you reach the lifetime cap or after four years, whichever comes first.
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Accommodation (RAD, DAP or a combination)
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Your room
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Agreed with the home. People with lower means may pay less or have their accommodation supported by the government.
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Higher everyday living fee (optional)
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Extra services or a higher standard of services, if you choose them
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Only if you agree. It can't be a condition of entry, and there's a 28-day cooling-off period.
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The structure of residential aged care fees for people entering care from 1 November 2025. People already in care before that date stay on their previous arrangements. Amounts depend on the home, your means assessment and current government figures. Last reviewed September 2026.
RAD vs DAP: the accommodation choice
The accommodation payment is where the big numbers sit, and you get to choose how to pay it.
A lump sum, what used to be called a bond. It is refunded when the person leaves, less any amounts drawn from it by agreement. For people entering care from 1 November 2025, 2% of the RAD is retained by the home each year, for up to five years.
A daily amount paid instead of the lump sum, calculated using a government-set interest rate. For people entering care from 1 November 2025, DAPs are indexed twice a year.
Part lump sum, part daily payment. Many people choose a mix.
Anyone entering permanent residential care on or after 1 November 2025 is on the fee arrangements introduced by the Aged Care Act 2024. These include the hotelling contribution, the non-clinical care contribution with its lifetime and four-year caps, and RAD retention. Government figures change regularly, so we always work from the current numbers with you.
What home care costs
Home care is usually far cheaper than residential care. Under Support at Home, there’s no contribution for clinical care such as nursing and physiotherapy. For independence and everyday living services, you pay a contribution based on your means assessment. Private home care is paid at the provider’s full rate.
Non-clinical contributions under Support at Home count toward the same lifetime cap as residential care, so what you pay at home reduces what you may pay later in residential care.
Common cost mistakes
Many people pay far less than the headline RAD figures suggest, once means testing is applied.
Whether to keep, rent or sell the family home is a big financial decision, so talk with your financial adviser first.
The lifetime and four-year caps limit what you pay for non-clinical care over time.
Fees are indexed twice a year and the new Act changed the rules, so old numbers online can mislead.
Frequently Asked Questions
How much does aged care cost in Australia?
There’s no single figure. It depends on the type of care and your means assessment. Support at Home is government-funded, with a means-tested contribution for some services. Residential care combines a basic daily fee, means-tested hotelling and non-clinical care contributions, and an accommodation payment (RAD, DAP or a combination). We explain the structure, and the fee estimator on My Aged Care gives a starting point for your own numbers.
What is a RAD and a DAP?
A RAD (Refundable Accommodation Deposit) is a refundable lump sum you pay for your room in residential care, what used to be called a bond. A DAP (Daily Accommodation Payment) is a daily amount you can pay instead, calculated at a government-set interest rate. You can also pay a combination of both. For people entering care from 1 November 2025, part of the RAD is retained each year for up to five years.
Do I have to sell my house to pay for aged care?
Not necessarily. The family home is treated in specific ways under the means test, and whether to keep, rent or sell it is a significant financial decision. We can’t give personal financial advice, so we encourage you to talk with your existing financial adviser before making that call. If you don’t have one, we can introduce you to someone suitable, on merit and with no fee in either direction.
What is the basic daily fee?
It’s a fee everyone in residential aged care pays toward everyday living costs such as meals, cleaning and laundry. It’s set at 85% of the single basic Age Pension and changes when the pension is indexed in March and September.
What is the higher everyday living fee?
It’s an optional fee for extra services, or a higher standard of services, such as a larger room, premium meals or extra amenities. You only pay it if you agree to it. It can’t be a condition of entry to a home, and you have a 28-day cooling-off period after agreeing.
Did aged care fees change in 2025?
Yes. The Aged Care Act 2024 introduced new fee arrangements for people entering residential care from 1 November 2025. These include a means-tested hotelling contribution, a non-clinical care contribution with lifetime and four-year caps, and retention of part of the RAD. People already in care before that date stay on their previous arrangements. We keep older people and families up to date as the settings change.
Can Aged Care Conversations give financial advice?
No, we’re not financial advisers. We explain how the fees work in general terms so you understand your options. For decisions about your own money, we encourage you to talk with your existing financial adviser, or we can introduce you to someone suitable.
Clear on fees, honest about limits
Our guidance comes from people who have worked inside the system and still do. Louise Greene is a Registered Nurse with an MBA and more than 40 years in health and aged care across clinical, executive, consulting and board roles, including chairing clinical governance committees. Kerry Mann is a former CEO in aged care and retirement living, holds an MBA, and has board experience including Ageing Australia’s NSW/ACT State Member Council.
How much we do is up to you. Some people want a single conversation to get their bearings. Others want us to manage the whole process, from the assessment through to finding and securing a place in the right home, with regular updates along the way.
We’re independent. Older people and families pay us directly, and we take no commissions from aged care homes, retirement villages or providers. When we help with placement, we’re working for you: homes pay us nothing. Where we introduce a partner, it’s on merit, with no fee in either direction. People come to us in the hardest weeks and leave with a clear plan and a person to call.
On costs, we stay strictly independent and current. We explain the structure, work from the latest government figures, and leave personal financial decisions to you and your financial adviser. Never a guess, never a commission.