Planning for Old Age

Parliament Passes Sweeping Reforms to Australia’s Aged Care System

Last week, Parliament passed significant reforms to Australia’s aged care system. These “once-in-a-generation” changes, set to begin next year on July 1, aim to improve how care is provided to older Australians at home, in their communities, and in nursing homes.

The new Aged Care Act focuses on improving quality and safety, protecting the rights of older people, and ensuring the financial sustainability of aged care providers.

A key change is the introduction of a new payment system, requiring wealthier people to contribute more for non-clinical services.

What to Expect from the Home Care Overhaul

Over the past decade, there’s been a noticeable shift towards “ageing at home”. The number of Australians using home care has more than quadrupled, surpassing those in nursing homes.

To meet growing demand, the government is adding 107,000 home care places over the next two years, with a goal to reduce wait times to just three months.

Starting July 1 2025, Support at Home will replace the Home Care Packages program. The table below shows some key differences between these two programs.

What to Expect from the Nursing Home Fees

Australia’s nursing home sector is struggling financially, with 67% of providers operating at a loss. To ensure sustainability and support upgrades to facilities, the government is introducing major funding changes.

Staying the Same

* The Basic Daily Fee, that everyone in nursing homes pays, set at 85% of the basic age pension (currently $63.57 a day or $23,200 annually), will not change.

What’s Changing

* The government currently pays a Hotelling Supplement of $12.55 per day per resident to cover everyday living services like cleaning, catering, and laundry ($4,581 annually).
* From July 1 2025, this supplement will become means-tested. Residents with annual incomes above $95,400 or assets exceeding $238,000 (or some combination of these) will contribute partially or fully to this cost.

Changes to Accommodation Payments

* Residents who pay their room price via a refundable lump sum will have 2% of their payment retained annually by the provider, up to a maximum of 10% over five years. For example, a $400,000 lump sum payment would result in $360,000 being refunded if a person stays five years or more, with the provider keeping $40,000.
* Daily accommodation payments (a rent-style interest charge) will no longer remain fixed for the duration of a person’s nursing home stay. Instead, these payments will be indexed twice annually to the Consumer Price Index.
* Providers will be able to set room prices up to $750,000 without government approval, an increase from the current $550,000 limit.

What if I Own My Home?

The treatment of the family home in means testing for nursing home costs will remain unchanged.

What Happens to Current Nursing Home Residents?

The new rules for contributions and accommodation will apply only to those entering nursing homes from July 1 2025. Existing residents will maintain their current arrangements and be no worse off.

Feeling Overwhelmed?

These reforms aim to improve care delivery, fairness, and sustainability, with the government emphasizing that many older Australians – particularly those with lower incomes and assets – will not pay more.

For more tailored advice and support, consider reaching out to financial advisors, specialist officers, or online tools to help you navigate the changes and make informed decisions.