Upcoming aged care reforms set to take effect from 1 July 2025 could significantly impact the financial position of Australians entering aged care, with important choices needing to be made in the next few months, according to Luke Robson, a financial adviser with HLB Mann Judd Brisbane.

The new Aged Care Act will prioritise the needs of older people requiring aged care, according to the Federal Government. The Royal Commission into Aged Care found the current Aged Care Act was no longer fit for purpose as it focused on providers and how to fund them, rather than around aged people accessing services.

The residential aged care changes include introducing a new means-tested services contribution for residents entering care from 1 July 2025. Key changes include means-testing of the hotelling supplement, which was previously paid by the Government at $12.55 per day. There will also be an introduction of a 2 per cent a year exit fee on Refundable Accommodation Deposits (RADs) and a lowering of the asset threshold for maximum fees to $1 million from approximately $2 million.

Additionally, a new lifetime cap of $130,000 for the non-clinical care contribution (NCCC) will be implemented, or after four years in residential care, whichever occurs first. The Support at Home Program replaces Home Care Packages and Short-Term Restorative Care programs. The new program introduces eight levels of ongoing funding, ranging from $11,000 to $78,000 per year.

“These are significant changes to how the aged care systems worked in the past. Older Australians will need to navigate these new rules which are complex, so they will need to carefully manage their financial situation.

“For those considering entering aged care this year, it may be advantageous to enter before 1 July 2025, as existing residents will be grandfathered under the current rules,” Mr Robson says.

He stressed the need for financial advice under the new framework.

“The need for financial advice becomes more critical under the new rules as many people will need guidance on whether to pay upfront through a refundable accommodation deposit (RAD) or through daily payments (DAP). RADs, while refundable, now come with a 2 per cent annual retention fee for up to five years.

“Selling or retaining the family home is another decision potentially impacted by these changes; retaining the home can offer pension benefits for two years post-admission to a care facility whereas selling it might affect means testing at a greater rate than that which previously applied,” he says.

The Australian Government introduced the Aged Care Bill 2024 to Parliament on 12 September 2024. The legislation passed both houses of Parliament on 25 November 2024 and will become the new Aged Care Act from 1 July 2025.