Since 1 November 2025, the new Aged Care Act has introduced significant reforms to Australia’s aged care system. This overhaul reshapes how aged care services are delivered and ensures the rights and needs of older Australians are at the centre of the system.
The reforms also change how aged care services are funded. The new model is designed so that people with the financial means contribute to the cost of their non-clinical care, while clinical care continues to be funded by the government.
For many of our clients who are already planning their estates or preparing for the future, it is important to understand how these changes may affect you or your loved ones, particularly if aged care services may be needed in the coming years.
Key Changes to How Aged Care Works
The Aged Care Act 2025 (Cth) aims to simplify the aged care system and make it easier for families to understand and access support.
The reforms introduce several major changes:
- A single entry point for aged care services, removing confusion about where to begin when seeking support.
- A single assessment tool to determine eligibility for care, helping ensure that those who need care the most are prioritised.
- Stronger oversight and accountability for aged care providers, giving families greater confidence in the quality and safety of care.
These reforms follow recommendations from the Royal Commission into Aged Care Quality and Safety and support the government’s broader goal of improving the quality of life for older Australians. One key outcome is the introduction of new funding programs, including the Support at Home program, which replaces the previous Home Care system.
Key Changes to Home Care
The new Act significantly reforms how home care services operate in Australia.
Major changes include:
- A complete overhaul of the current Home Care Packages and Short-Term Restorative Care Scheme, replaced by the new Support at Home Framework.
- Eight levels of care packages (previously four), with annual funding ranging from $11,000 to $78,000 depending on care needs.
- The introduction of two additional care pathways:
- Restorative Care Pathway
- End-of-Life Pathway
- A new funding model where:
- Clinical care is fully funded by the government, and
- Participants contribute to independence services and everyday living services, based on a means test.
- A separately funded Assistive Technology and Home Modifications Scheme to help people remain safely in their homes.
A means test assesses a person’s income and assets to determine how much they are required to contribute towards certain aged care services.
Transition for Existing Home Care Recipients
People who were receiving or approved for a Home Care Package on or before 12 September 2024 will have transitioned to the Support at Home program on 1 November 2025. Importantly, the “no worse off” principle applies to these clients. This means that individuals who are grandfathered into the system should not pay more under the new scheme, even if they are reassessed for a higher level of care after the reforms commence.
Key Changes to Residential Aged Care
The new legislation also changes how residential aged care services are funded and structured.
Key changes include:
New means testing arrangements, including:
- The abolition of the Means-Tested Care Fee
- The introduction of a Hotelling Contribution and a Non-Clinical Care Contribution
Under the new system:
- Clinical care will be fully funded by the government, and
- Residents will contribute towards other services provided by the aged care facility.
These contributions are determined through a means test and are subject to annual and lifetime caps.
Additional changes include:
- The abolition of the Extra Services Fee and the Additional Services Fee
- The introduction of the Higher Everyday Living Fee
Changes to Refundable Accommodation Deposits (RAD)
If a resident chooses to pay for their accommodation through a Refundable Accommodation Deposit (RAD), an important change applies. Previously, RADs were generally returned in full when a resident left care. Under the new system, a provider may retain a portion of the RAD.
Specifically:
- A retention of 2% per year may be deducted
- For a maximum of five years
- Up to a maximum of 10% of the deposit
This means that if a resident stays in aged care for five years or more, up to 10% of the RAD may be retained by the provider before the remaining amount is refunded.
Existing Residential Aged Care Residents
Residents who were already in permanent residential aged care before 1 November 2025 will generally remain under their existing fee arrangements. This means they will not pay more for their care or accommodation (unless they choose to opt into the new system), provided that:
- They remain in the same aged care home, or
- They move between aged care homes without a break in care of more than 28 days.
However, if a resident leaves residential aged care for more than 28 days after 1 November 2025, they may become subject to the new accommodation payment arrangements if they later return to care or move to a new facility.
New Reporting Requirements
Under the new system, there is also a new obligation to report changes in personal or financial circumstances.
Any relevant changes must be reported within 28 days of the change to:
- Services Australia, or
- The Department of Veterans’ Affairs
Considering Moving to the New System
If you are currently under the existing aged care system and are considering opting into the new arrangements, it is essential to seek legal and financial advice first.
This will help ensure the new system is appropriate for your circumstances and that you fully understand how the changes may affect your aged care costs and estate planning.
What This Means for Estate Planning
Changes to aged care legislation can have important implications for estate planning, asset protection, and long-term financial planning. With the introduction of the Support at Home program and new funding arrangements for residential care, it is important to consider how these changes may affect:
- Your future care needs
- Your financial arrangements
- The way your estate plan is structured
If you or your family members are planning for future aged care, it may be wise to review your estate planning documents to ensure they remain appropriate under the new aged care framework.
How We Can Help with Estate Planning and Aged Care
At Southern Waters Legal, we understand that changes to aged care legislation can feel overwhelming, especially when planning for the future or supporting a loved one through the aged care system.
Our experienced team can assist with:
- Estate planning and wills
- Elder law advice
- Reviewing aged care contracts and residence agreements
- Helping you understand your legal rights and obligations
If you would like assistance planning for the future, please contact our team of experienced solicitors. (02) 9523 5535 or clientservices@southernwaters.com.au.
