On 1 November 2025 the Australian Government’s significant reforms to the funding and viability of residential aged care accommodation will come into effect. The RMB Wills & Estates & Disputed Wills Division explains.
Changes to the Aged Care Act 2024 were originally to commence in July 2024, but delays mean they will start on 1 November 2025, with big implications for residents entering aged care after that date.
A key aspect of these reforms involves the phased reduction of Refundable Accommodation Deposits (RADs), which have historically been a primary source of funding for aged care providers.
Currently, providers must seek approval to charge room prices above $550,000, a cap that has remained unchanged since 2014 despite rising costs. From January 1, 2025, this maximum increased to $750,000 and will be indexed annually to the consumer price index, providing greater certainty for providers to develop high-quality accommodation and plan future builds.
A notable change is the introduction of a “Retained RAD” mechanism, effective from 1 November. Under this system, providers will retain a small portion of each new RAD to support ongoing capital needs - a major shift as currently operators must fully refund deposits within 14 days after:
- a resident permanently leaves residential care
- sighting probate or letters of administration after a resident dies.
Currently operators cannot deduct any amount from a RAD before refunding it, unless a deduction has been agreed in writing with the resident.
However, residents entering aged care from October will have 2% deducted from their RAD balance per annum, debited monthly and capped at five years (meaning the total retention fee is 10% of the original deposit). This effectively will reduce the amount refunded to residents or their estate.
Importantly, this change will not affect residents who entered care before 1 November 2025, respecting the “no worse off” principle.
Additionally, the government will index Daily Accommodation Payments (DAPs) - the ongoing daily fees paid by residents - from October. This indexing, aligned with the consumer price index, aims to maintain the real value of these payments, which currently remain fixed at entry.
Furthermore, the government will undertake a review of accommodation supplement rates and related settings over the next two years to evaluate incentives for quality provision and acceptance of low-means residents.
Looking ahead, a phased withdrawal of RADs is planned to reduce reliance on RADs, addressing concerns raised by the Royal Commission into Aged Care Quality and Safety, while ensuring ongoing access to quality residential care.
Aged care is complex — and these reforms add new financial and legal layers. Whether you're planning ahead or supporting a loved one, understanding your rights is crucial. Your first step should be to contact our office to arrange a consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.