Understanding the Real Cost of Aged Care: Your Guide to Financial Planning for Aged Care
The New Landscape of Aged Care Fees in 2025
Australia’s aged care system has undergone significant changes. From 1 January 2025, the Refundable Accommodation Deposit (RAD) cap has risen from $550,000 to $750,000. This change allows aged care providers to charge higher upfront accommodation fees without requiring government approval, fundamentally shifting the financial landscape for families across Australia.
But what does this mean for your family? We’ve seen firsthand how these changes impact our clients’ retirement planning strategies. The increased RAD cap doesn’t just affect those paying lump sums – it ripples through to daily accommodation payments as well.
Breaking Down the Four Key Costs
When we guide our clients through financial planning for aged care, we focus on four essential cost components:
1. Basic Daily Fee
Everyone entering residential aged care pays this fee. As of 20 March 2025, the basic daily fee is $65.55. This covers day-to-day living expenses like meals, laundry, and general nursing care.
2. Accommodation Costs
This is where careful planning makes the biggest difference. You have three payment options:
- A Refundable Accommodation Deposit (RAD) – a lump sum that’s refunded when you leave
- Daily Accommodation Payments (DAP) – ongoing daily fees
- A combination of both
With the Maximum Permissible Interest Rate (MPIR) at 7.78% as of 1 July 2025, choosing between RAD and DAP requires careful consideration of your investment returns and liquidity needs.
3. Means-Tested Care Fees
These fees depend on your income and assets. We help our clients understand that from 1 July 2025, the non-clinical care contribution (NCCC) will replace the means-tested care fee, with a daily cap of $101.61.
4. Additional Services
Many facilities offer enhanced services beyond standard care. These might include premium meal options, additional entertainment, or enhanced room amenities.
Strategic Approaches to Managing Costs
Through our experience in financial planning for aged care, we’ve developed strategies that can significantly reduce the financial burden:
Asset Structuring Before Entry
Timing is everything. We work with families to structure assets strategically before entering care. This might involve:
- Converting assessable assets into exempt assets where appropriate
- Utilising gifting strategies within allowable limits
- Establishing funeral bonds or prepaid funeral arrangements
The Family Home Decision
One of the most emotionally charged decisions involves the family home. We help families understand that if a spouse or protected person remains in the home, it’s exempt from means testing. However, if vacant, it’s capped at $210,555.20 for care fees but full value for Age Pension.
Many families don’t realise that superannuation death benefits paid to non-dependants (like adult children) can attract tax of up to 17%. We develop strategies to minimise this impact, potentially saving families tens of thousands of dollars.
Planning for Tomorrow, Today
- Strategic asset positioning
- Tax-effective wealth transfer planning
- Peace of mind for the entire family
Taking the Next Step
Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this article, MiQ Private Wealth recommends that you consider whether it is appropriate for your circumstances. If this article contains reference to any financial products, MiQ Private Wealth recommends you consider the Product Disclosure Statement (PDS) or other disclosure document before making any decisions regarding any produ
