BY WEALTH ADVISER
Introduction: The Changing Landscape of Aged Care in Australia
Australians are living longer, and the challenge of preparing for aged care is becoming increasingly relevant for families nationwide. Projections suggest a 68% increase in the population aged 70 or above over the next two decades, leading to unprecedented demand for both home-based support and residential aged care. The importance of planning ahead—whether for oneself or a loved one—cannot be understated. Early preparation empowers families to manage transitions smoothly, secure an appropriate standard of living, and create contingencies for the unexpected.
In recent commentary, experts have reflected on the importance of getting one’s affairs in order before a health crisis arises: “This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.” The emotional and practical stakes are clear, and with reform on the horizon, many are seeking guidance to ensure their choices will lead to peace of mind and dignity in later life.
Key Aged Care Reforms: Rights, Access and New Financial Realities
The incoming Aged Care Act, taking effect on 1 November 2025, constitutes a historic shift in Australia’s approach. It embeds a rights-based framework designed to ensure that older Australians can access safe, high-quality care tailored to their needs. The Act is supported by significant government funding, but the reality of means-tested contributions and more robust standards means financial realities are coming sharply into focus.
A central pillar of reform is the new Support at Home program, which will replace the existing Home Care system. This change reflects the nation’s broader commitment to supporting older citizens to live independently for as long as possible. As the government’s official guidance notes, “Support at Home is designed to help older Australians live longer in their homes. How much the individual contributes will depend on the services used and their assessable assets and income as determined by Services Australia.”
Residential care will also see new fee tiers and means-testing. The introduction of the Non-Clinical Care Contribution (NCCC) ensures that those with greater means contribute more toward their care needs—up to a lifetime cap—while clinical care costs remain fully government-funded. For daily living expenses, new “hoteling” contributions will cover essentials such as food and cleaning, calculated based on income and assets.
From financial planning guides to commission reports, the message is consistent: strong protections are in place to ensure affordability and fairness, but understanding the details is now more crucial than ever. As Yield Financial Planning underscores, “Anticipate that greater complexity will mean more Australians will benefit from financial advice before moving into aged care.”
The role of a financial adviser now extends well beyond basic product selection. Advisers help clients compare funding options—such as the balance between lump-sum Refundable Accommodation Deposits (RADs) and daily accommodation payments (DAPs)—while also modelling the impact on cash flow, Age Pension entitlement, and overall estate value.
Making Informed Choices: Role of Advice and Customised Strategies
Faced with these reforms, Australian families must navigate an increasingly intricate landscape, where individual circumstances and choices can have lasting consequences. The clear consensus from advisory experts and professional bodies is that comprehensive financial advice is invaluable in weighing aged care options.
“Confusion, concern, and complexity are a common thread with aged care, so it is important to consider obtaining professional, financial advice. Planning ahead, including both estate planning and aged care planning, can make a difference.” This sentiment is echoed throughout adviser reports, highlighting the importance of integrating aged care planning with broader retirement and wealth management strategies.
The role of a financial adviser now extends well beyond basic product selection. Advisers help clients compare funding options—such as the balance between lump-sum Refundable Accommodation Deposits (RADs) and daily accommodation payments (DAPs)—while also modelling the impact on cash flow, Age Pension entitlement, and overall estate value. Aged Care Steps advises that “advisers must be prepared for greater demographic changes, more robust standards for advice, and in-depth strategies to respond to longevity risk and frailty.”
Scenario modelling and long-term analysis are vital. For example, the case of Betty, facing decisions about paying a lump-sum RAD versus daily fees, illustrates how a financial adviser’s input can clarify the knock-on effects on Age Pension, assets, and ongoing costs. Only by comparing both immediate and future outcomes can families reach sound conclusions.
Financial Resilience: Protecting Assets and Adapting to New Rules
Protecting wealth throughout the aged care transition involves both practical strategies and philosophical considerations. The new Aged Care Act continues to offer choices, with RADs remaining government guaranteed and exempt from Centrelink asset tests, while changes to retention rates and indexed interest payments under the daily payment model mean it is vital to re-examine planning assumptions.
As one expert from First Financial notes, “In Australia, the average RAD payable is $470,000 but can be much higher for in demand locations. The RAD has its advantages, being government guaranteed and Centrelink assets test exempt. For those entering aged care from 1 November 2025, the facility must retain 2% pa of the RAD, up to 10% over five years.”
Crucially, new rules around means-testing, lifetime contribution caps, and provider oversight add additional layers of complexity. Government reforms stipulate, “Residents with sufficient means, based on their assets and income, contribute until reaching a lifetime cap ($130,000 in total contributions, or after four years, whichever comes first). Clinical care costs in residential aged care will be fully funded by the Government.”
Advisers regularly stress the risk of focusing too narrowly on short-term cost differences, as broader impacts on pension entitlements, estate planning, and future family circumstances can outweigh initial savings. This is where philosophical insights become practical advice, encouraging clients to think holistically and proactively.
Conclusion: Preparing for Dignity, Certainty and Peace of Mind
Aged care transitions present both challenges and opportunities for Australian families. The weight of lived experience—regrets about acting too late, gratitude for forward planning—runs through client stories and expert reflections alike. The new Aged Care Act delivers enhanced rights, stronger protections, and broader choices, but complexity demands a thoughtful, resilient approach.
By planning early, seeking specialised advice, and considering the intersection of aged care, estate, and retirement planning, families can ensure dignity and security—both for themselves and future generations. The journey may require confronting uncertainty and embracing difficult conversations, but the peace of mind gained is invaluable.
The underlying message from market leaders, government agencies, and advisory experts is clear: “Only by considering the full picture and comparing results can a decision be reached.” As Australia enters a new era of aged care, taking a proactive stance is not just prudent—it is essential for wellbeing, confidence, and financial resilience.
Reference List
1. Preparing for Aged Care – Brooke Logan, Firstlinks, 2 October 2025
2. Aged Care Act Changes 2025 | Planning – First Financial, 8 September 2025
3. How will the new Aged Care Act impact retirement planning for advisers? – IFA, 3 April 2025
4. New Financial and Prudential Standards – Aged Care Quality and Safety Commission, 1 July 2025
5. How the new Aged Care Act impacts advisers – Advisely, 26 August 2025
6. Aged Care Planning: What You Need to Know – Yield Financial Planning, 17 July 2025
7. Once in a generation aged care reforms – Australian Government: PM & Cabinet, 11 September 2024
8. What Every Australian Financial Adviser Needs to Know – Aged Care Steps, 19 June 2025 9. Upcoming changes to aged care funding: how they affect you – MyAgedCare, 31 August 2025
10. About the new rights-based Aged Care Act – Australian Government Department of Health, 16 September 2025
11. Aged care reforms 1 July 2025 – Challenger, 23 January 2025
