The 6.5 per cent question: what aged care really costs a self-funded family, one year into the new rules

Most of our clients meet the aged care system twice. The first time is as a son or daughter, sitting across a desk from an admissions officer and trying to understand what a refundable deposit is while a parent waits in hospital for a bed. The second time is their own, usually a decade or two later, and usually with less warning than they expected.

On 1 November 2025, the rules for both changed. The new Aged Care Act started, Support at Home replaced Home Care Packages, and the fees in aged care homes were redesigned. One year on, the system asks people with means to pay a noticeably larger share of their own care, and the decisions that set how much they pay are made quickly, under pressure, and often without anyone running the numbers.

This article sets out what aged care costs a self-funded family today, where the real decisions sit, and why one figure, about 6.5 per cent, matters more than most families realise.

Three Changes That Matter If You Have Means

1. At home, you now pay a share of almost everything except clinical care. Under Support at Home, the government sets a budget based on your assessed needs, from about $11,000 a year at the lowest of eight funding levels to about $80,000 at the highest. Clinical care, such as nursing and physiotherapy, is fully funded. Everything else carries a contribution. For a self-funded retiree who does not qualify for a Commonwealth Seniors Health Card, it is the maximum: 50 per cent of independence services such as transport and respite, and 80 per cent of everyday living services such as cleaning, gardening and meals.

2. In an aged care home, care itself is now partly user-pays. On top of the basic daily fee, residents with means pay a hotelling contribution and a non-clinical care contribution, both set by Services Australia's income and assets assessment.

3. A lump-sum deposit is no longer fully refundable. For new residents who pay a refundable accommodation deposit (RAD), the provider now keeps 2 per cent of the balance each year, for up to five years.

Staying at Home: the Bill Lands on the Everyday

The surprise for many families is where the money goes. The services that keep someone living independently, such as meals, cleaning and a lift to appointments, are exactly the ones charged at the highest rates.

There was one welcome change this year. From 1 October 2026, personal care, such as help with showering and dressing, moved into the fully funded clinical category, so nobody contributes to it any more.

Two practical points follow. First, a person who holds or qualifies for a Commonwealth Seniors Health Card is assessed on their income and assets rather than charged automatically at the top rate. Plenty of retired couples with substantial super qualify for the card without realising it, because it has an income test but no assets test. Holding the card does not guarantee lower contributions, because the Support at Home assessment still counts assets, but it is worth checking before services start, not after.

Second, the wait. At 30 June 2026, 106,977 people were waiting for ongoing Support at Home funding, and the department's own data put the wait for people approved at standard priority at seven to eight months, and the average time from application to services starting at about ten months. For a family, that means arranging an assessment when help first looks likely to be needed, not when it becomes urgent. In the meantime, privately paid services are often the bridge.

Moving Into an Aged Care Home: the Daily Bill

Before anyone discusses the room, there is the daily cost of living in the home. These are the maximum rates from 20 September 2026:

The basic daily fee applies to everyone. The other two are set by Services Australia's means assessment, and a resident with substantial assets or income can expect to pay at or close to the maximum. Paid at the full rate by someone who has paid no home care contributions, the non-clinical care contribution reaches the lifetime cap in about three and a half years, and that part of the bill then stops. There is also a new, optional higher everyday living fee for services above the required standard, such as premium meals or extra activities. It can only be agreed after moving in, has a 28-day cooling-off period, and cannot be charged for the room itself.

The Room, and the 6.5 Per Cent Question

Each aged care home publishes a price for each room. Without approval from the independent pricing authority, the maximum a home can charge is currently $789,686, and in sought-after parts of Sydney prices can sit close to that ceiling.

You can pay that price in three ways: as a refundable lump sum (the RAD), as a daily accommodation payment (DAP) that is never refunded, or as a mix of the two. The daily payment is worked out by applying the maximum permissible interest rate to whatever part of the price you have not paid as a lump sum. For anyone whose room price is agreed between 1 October and 31 December 2026, that rate is 8.51 per cent. On a $750,000 room, the daily payment is $174.86, or about $63,800 a year.

Under the old rules, the comparison was simple: a lump sum cost you only what that money would otherwise have earned. Two changes have shifted it. The lump sum now also costs the 2 per cent retention, about $14,850 in the first year on a $750,000 deposit and around $71,400 over the five years it applies. And for new residents, the daily payment is now indexed twice a year, which added about 4 per cent in the year to 20 September 2026.

Put those together and the cost comparison comes down to one question. For the first five years, the lump sum costs roughly 2 per cent a year in retention plus whatever the money would have earned elsewhere. The daily payment costs 8.51 per cent, and rises with indexation. So unless the money you keep out of the deposit can reliably earn more than about 6.5 per cent a year after tax, paying the lump sum is usually the cheaper option. Once retention stops after five years, the hurdle rises to the full 8.51 per cent.

Under the new rules, the daily payment only pays its way if the money you keep can earn more than about 6.5 per cent a year, after tax, without taking a risk you cannot afford.

That is a high bar for money that has to remain available to someone in their eighties. Cost is only part of the decision, though. Paying a large deposit can leave too little in liquid assets to meet the daily fees. For anyone receiving the Age Pension, the RAD is exempt from the pension assets test, although it still counts in the aged care means assessment, which changes the arithmetic again. Many families settle on a combination: a deposit large enough to keep the daily payment manageable, with enough left invested to fund the fees.

The Family Home

For most self-funded families the home is the largest asset and the hardest decision.

• In the means assessment for an aged care home, the home is counted only up to a capped value of $219,858.40, and not at all while a partner or another protected person still lives there.
• Selling releases capital that can fund a deposit, but the proceeds are then counted in full in the means assessment.
• Keeping the home and renting it out produces income that is assessed, and can change the capital gains tax position of what was your main residence. That is worth checking before any lease is signed, particularly with the new capital gains tax rules arriving on 1 July 2027.

There is also an option many self-funded retirees overlook. The government's Home Equity Access Scheme lets people of Age Pension age borrow against their home, either as a fortnightly payment or as limited lump sums, at 3.95 per cent a year, compounding fortnightly. It is not right for everyone and the rate can change, and the amount you can draw is capped, but for a family that wants to keep the house, it can help fund part of the fees and belongs in the comparison.

What Is Still Moving

The system is still settling. Price caps on home care services, originally due in July 2026, have been deferred, so providers still set their own prices, although they must publish them. An independent review of the assessment tool that decides people's funding levels was announced in October. A Senate inquiry into Support at Home is due to report on 24 November. Expect further change in 2027.

Five Things Worth Doing Now

1. Have the conversation before the crisis. Talk with your parents, or your own family, about preferences, money and paperwork while there is time. Check that enduring powers of attorney are in place. Under the new Act, an older person can also nominate registered supporters to help them deal with My Aged Care and providers.
2. Get the income and assets assessment done early. Without one, a self-funded person is generally charged at the highest contribution rates. Check eligibility for the Commonwealth Seniors Health Card at the same time.
3. Apply for an aged care assessment as soon as help looks likely. Waits at standard priority are seven to eight months after approval, and about ten months on average from application to services starting, so the clock starts when you apply, not when you need the help.
4. Price the room decision before you sign. Run the lump sum, daily payment and combination on your own numbers, including whether there will be enough cash to meet the daily fees. The interest rate on daily payments is set on the day the room price is agreed.
5. Decide on the home deliberately. Selling, keeping, renting and borrowing against it each lead to different outcomes for the means assessment, the Age Pension, tax and the estate. The deposit balance, after retention and any agreed deductions, is refunded to the estate once probate or other evidence is provided, so it should fit with the will and the rest of the estate plan.

Good care is worth paying for, and the new caps limit the worst outcomes. The decisions around it deserve the same care as any other financial decision of this size: made early, with the numbers in front of you and the whole family's position in view, rather than in a hospital corridor.