Understanding how aged care is funded in Australia is essential for planning your or your family’s future care needs. The Australian aged care system combines government funding with individual contributions to ensure quality care is accessible to all older Australians. This guide explains aged care funding, what the government pays for, and your financial responsibilities.
How is Aged Care Funded in Australia?
Aged care funding in Australia operates through a shared-cost model between the Australian Government and care recipients. The government provides the majority of funding (approximately 70-80%), while individuals contribute based on their income and assets.
The Funding Framework
Government Contributions:
- Basic care subsidies paid to providers
- Accommodation supplements for those who need financial support
- Additional supplements for complex care needs
- Infrastructure and workforce development funding
Individual Contributions:
- Basic daily fees (everyone pays)
- Income-tested care fees (higher-income earners)
- Accommodation payments (residential care)
- Additional services (optional extras)
Government Aged Care Subsidies
How Government Subsidies Work
The Australian Government provides aged care subsidies directly to aged care providers based on:
- Assessed care needs (determined by ACAT assessment)
- Type of service (home care vs residential care)
- Provider location and characteristics
- Current funding rates (updated annually)
Types of Government Funding
Basic Care Subsidies:
- Cover fundamental care and support services
- Rates vary by care complexity and service type
- Paid monthly to approved providers
- Form the foundation of aged care funding
Accommodation Support:
- Helps those who cannot afford accommodation costs
- Accommodation supplements for eligible residents
- Hardship provisions for financial difficulty
- Ensures access regardless of financial capacity
Special Supplements:
- Dementia and cognition supplements
- Oxygen therapy supplements
- Enteral feeding supplements
- Transition care supplements
Home Care Package Funding
Government Contribution to Home Care
Home Care Package Funding Levels (2024-25):
- Level 1: $9,304 annually (basic support)
- Level 2: $17,417 annually (low-level care)
- Level 3: $34,919 annually (intermediate care)
- Level 4: $58,355 annually (high-level care)
What You Pay for Home Care
Basic Daily Fee:
- $10.69 per day (2024-25 rate)
- $3,901.85 annually
- Everyone pays this regardless of income
- Covers administration and basic services
Income-Tested Care Fee:
- Additional fee for higher-income earners
- Based on income and assets assessment
- Maximum 50% of package value
- Assessed by Services Australia
What Home Care Funding Covers
Included Services:
- Personal care and nursing
- Domestic assistance
- Allied health services
- Equipment and home modifications
- Transport to appointments
- Social support
Not Covered:
- Accommodation costs
- Food and groceries (except preparation)
- Medical costs covered by Medicare
- Utility bills and rent
Residential Aged Care Funding
Government Support for Residential Care
Care Subsidies: The government pays providers for basic care based on residents’ assessed needs and the facility’s approved care level.
Accommodation Support:
- For residents who cannot afford accommodation costs
- Accommodation supplement up to $68.02 per day (2024-25)
- Means-tested based on income and assets
Resident Contributions
Basic Daily Fee:
- $59.57 per day (2024-25)
- Covers meals, cleaning, laundry, and utilities
- All residents pay regardless of income
Means-Tested Care Fee:
- For higher-income residents
- Annual cap of $33,309 (2024-25)
- Based on income and assets assessment
Accommodation Payments: For residents not eligible for accommodation support:
- Refundable Accommodation Deposit (RAD): Lump sum
- Daily Accommodation Payment (DAP): Daily payment
- Combination: Part RAD, part DAP
Who Funds Aged Care: Government Roles
Australian Government
Primary Responsibilities:
- Policy development and regulation
- Majority funding through subsidies
- Quality and safety oversight
- Workforce development initiatives
Funding Channels:
- Department of Health and Aged Care
- Direct subsidies to providers
- Infrastructure grants
- Regional and remote supplements
State and Territory Governments
Supporting Roles:
- Some infrastructure funding
- Health service integration
- Social housing for older people
- Community transport services
Individual and Family Contributions
Based on Capacity to Pay:
- Income and assets assessments
- Progressive contribution structure
- Hardship provisions available
- Protection of essential income
Means Testing and Financial Assessments
How Income and Assets Testing Works
Services Australia Assessment:
- Reviews all income sources
- Values assets (excluding some items)
- Determines contribution requirements
- Annual reviews and updates
What’s Included in Assessments
Income Assessment:
- Age Pension and government payments
- Superannuation income
- Investment returns
- Employment income
- Deemed returns on assets
Assets Assessment:
- Financial investments
- Investment properties
- Personal assets over thresholds
- 50% of home value (capped at $198,364)
Protected Assets
Not Included:
- Basic household contents
- Car for personal use
- Accommodation bonds and RADs
- Some compensation payments
Commonwealth Home Support Programme (CHSP)
Government-Funded Entry-Level Services
CHSP Funding:
- No means testing required
- Government pays service providers
- Minimal client contributions
- Basic support services
Available Services:
- Domestic assistance
- Personal care
- Social support
- Transport
- Meals and shopping
- Nursing and allied health
Client Contributions
Voluntary Contributions:
- Suggested fees based on capacity to pay
- Cannot be refused service for non-payment
- Typically $5-$25 per service
- Provider determines contribution requests
Future of Aged Care Funding: Support at Home Program
New Program from July 2025
Enhanced Government Investment:
- Additional $2.2 billion over 4 years
- No waiting lists for approved services
- More flexible funding arrangements
- Higher government contribution rates
Reformed Client Contributions:
- Simplified means testing
- Protected minimum income
- Progressive fee structure
- Enhanced hardship support
What This Means for You
Improved Access:
- Faster access to services
- More choice and control
- Better integrated care
- Stronger government support
Regional and Remote Funding Support
Additional Government Assistance
Viability Supplements:
- Extra funding for remote area providers
- Regional service sustainability support
- Cultural appropriateness funding
- Infrastructure grants for rural facilities
Workforce Support:
- Incentives for workers in remote areas
- Training and development funding
- Retention programs
- Technology and innovation grants
Financial Planning for Aged Care
Estimating Your Costs
Planning Tools:
- My Aged Care cost calculator
- Financial planning services
- Provider cost information
- Regular fee reviews
Funding Sources
Potential Resources:
- Superannuation access
- Age Pension and supplements
- Home equity (if appropriate)
- Private health insurance
- DVA support (eligible veterans)
Asset Protection Strategies
Legal Considerations:
- Early financial planning
- Professional advice
- Family discussions
- Understanding exemptions and caps
Getting Help with Aged Care Funding
Free Government Services
My Aged Care (1800 200 422):
- Information about services and costs
- Assessment arrangements
- Provider referrals
Services Australia (1800 227 475):
- Income and assets assessments
- Fee calculations
- Hardship assistance
Professional Support
Financial Advisors:
- Aged care financial planning
- Asset protection advice
- Tax implications
- Estate planning
Aged Care Specialists:
- Service navigation
- Cost comparisons
- Application assistance
- Ongoing advocacy
Frequently Asked Questions
Will I lose my home to pay for aged care?
Your main residence is protected while you or your spouse lives there. Only 50% of the home value (capped at $198,364) counts toward the assets test, and this only affects care fees, not accommodation costs.
What if I can’t afford aged care costs?
Hardship provisions exist including fee reductions, payment deferrals, and additional government support. Contact Services Australia or your provider to discuss options.
How often are aged care fees reviewed?
Government rates are reviewed annually (July 1), while individual assessments are reviewed annually or when circumstances change significantly.
Does Medicare cover medical costs in aged care?
Medicare continues to cover GP visits, specialist consultations, PBS medications, and hospital admissions. Personal care and accommodation costs are separate.
Conclusion
Understanding how aged care is funded in Australia helps you plan effectively for future care needs. The system balances government support with individual contributions based on ability to pay, ensuring essential care remains accessible while those who can afford it contribute appropriately.
Key points to remember:
- Government provides majority funding through subsidies
- Individual contributions based on means testing
- Hardship provisions protect those with limited means
- New Support at Home Program will improve access from 2025
Whether planning ahead or facing immediate decisions, understanding aged care funding empowers you to make informed choices about care options and costs. For personalized advice, contact My Aged Care or consult with aged care financial specialists.