Navigating the cost of aged care in Australia can be one of the most stressful experiences for any family. You’re trying to find the best possible care for a loved one, but you’re faced with a wall of confusing terms, uncertain figures, and a deep-seated fear of the financial burden.
This guide is here to change that. We will walk you through every aspect of nursing home costs in Australia for 2025, using over a dozen official government sources. We will break down the different fees, explain the assessment process step-by-step, and, most importantly, address the real-world questions and “hidden costs” that cause the most worry. Our goal is to give you clarity, confidence, and a full understanding of your rights.
The Real Cost of Nursing Homes in Australia
There is no single price tag for aged care, as the final cost depends on a government assessment of your income and assets, and the specific home you choose. However, the costs are made up of three potential components:
- Basic Daily Fee: Everyone pays this.
- Means-Tested Care Fee: A contribution that depends on your financial situation.
- Accommodation Cost: A charge for your room, which also depends on your financial situation.
The most important thing to know is that the system is designed so that you will only ever be asked to pay what you can reasonably afford. The entire system is underpinned by major government reforms and funding commitments. Source: Australian Government Treasury
Step-by-Step Guide: How Fees Are Calculated
The process of determining your exact costs is systematic. Here is the official journey.
Step 1: The My Aged Care Eligibility Assessment
Before any costs are discussed, you must be assessed by an Aged Care Assessment Team (ACAT, or ACAS in Victoria). This free assessment determines if you are eligible for government-funded aged care and the level of care you need. Source: My Aged Care
Step 2: The Formal Income and Means Test
This is the most crucial step for determining costs. It is a detailed look at your income and assets, conducted by either Services Australia or the Department of Veterans’ Affairs (DVA). This assessment works out exactly what you can afford to contribute towards your care and accommodation. Source: Services Australia
Step 3: Receiving Your Fee Letter
Once the assessment is complete, you will receive a letter that details the maximum fees you can be asked to pay. You can then provide a copy of this letter to your chosen aged care home, and they will use it to formalise your exact costs.
A Detailed Breakdown of Nursing Home Fees
Your final bill is made up of these parts. Here’s what they are, with figures based on the latest government information.
1. The Basic Daily Fee
This covers your day-to-day living costs like meals, laundry, cleaning, and power. Everyone in a nursing home pays this fee. It is set by the government at 85% of the single person rate of the basic Age Pension. As of March 2025, this fee is $52.71 per day. Source: My Aged Care
2. The Means-Tested Care Fee
This is a contribution towards the cost of your clinical and personal care, partly funded by initiatives to ensure higher wages for care staff. The amount you pay is determined by your means test. There are annual and lifetime caps on this fee. For 2025, the annual cap is $34,311.23, and the lifetime cap is $82,347.13. If your income and assets are below the threshold, you will not have to pay this fee. Sources: My Aged Care and Department of Health
3. Accommodation Costs
This is the cost for your room, which is set by the aged care home. Whether you pay it, and how you pay it, depends on your means test. If your income and assets are below a certain amount, the Australian Government will pay the full cost for you.
If you are asked to contribute, you have a choice in how to pay:
- Refundable Accommodation Deposit (RAD): A lump-sum payment that is fully refunded to you or your estate when you leave.
- Daily Accommodation Payment (DAP): A daily rental-style payment, calculated from the RAD amount.
- A Combination: Pay a partial RAD and an ongoing DAP for the remainder.
You can find detailed information on managing these payments on the Department of Health website. The maximum RAD a facility can charge without government approval is currently $758,627. Sources: Department of Health - Fees and Department of Health - Managing Fees
4. Extra and Optional Service Fees
This is where many “hidden costs” can appear. Homes may offer a package of extra services for an additional fee. It is critical to ask for a full list of these fees from any home you consider. For a deeper understanding, review the government’s fee scenario documentation. Source: Department of Health - Fee Scenarios
Frequently Asked Questions: Addressing Your Biggest Fears
This process brings up many valid questions. Here are answers to the concerns we see most often, backed by official sources.
What happens if I can’t afford the fees or run out of money?
The system is designed to protect the vulnerable. If you can’t afford the fees based on your assessment, the government pays them for you. If your financial situation changes while you are in care, you can apply for a formal financial hardship assessment. The Department of Social Services outlines the various forms of assistance available. You will not be asked to leave care if you cannot afford the fees. Source: Department of Social Services
What are my rights as a resident?
You have the right to be treated with dignity and respect, and to receive high-quality care. The Aged Care Quality and Safety Commission is the national regulator, and they publish the Charter of Aged Care Rights that every resident is entitled to. These rights are protected by law. Source: Aged Care Quality and Safety Commission
How do I know I’m getting value for the fees I pay?
The government sets the pricing for aged care through the Independent Health and Aged Care Pricing Authority (IHACPA), which provides detailed advice on costs. Furthermore, the Aged Care Quality and Safety Commission is responsible for monitoring the quality of care and how providers are funded. Sources: IHACPA and Aged Care Quality and Safety Commission - Funding
Will I be forced to sell my family home?
Not necessarily. The value of your former home is included in the means test, but only up to a capped amount. Crucially, your home is completely exempt from the means test if a “protected person” continues to live there. This can include a spouse, a dependent child, or a carer who has lived there for at least two years and is eligible for an income support payment.
Is the quality of care worse if the government is paying for it?
No. The quality of care a resident receives is not based on their financial contribution. All residents in a government-funded aged care home are entitled to the same standard of care. This is a central part of the government’s aged care policy. Source: Department of Social Services - Aged Care
Figuring out aged care costs is a journey, but it’s not one you have to take alone. While the system has many parts, it is designed to ensure everyone can access the care they need, with strong consumer protections and clear rights. The key is to follow the process, get the formal government assessments, and use that official information to talk to potential aged care homes.
At MD Home Care, we believe that finding quality care shouldn’t be a stressful, confusing ordeal.
If you have questions about aged care or need help navigating your options, contact MD Home Care today.