Moving into residential aged care can be an emotional decision. The financial side can feel just as overwhelming, particularly when you're trying to understand how your home, superannuation, investments, pension and other assets could affect what you pay.
The good news is that the system is designed around a relatively straightforward principle: your income and assets are assessed to determine how much you may need to contribute towards your care and accommodation.
However, the rules changed significantly from 1 November 2025, when the new Aged Care Act 2024 and associated rules introduced new fee arrangements for many people entering residential aged care.
Understanding the basics early can make the eventual transition much less stressful.
What is a residential aged care means assessment?
Before entering permanent residential aged care, most people should have a means assessment completed through Services Australia or, in some circumstances, the Department of Veterans' Affairs.
The assessment looks at your income and assets and helps determine:
- whether you qualify for government assistance with accommodation costs
- whether you need to pay means-tested fees or contributions
- how much you may need to contribute towards your accommodation.
You can complete the assessment before or after entering care. However, completing it beforehand can give you and your family a clearer picture of the potential costs before important financial decisions need to be made.
Importantly, you don't have to provide your financial information. But choosing not to complete a means assessment can result in you being charged at the highest applicable contribution rates.
Income and assets: what actually counts?
The assessment considers more than just the money sitting in your bank account.
Assessable income can include:
- Age Pension and other government income support
- superannuation and income stream products
- deemed income from financial investments
- rental income
- business income
- dividends and some trust distributions
- overseas pensions and certain other income streams.
The system can also apply deeming rules to financial assets. This means the assessment may use a deemed rate of return rather than your actual investment earnings.
Assessable assets can include:
- cash and bank accounts
- shares and managed investments
- investment properties
- superannuation
- vehicles and personal assets
- business interests
- trusts and private companies
- other property and investments.
Gifting can also have consequences. Certain gifts above the permitted limits can continue to be included in the assessment rather than immediately reducing your assessable assets.
That means transferring money or property to children shortly before entering care isn't necessarily an effective way of reducing your assessed means.
What happens to the family home?
The family home is one of the areas that can cause the most confusion.
Under the current rules, the treatment of your home depends on your circumstances, including whether a protected person continues to live there. A protected person can include a spouse or dependent child, and certain carers or close relatives who meet the relevant requirements.
If the home is not occupied by a protected person, its value may be included in the means assessment, subject to the applicable home exemption cap and current rules.
This is particularly important for couples.
Selling the family home can change the financial position of both partners, potentially affecting aged care contributions, accommodation costs and other government payments. The Australian Government's own examples demonstrate that changing how a couple funds accommodation can affect the means-tested position of the partner who remains at home.
So, selling the family home should rarely be treated as a simple "pay for aged care" decision.
How do the income and asset tests work together?
Think of the means assessment as looking at two sides of the same financial picture:
Income test + assets test = means-tested position
Your income and assets are assessed using legislated rules and thresholds. The result helps determine whether you receive government assistance and which contributions may apply.
Under the fee arrangements introduced from 1 November 2025, eligible residents may pay a hotelling contribution and, where applicable, a non-clinical care contribution. These are different from the means-tested care fee that applies to residents who remain under the older 1 July 2014 arrangements.
The thresholds and rates are also indexed periodically, so the figures can change over time. For this reason, using an old aged care fee example found online can produce a very different result from a current assessment. The Department of Health and Aged Care publishes updated schedules of fees, charges and thresholds.
And then there's accommodation
Your means assessment doesn't simply determine one overall "aged care fee".
Accommodation is a separate part of the equation.
Depending on your financial circumstances and the aged care home you choose, you may need to pay an accommodation payment or contribution. Payment options can include a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two.
The maximum accommodation payment amount is indexed annually. From 1 July 2026, the national maximum accommodation payment amount is $789,686, unless a provider has the required approval to charge above that amount.
This doesn't mean every resident will pay that amount. The actual room price is set by the provider and published through My Aged Care, and your means assessment determines whether government assistance with accommodation may apply.
It also means the decision about whether to use a lump sum, retain investments or pay daily accommodation costs can have broader financial consequences.
What should you do before residential care is needed?
The best time to understand aged care costs is before you're under pressure to make a decision.
Rather than waiting until a health event forces a move, consider reviewing:
1. Your overall financial position
Understand what you own, what you owe and how your assets are structured.
This should include superannuation, investments, property, cash and any business or trust interests.
2. Your partner's position
For couples, aged care planning isn't just about the person entering care.
The way accommodation is funded can affect the partner remaining at home, including their assets, income and potentially their government benefits.
3. Your family home
Before deciding whether to sell, retain or rent the family home, understand how each option could affect your aged care means assessment and broader retirement position.
4. Your superannuation and investments
Don't automatically assume that using super or selling investments to fund a RAD is the most efficient strategy.
The right approach depends on your circumstances, cash-flow needs, investment returns, tax position and the effect on your aged care assessment.
5. Any planned gifting
If you're considering giving significant amounts of money or property to children or other family members, understand the aged care gifting rules first.
A transaction intended to reduce your assessable assets may not produce the outcome you expect.
Don't make a big financial decision just because aged care feels urgent
Aged care decisions often happen during a stressful period. That's exactly when large financial decisions can be made too quickly.
The introduction of the new fee arrangements from 1 November 2025 makes it even more important to understand which rules apply to your circumstances. Existing residents may remain under older arrangements, while newer residents generally fall under the newer framework unless specific transitional protections apply.
And remember: the cheapest option on paper isn't necessarily the best financial decision.
Retaining the family home, selling it, paying a RAD, keeping investments or restructuring assets can each have flow-on effects.
A good aged care strategy considers the whole picture — not just the next invoice.
A little planning can remove a lot of uncertainty
You don't need to know every aged care rule yourself.
Start by understanding your current financial position, obtain a formal means assessment when appropriate, and seek professional advice before making significant changes to property, superannuation or investments.
The Australian Government's rules are detailed and regularly indexed, and the treatment of your finances can depend on your individual circumstances.
The goal isn't simply to minimise aged care fees. It's to make informed decisions that help protect your financial security, your partner's position and your family's choices when care is needed.
General information only. This article is general information only and does not take into account your personal circumstances. Aged care rules, rates and thresholds can change. Before making financial or accommodation decisions, consider obtaining advice from a qualified financial adviser and refer to current information from Services Australia, My Aged Care and the Australian Government Department of Health and Aged Care.