Aged care reforms spark concerns over access for low-income Australians

Australia’s aged care system is undergoing a significant overhaul, with the federal Labor government introducing reforms aimed at improving quality and sustainability.

However, industry leaders and advocates warn that these changes, set to take effect from 1 November 2025, may inadvertently disadvantage elderly Australians reliant on government support, potentially prioritising wealthier residents.

The reforms, informed by the 2021 Royal Commission into Aged Care Quality and Safety and a subsequent Aged Care Taskforce, seek to balance funding by increasing contributions from those with greater financial means while maintaining support for clinical care. Yet, the gap between accommodation payment options is raising alarms about equitable access.

The Reforms: A New Funding Model

The Aged Care Act 2024, passed in November 2024, introduces a new framework to address the growing demands of an ageing population. With the number of Australians over 65 expected to double and those over 85 to triple within 40 years, the government aims to ensure the sector’s financial viability. Key changes include:

• Increased Contributions for Wealthier Residents: From 1 November 2025, new residents entering aged care facilities will face means-tested fees for non-clinical services, such as cleaning, laundry, and lifestyle activities. A new Non-Clinical Care Contribution (NCCC) will cap at $36,923.40 annually, with a lifetime limit of $130,000 or four years. Wealthier residents may also pay a Hotelling Contribution of up to $4,580.75 per year for everyday living costs.
• Accommodation Payment Changes: The Refundable Accommodation Deposit (RAD), a lump-sum payment averaging $470,000, will now incur a 2% annual retention fee for up to five years, reducing the refundable amount by up to 10%. The RAD cap has increased from $550,000 to $750,000, indexed to inflation annually. Alternatively, residents can opt for a Daily Accommodation Payment (DAP), which will be indexed to the Consumer Price Index (CPI) twice yearly, potentially increasing costs for those who choose not to pay the lump sum.
• Support for Low-Income Residents: The government will fully fund clinical care, including nursing and physiotherapy, ensuring no out-of-pocket costs for essential medical services. Low-means residents will continue to receive an accommodation supplement, currently $69.79 per day, to cover part or all of their accommodation costs. However, this supplement is significantly lower than the daily equivalent of a RAD, creating a financial incentive for providers to prioritise wealthier residents.

The equity concern

Tracey Burton, chief executive of Uniting NSW.ACT, a major aged care provider with 75 homes and 8,000 residents, has highlighted a critical issue: the financial disparity between the RAD and the accommodation supplement may lead providers to favour residents who can pay the lump sum.

“When a provider has one bed left, the decision to accept a supported resident paying $69.79 per day versus someone contributing double that through a RAD is tough,” Burton told The Guardian. This could result in low-income elderly Australians being “squeezed out” of aged care homes, particularly in high-demand areas where occupancy rates exceed 94% in cities and 92% in regional centres.

The Aged Care Taskforce’s March 2024 report noted that 46% of providers operated at a loss on accommodation in 2022/23, underscoring the sector’s financial strain. The new retention fee on RADs and higher room price caps aim to bolster provider finances, but critics argue these measures exacerbate inequities.

Grant Corduroy, an aged care expert, told Guardian Australia, “The current accommodation supplement is inadequate compared to what wealthier residents contribute, and with rising demand, providers may prioritise those who can pay more.”

To address this, the government has implemented a 25% reduction in the accommodation supplement for providers with fewer than 40% supported residents, incentivising them to accept low-means individuals.

However, Burton argues this measure is insufficient and calls for the supplement to be increased or aligned with RAD-equivalent rates. A planned review of accommodation pricing, due by mid-2026, will examine these concerns, but advocates urge faster action to prevent access disparities.

Support at home and broader reforms

The reforms also introduce the Support at Home program, replacing the Home Care Packages Program from 1 November 2025.

This initiative aims to help 1.4 million Australians remain in their homes longer by offering tailored services across clinical care (fully government-funded), independence services (e.g., personal care), and everyday living services (e.g., gardening).

Contributions will be means-tested, with full and part pensioners paying based on their pension assessments, while non-pensioners will need to provide income and asset details.

The “no worse off” principle ensures that existing home care recipients as of 30 June 2025, or those on the National Priority System by 12 September 2024, will not face higher fees upon transitioning to Support at Home.

However, new residents entering aged care homes after 1 November 2025 will be subject to the updated payment structures, which could mean higher costs for those with assets above $238,000 or income above $95,400.

Industry and government response

Aged care providers have broadly welcomed the reforms, which are expected to inject $930 million into the sector over four years while saving $12.6 billion over a decade through increased user contributions.

However, Ageing Australia, a peak body, has expressed concerns about unresolved regulatory details, warning of potential “unintended consequences” as the implementation date approaches.

Minister for Aged Care Sam Rae has emphasised the government’s commitment to equitable access, stating, “We’re ensuring the accommodation supplement provides appropriate incentives so those who need care most can access it, regardless of financial means.”

The upcoming pricing review will involve wide consultation to refine these mechanisms.