Getting your head around the cost of a nursing home?
Key Points
Refundable Accommodation Deposits, retentions, Hotelling Supplements, and non-clinical care contributions are just some of the jargon-heavy terms that confront families new to residential aged care. These aren’t just words—they directly impact how much you pay and how you structure your finances.
Expert help is essential to decode the language, understand how fees like the Agreed Room Price, Indexation factor at entry, MPIR, and Retentions taken work, and uncover the most viable financial path forward.
With more than 20 years’ experience and hundreds of Australians supported through aged care transitions, we’re uniquely placed to help you understand the system, assess your options, and move ahead with clarity and confidence.
Everyone’s situation is different. Your strategy will depend on income and asset thresholds, accommodation payment structure, sale or retention of the family home, and the needs of any spouse or dependent. The right advice—at the right time—makes all the difference.
Note: the new rules start 1 July 2025—this article refers to the updated regime.
A Simple Introduction
Working out what you’ll pay in residential aged care can feel overwhelming. At a high level, you’ll cover:
A Basic Daily Fee (linked to the Age Pension)
Means tested fees - based on the financial situation of the resident
Accommodation charges—either up front or as an ongoing payment
That’s it in broad strokes. Below we unpack each building block in detail.
Detailed Breakdown
1. Baseline Daily Charge: Basic Daily Fee
Everyone pays the Basic Daily Fee, set at 85% of the maximum Age Pension rate. If you qualify for high-level pension support, this is your only mandatory daily cost.
To find out more about qualifying for Concessional or low means status - read our blog here.
2. Means-Tested Fees
These fees depend on your finances and are assessed via a means test:
Hotelling Supplement – covers room quality, meals and utilities.
Non-clinical Care Contribution – covers services like cleaning and activities.
Both are capped at a maximum annual amount and limited to a four-year period—most stays (average under 20 months) won’t reach that cap. If you don’t supply financial details, you’re assigned a “means not disclosed” status and pay the maximum until you comply. We can help you determine if you will be subject to the maximum fees and save you paperwork.
3. Optional Provider Fees: Higher Everyday Living Fees
Some providers offer premium services (e.g., larger rooms or restaurant-style dining) under a Higher Everyday Living Fee. These are elective, with consumer protections:
You can’t be forced to agree to these fees before entry.
You have 28 days to change your mind or renegotiate once you’ve moved in.
4. Accommodation Charges: Your Refundable Accommodation Deposit (RAD)
The RAD is effectively your “room purchase” cost:
If you pay in full: the provider may retain up to 2% per annum of your RAD (the Retentions taken) for up to five years.
If you don’t pay in full: you pay a Daily Accommodation Payment (DAP) instead, calculated using:
Agreed Room Price – the total cost you and your provider agree on.
Indexation factor at entry – adjusts that price to today’s dollars on move-in.
Indexation factor on the day – a CPI-based multiplier applied every six months.
MPIR (Maximum Permissible Interest Rate) – caps the interest on any unpaid RAD.
AND the amount unpaid is subject to the 2% per annum retention
The easiest and fastest way to find out Refundable Accommodation Deposits is by using our Aged Care Homes Near Me tool, and clicking on “show Rooms”
The Home Equity Access Scheme
Paying for residential aged care—and making the most of a complex system—requires careful, experienced analysis and swift action. The Home Equity Access Scheme (HEAS) lets you access a portion of your home’s value to help fund care costs without selling immediately. Because HEAS is a government-run program, it can take several weeks to set up:
Early planning is essential. Start your application before you need care so approvals and security arrangements are in place ahead of time.
Boost your cash flow. HEAS can reduce or eliminate up-front RAD/DAP payments, freeing capital for other uses.
Stay in your home longer. By accessing equity instead of selling, you retain the option to move back home if your needs change.
If you’re anticipating an aged care transition, we recommend considering the HEAS as soon as possible. That way, you won’t face last-minute delays or miss out on potential entitlements when your care journey begins.
Why Getting Expert Advice Matters
With every component—Basic Daily Fee, Hotelling Supplement, Non-clinical Care Contribution, accommodation payment options and means-tests—there are caps, indexation rules and timing issues to navigate. A tailored strategy before you move in can save tens of thousands over your stay.
Brendan
Brendan Ryan CFP
(02) 9173 8560