The residential aged care fee can be broken down into the following categories:

Accommodation payment

The amount paid for accommodation and entry into aged care will depend on the amount advertised by the facility and an individual’s means. This may be paid as either an upfront lump sum (refundable accommodation deposit – RAD), a daily payment (daily accommodation payment – DAP), or a combination of both.

Basic daily fee

The basic daily fees are paid by all residents to cover basic living expenses. Means-tested care fee. Individuals may pay a means tested daily fee to assist in covering the cost of ongoing health care which will vary depending on the level of assets and income and is subject to certain caps.

Extra service fee

In certain circumstances, an individual may pay an additional fee to cover amenities and services above the minimum standard agreed by that individual and their care provider. All providers are able to offer extra services agreed with the individual based on an opt-in / opt-out basis.

Funding considerations

Depending on an individual’s personal situation, there may be ways to increase their Age Pension entitlement and reduce their aged care fees. These strategies may include spending money on non-assessable assets such as their home, giving away assets up to allowable limits or investing in assets which receive concessional assessment under the means tests. To improve cash flow and help fund aged care fees, some people might also consider drawing down from their investments, taking higher payments from their superannuation pensions, commencing a long-term annuity or renting their home.