How Does Aged Care Funding Work in Australia?

Key Points

• The Australian Government funds approximately 75% of all aged care costs, with the total budget exceeding $35 billion per year
• Residential residents contribute through the basic daily fee, a means-tested care contribution, and accommodation payments; home care under Support at Home has no basic daily fee and uses service-based contributions instead
• Support at Home, which commenced on 1 November 2025, replaced Home Care Packages and uses eight classification levels (the old four HCP levels ranged from about $9,500 to $61,000 a year)
• The Commonwealth Home Support Programme (CHSP) provides entry-level services with minimal client contributions and continues until at least 30 June 2027
• The former ACAT and RAS assessment arrangements were consolidated into the Single Assessment System
• Hardship provisions exist for people who cannot afford their assessed contributions

How Australian Aged Care Is Funded

Aged care funding in Australia is built on a shared responsibility model. The Australian Government provides the majority of funding through the Department of Health and Aged Care, while care recipients contribute based on their capacity to pay. This approach is designed to make sure that everyone who needs aged care can access it, regardless of their financial position.

The government does not pay providers a single flat rate. Instead, aged care funding is calculated through a combination of subsidies, supplements, and grants that reflect the assessed needs of each individual, the type of service being delivered, and the characteristics of the provider (such as location and size).

Care recipients contribute through a structured fee framework, and that framework now differs by care type. In residential care, every resident pays a basic daily fee, and people with higher incomes or greater assets pay an additional care contribution (the means-tested care fee for pre-1-November-2025 residents, or the Non-Clinical Care Contribution for those who entered from 1 November 2025), plus accommodation costs depending on their assessment. In home care under Support at Home, there is no basic daily fee and no income-tested care fee. Instead, recipients make service-based contributions, set by service category (clinical, independence, everyday living) and their means.

State and territory governments play a smaller but still meaningful role. They contribute through public hospital services that support older Australians transitioning between hospital and aged care, community health programs, social housing, and community transport services.

The Scale of Government Investment

The Australian Government’s investment in aged care has grown significantly over the past decade. The 2025-26 federal budget allocates approximately $36 billion to aged care, making it one of the largest areas of government spending outside of health and social security.

This investment covers:

• Subsidies for residential aged care facilities
• Funding for home care under the Support at Home program (which replaced Home Care Packages)
• The Commonwealth Home Support Programme
• The new Support at Home program
• Aged care workforce programs and wage supplements
• Quality and safety regulation through the Aged Care Quality and Safety Commission
• Capital grants for infrastructure in regional and remote areas
• Research and innovation in aged care service delivery

The Royal Commission into Aged Care Quality and Safety, which reported in 2021, recommended substantial increases in government funding. The government responded with commitments totalling more than $17 billion in additional investment over subsequent years, focused on workforce improvements, quality standards, and expanded home care capacity.

Home Care Package Funding by Level (historical, replaced by Support at Home)

Note: Home Care Packages were replaced by Support at Home on 1 November 2025. The four-level structure below is now historical and is included for context, because many people still describe their care in these terms during the transition. Support at Home uses eight classification levels instead (see the Support at Home section further down).

Home Care Packages (HCPs) were funded by the government at four levels. Each level provided a set annual budget that was paid directly to the approved provider managing the package on behalf of the care recipient. The care recipient then worked with their provider to decide how that budget was spent on services.

Level 1: Basic Care Needs

Level 1 packages are designed for people with basic care needs. The government subsidy is approximately $9,500 per year. This level typically covers a small number of hours of support each week, such as help with housework, basic personal care, or social support.

Level 1 is suited to someone who is largely independent but needs a small amount of regular assistance to remain safely at home.

Level 2: Low-Level Care Needs

Level 2 packages provide approximately $17,500 per year in government funding. This level supports people who need more regular assistance, potentially including a combination of domestic help, personal care, nursing visits, and allied health services.

Most people entering the home care system for the first time are assessed for Level 2.

Level 3: Intermediate Care Needs

Level 3 packages receive approximately $38,000 per year. This level is designed for people with intermediate care needs who require more frequent or more complex services. It can fund regular nursing, physiotherapy, occupational therapy, more extensive personal care, and equipment.

Level 4: High-Level Care Needs

Level 4 packages provide approximately $61,000 per year. This is the highest level of home care funding and supports people with high and complex care needs. Level 4 can fund daily personal care, regular nursing, allied health, case management, and other services that allow someone with significant needs to remain at home rather than moving into residential care.

What HCP Funding Covers

Home Care Package funding can be used for a wide range of services, including:

• Personal care such as bathing, dressing, and grooming assistance
• Nursing care including wound management, medication administration, and health monitoring
• Allied health services like physiotherapy, occupational therapy, podiatry, and dietetics
• Domestic assistance including cleaning, laundry, and meal preparation
• Home maintenance and minor modifications such as grab rails and ramp installation
• Transport to medical appointments and community activities
• Social support and community participation
• Assistive technology and equipment
• Respite care to give carers a break

HCP funding cannot be used for food and groceries (other than the cost of meal preparation services), rent or mortgage payments, medical costs already covered by Medicare, pharmaceuticals covered by the PBS, gambling, entertainment, or travel for holidays.

For a detailed breakdown of what you might pay under a Home Care Package, see our aged care fees calculator.

Client Contributions for Home Care (Support at Home)

Home care contributions changed completely on 1 November 2025. Under the old Home Care Packages program, recipients paid a basic daily fee (17.5% of the single Age Pension) and, for higher incomes, an income-tested care fee. Both of those fees were abolished.

Under Support at Home, there is no basic daily fee. Instead you make service-based contributions:

• Clinical care (nursing, allied health): fully government funded, no contribution
• Independence services (personal care, domestic assistance): around 5 to 50% of the cost, by means
• Everyday living services (gardening, home maintenance, transport): around 17.5 to 80% of the cost, by means

Full pensioners pay the lowest contribution rates and self-funded retirees pay the most. A lifetime contribution cap ($135,318.69, indexed) limits total out-of-pocket costs. Existing Home Care Package recipients are protected by a “no worse off” principle.

Residential Aged Care Funding

Residential aged care (nursing home care) involves a different funding structure from home care. The government pays a care subsidy directly to the facility based on each resident’s assessed care needs, and the resident pays fees that cover daily living costs, care contributions, and accommodation.

Government Care Subsidies

The government’s care subsidy for residential aged care is calculated using the Australian National Aged Care Classification (AN-ACC) funding model. AN-ACC replaced the previous Aged Care Funding Instrument (ACFI) in October 2022.

Under AN-ACC, each resident is assessed and classified into one of 13 classes based on their care needs. The government then pays the facility a daily subsidy that includes:

• A facility-level component that reflects the general cost of running the facility
• A resident-level component based on the individual’s assessed care needs
• Adjustments for factors such as Indigenous status, homelessness, and geographic remoteness

AN-ACC was designed to fund care based on what residents actually need, rather than what providers claim, which reduces the inconsistencies that affected the older ACFI system.

The total government subsidy varies widely depending on care needs. For residents with straightforward care needs, the daily subsidy might be around $80 to $120. For residents with complex care needs, including advanced dementia, significant behavioural support needs, or complex medical conditions, the subsidy can exceed $250 per day.

Care Supplements

The government pays additional supplements on top of the base subsidy for specific circumstances:

• Oxygen supplement for residents who require ongoing oxygen therapy
• Enteral feeding supplement for residents receiving nutrition through a feeding tube
• Respite supplement for residents in short-term respite care
• Veterans supplement for eligible Department of Veterans’ Affairs clients
• Homeless supplement for residents who were experiencing homelessness before admission
• Viability supplement for facilities in regional, rural, and remote areas where operating costs are higher

What Residents Pay

Residential aged care residents pay up to three types of fees:

Basic daily fee. All residents pay this fee regardless of income or assets. It is set at 85% of the single basic Age Pension and covers daily living costs such as meals, cleaning, laundry, heating, and cooling. This fee is currently $66.80 per day.

Care contribution. Residents with income and assets above certain thresholds pay an additional care contribution. Services Australia conducts the means test and calculates the amount. For residents who entered before 1 November 2025 this is the means-tested care fee, with an annual cap of $35,910.43 and a lifetime cap of $86,185.23 (as at 20 March 2026, indexed each March and September). For residents who entered from 1 November 2025, it is the Non-Clinical Care Contribution (maximum $107.32 per day, with a combined lifetime and four-year cap of $137,917.01), plus a Hotelling Contribution toward everyday living costs.

Not everyone pays a care contribution. If your income is limited to the full Age Pension and your assets are below the relevant thresholds, you will not pay it. The asset thresholds are indexed and change twice a year, so confirm current figures with Services Australia.

Accommodation payment. Residents who are assessed as being able to pay for their accommodation will need to make an accommodation payment. This can be paid as:

• A Refundable Accommodation Deposit (RAD), which is a lump sum that is fully refundable when the resident leaves the facility
• A Daily Accommodation Payment (DAP), which is a daily rental-style payment
• A combination of both

Accommodation prices vary significantly between facilities and locations. In metropolitan areas, RADs can range from $300,000 to over $1 million. In regional areas, RADs are typically lower.

Residents who are assessed as “supported” (meaning they cannot afford accommodation costs) receive an accommodation supplement from the government, and the facility cannot charge them an accommodation payment.

For more information on how fees are calculated, visit our aged care fees calculator.

Commonwealth Home Support Programme (CHSP)

The Commonwealth Home Support Programme is the entry-level tier of home care. It provides individual services rather than a coordinated package, and it is designed for people who need a small amount of help to stay independent at home.

How CHSP Is Funded

The government funds CHSP by paying subsidies directly to approved service providers. Unlike Home Care Packages, there is no individual budget allocated to each client. Instead, the government funds providers to deliver a set volume of services across their client base.

CHSP covers a range of services including:

• Domestic assistance (cleaning, laundry)
• Personal care (help with bathing, dressing)
• Meals and food services (delivered meals, assistance with meal preparation)
• Social support (group activities, one-on-one companionship)
• Transport (to medical appointments, shopping, social activities)
• Home maintenance (minor repairs, garden maintenance)
• Allied health and therapy services
• Nursing care
• Respite care

Client Contributions Under CHSP

CHSP operates on a co-contribution model. Clients are asked to make a contribution towards the cost of services, but the amount is based on their capacity to pay. Typical contributions range from $5 to $15 per service session.

Importantly, CHSP providers cannot refuse to provide services because a client is unable to make a co-contribution. The government’s policy is that no one should miss out on services due to financial hardship.

There is no formal means test for CHSP. The co-contribution is determined by the provider based on a conversation with the client about their financial circumstances.

CHSP Transition to Support at Home

CHSP continues to operate until at least 30 June 2027, and is scheduled to transition into the new Support at Home program no earlier than 1 July 2027. Existing CHSP clients will transition to the new program with their current services maintained. The transition is designed to be seamless, with no gap in service delivery.

The Support at Home Program

The Support at Home program is the most significant reform to home-based aged care funding in Australia’s history. It replaces both Home Care Packages and the Commonwealth Home Support Programme with a single, unified program.

How Support at Home Funding Works

Support at Home uses eight classification levels instead of the four HCP levels. Each level corresponds to a different intensity of care and a different annual budget. The classification levels are:

• Levels 1 to 3: For people with lower care needs, replacing what was previously covered by CHSP and HCP Levels 1 and 2
• Levels 4 to 6: For people with intermediate care needs, roughly corresponding to HCP Levels 2 to 4
• Levels 7 and 8: For people with high and complex care needs, providing more funding than the previous HCP Level 4

This expanded classification system allows for more precise matching between a person’s care needs and their funding level. Under the previous system, there was a large gap between Level 2 ($17,500) and Level 3 ($38,000), which meant some people were either underfunded or overfunded for their actual needs.

For a full breakdown of each classification level, see our Support at Home program complete guide.

Three Service Categories

Support at Home organises services into three categories, each with different contribution requirements:

Clinical care. This includes nursing, allied health, and other clinical services. The government fully subsidises clinical care for all participants, regardless of income. No client contribution is required for clinical services. From 1 October 2026, personal care (such as showering, dressing, grooming, non-clinical continence support, eating, hygiene, and help self-administering medication) moves into the clinical supports category and becomes fully government funded, with no participant contribution. Until 1 October 2026, contributions applied to personal care.

Independence services. This includes domestic assistance, meal preparation, and other services that support daily living. Client contributions for independence services are based on a means test.

Everyday living services. This includes services like gardening, home maintenance, and transport. Clients pay a higher proportion of the cost for everyday living services, as these are considered less clinically essential.

Client Contributions Under Support at Home

The Support at Home contribution framework is more structured than the previous system. Contributions are determined by:

• The type of service (clinical, independence, or everyday living)
• The person’s income and assets (assessed by Services Australia)
• Whether the person receives a full, part, or no Age Pension

People on a full Age Pension pay no contribution for clinical care, a small contribution for independence services, and a moderate contribution for everyday living services. People with higher incomes and assets pay progressively more, up to a cap.

The lifetime contribution cap and annual contribution cap continue to apply under Support at Home, providing a ceiling on total out-of-pocket costs.

Consumer vs Government Contributions: Who Pays What

Understanding the balance between what the government pays and what individuals pay is essential for financial planning.

Government Share

Across the aged care system as a whole, the government funds approximately 75% of total costs. This includes:

• Care subsidies for residential and home care
• Accommodation supplements for supported residents
• Workforce supplements and grants
• Quality regulation and oversight
• Capital grants for facility construction and upgrades

The government’s share is higher for people with lower incomes and fewer assets. For someone on a full Age Pension with minimal assets, the government may fund more than 90% of their care costs.

Individual Share

Care recipients contribute approximately 25% of total aged care costs nationally, though this varies significantly between individuals.

A person on a full Age Pension receiving home care under Support at Home pays nothing toward clinical care and only a small share of independence and everyday living services, because there is no basic daily fee and no income-tested care fee for home care.

A self-funded retiree entering residential care might pay the basic daily fee, a care contribution up to the relevant cap, and a significant accommodation payment, while the government provides a care subsidy of $30,000 to $90,000 per year depending on care needs.

Caps on out-of-pocket costs

The government caps care contributions to protect people from excessive out-of-pocket costs:

• For pre-1-November-2025 residential residents, the means-tested care fee has an annual cap of $35,910.43 and a lifetime cap of $86,185.23 (as at 20 March 2026)
• For residents who entered from 1 November 2025, the Non-Clinical Care Contribution has a combined lifetime and four-year cap of $137,917.01
• Home care under Support at Home has its own lifetime contribution cap ($135,318.69, indexed)
• Once a cap is reached, you no longer pay that contribution

These caps are indexed to keep pace with cost increases. The basic daily fee (residential) and accommodation payments sit outside these caps.

Budget Allocations and Government Spending

Where the Money Goes

The aged care budget is divided across several major areas:

Residential care receives the largest share, accounting for approximately 60% of total aged care spending. This reflects the high cost of providing 24-hour care in a facility setting, including staffing, accommodation, meals, and clinical services.

Home care receives approximately 25% of total spending, a proportion that has been growing as the government prioritises supporting people to remain at home. The expansion of home care funding has been a key recommendation of the Royal Commission.

CHSP and entry-level services account for approximately 10% of spending, covering the large number of older Australians who need only minimal support.

Workforce, regulation, and other programs make up the remaining 5%, including the Aged Care Quality and Safety Commission, workforce training and retention programs, and aged care research.

Workforce Funding

A significant portion of recent funding increases has been directed at the aged care workforce. The government has funded:

• A 15% interim pay increase for aged care workers, followed by further increases
• Mandatory minimum care minutes per resident per day in residential care (200 minutes, including 40 minutes of registered nurse time)
• Workforce training and professional development programs
• Registration and regulation of the aged care workforce

These workforce investments are reflected in higher subsidy rates paid to providers.

How Australia Compares Internationally

Australia’s aged care funding model sits between the universal, free-at-point-of-use systems found in some countries and the predominantly private-pay model used in others. The government underwrites most of the cost, but asks people who can afford it to contribute.

Spending as a Percentage of GDP

Australia spends a smaller share of national income on aged care than many comparable OECD countries:

The Royal Commission noted this gap and said spending would need to increase to meet the needs of an ageing population.

Key Differences From Other Systems

Japan introduced a mandatory long-term care insurance system in 2000. Everyone aged 40 and over pays premiums, and everyone aged 65 and over is entitled to services based on assessed need. This gives Japan a dedicated, ring-fenced funding stream that Australia does not have.

The Netherlands uses a similar social insurance model, with mandatory contributions funding a comprehensive aged care entitlement. It is one of the best-funded systems in the world.

The United Kingdom has historically relied on local council funding supplemented by private pay. Reforms under the Care Act 2014 attempted to cap individual costs, though implementation has been repeatedly delayed.

Because Australia funds aged care mainly from general taxation revenue, aged care competes with other budget priorities such as health, education, and defence. This contributed to periods of underfunding, particularly in the years before the Royal Commission.

Regional and Remote Funding Support

Delivering aged care in regional and remote Australia costs more than in metropolitan areas, so the government provides extra funding to support access in these locations.

Viability supplements give additional funding to providers in areas where a small population makes services financially unworkable without support.

The National Aboriginal and Torres Strait Islander Flexible Aged Care Program funds culturally appropriate aged care services in remote Indigenous communities, with funding models adapted to community-controlled delivery.

Workforce incentives aim to attract and retain aged care workers in regional and remote areas through salary supplements, relocation assistance, and professional development funding.

Means Testing and Financial Assessments

How the Assessment Works

Services Australia conducts the financial assessment for aged care fees. When you enter aged care, you can complete an income and assets assessment. For residential care, if you do not complete it you will be charged the maximum care contribution. (The aged care needs assessment itself is now handled through the Single Assessment System, using the Integrated Assessment Tool, which replaced the former ACAT and Regional Assessment Service arrangements.)

The assessment looks at:

Income from all sources:

• Age Pension and other Centrelink payments
• Superannuation income streams
• Investment income (interest, dividends, rental income)
• Employment income
• Deemed income from financial assets (using deeming rates set by the government)

Assets:

• Bank accounts and term deposits
• Shares, managed funds, and other investments
• Investment properties
• Personal assets above a threshold
• The family home (assessed differently depending on whether a partner still lives there)

Home Assessment Rules

Your family home is treated differently depending on your circumstances:

• If your spouse or dependent child still lives in your home, the home is excluded from the assets test entirely
• If no protected person is living in the home, the value is included in the residential means test but capped ($214,884 as at 20 March 2026, indexed)
• You will never be forced to sell your home to pay for aged care

Hardship Provisions

If you are assessed as needing to pay fees but genuinely cannot afford them, hardship provisions are available. You can apply to Services Australia for a determination that reduces or waives your fees.

Hardship provisions may apply if:

• Paying fees would leave you unable to meet basic living expenses
• Your assets are tied up in a form that cannot easily be converted to cash (such as a farm or business)
• You have experienced a significant change in financial circumstances
• Selling your home would cause unreasonable hardship to you or your family

Planning for Aged Care Costs

Steps to Take Now

Regardless of whether you or a family member needs aged care now or in the future, there are practical steps you can take:

1. Understand the system. Read about how aged care is funded, what services are available, and what you might need to pay. This guide is a starting point.

2. Get an assessment. Contact My Aged Care on 1800 200 422 to arrange an aged care assessment. This determines your eligibility and the level of care you need.

3. Complete the financial assessment. Submit an income and assets assessment to Services Australia. This determines your fee contributions. Completing this assessment usually results in lower fees than the default maximum.

4. Consider financial advice. A financial adviser who specialises in aged care can help you understand the implications for your pension, assets, and estate. Look for advisers accredited with the Aged Care Financial Advice Network.

5. Compare providers. Use the My Aged Care website to compare approved providers, their fees, services, and quality ratings.

Where to Get Help

If you need help understanding aged care funding or navigating the system, these resources are available:

• My Aged Care: 1800 200 422 for information, assessments, and referrals
• Services Australia: 1800 227 475 for income and assets assessments and fee calculations
• Older Persons Advocacy Network (OPAN): 1800 700 600 for free, independent advocacy
• Financial Information Service (FIS): Free seminars and appointments through Services Australia

You can also explore our aged care services page for information about providers and support options in your area.

How Carevo Can Help

Navigating aged care funding can feel overwhelming. Carevo is a connection platform that helps older Australians and their families find the right aged care providers and understand their funding options.

We can help you:

• Understand what funding you may be eligible for
• Connect with approved aged care providers in your area
• Compare services, fees, and quality across multiple providers
• Get answers to your questions about the aged care system

Call 1800 953 253 to find the right aged care provider through Carevo. We connect you with trusted providers who can answer your funding questions.

March 2026: Ministerial Investigation Into Premium Service Fees

On 16 March 2026, the Aged Care Minister announced an investigation into claims that some aged care providers are charging premium fees for basic services that should be covered under standard government-funded care arrangements. The Minister specifically named Opal Healthcare as one provider under scrutiny, calling the practice “disgusting sidestepping” of aged care regulations.

This investigation is critical for understanding aged care funding. Government subsidies are designed to cover the cost of care services required to meet assessed needs. Providers should not be charging separately for basic care activities that are already funded through government subsidies and resident contributions (basic daily fee and means-tested care fee).

When reviewing aged care funding arrangements with providers, ensure you understand which services are covered by government funding and your assessed contributions, and which (if any) are legitimate optional extras. If you believe you are being charged inappropriately for services that should be government-funded, lodge a complaint with the Aged Care Quality and Safety Commission on 1800 951 822.

Source: ABC News, 16 March 2026

Frequently Asked Questions

Can I lose my home to pay for aged care?

No. You cannot be forced to sell your home to pay for aged care. If your spouse or dependant still lives in your home, it is excluded from the assets test entirely. If no one is living there, only a capped portion of the value is counted in the assessment. Hardship provisions provide additional protection if selling would cause unreasonable difficulty.

What if I cannot afford the assessed fees?

Contact Services Australia to apply for a financial hardship determination. Your fees may be reduced or waived. Providers cannot refuse to deliver care because you cannot pay your assessed care contribution. In residential care you will still owe the basic daily fee, but even this can be reduced in genuine hardship cases. Home care under Support at Home has no basic daily fee.

How often do aged care funding rates change?

Government subsidy rates and fee thresholds are indexed on 20 March and 20 September each year. Major funding changes (such as new programs or structural reforms) are announced in the federal budget (usually May) and typically take effect on 1 July.

Does Medicare cover aged care costs?

Medicare continues to cover GP visits, specialist consultations, PBS medications, and hospital care for aged care recipients. However, Medicare does not cover the cost of aged care services themselves (personal care, domestic assistance, accommodation). These are funded through the aged care system described in this guide.

What happens to my Age Pension if I enter aged care?

Your Age Pension is not automatically cancelled when you enter aged care. It continues to be paid, and it is counted as income in your aged care financial assessment. If you enter residential care and rent out your home, the rental income will be assessed, and the home value may be included in the assets test, which could affect your pension rate.

Is aged care funding the same in every state?

Yes. Aged care is funded by the Australian Government (Commonwealth) and operates under national legislation. The funding rules, fee structures, and assessment processes are the same in every state and territory. However, the cost of accommodation (particularly RADs) varies by location, with metropolitan areas generally more expensive than regional areas.

Is aged care funding sustainable long term?

This is one of the biggest policy questions facing Australia. With the population aged 85 and over projected to more than double by 2050, aged care costs will keep rising. The Intergenerational Report projects that aged care spending will increase from around 1.2% of GDP to approximately 2.1% of GDP by 2060-61. To meet this, the government will need to find additional revenue, increase the share paid by individuals, or do both. The Royal Commission also recommended an independent pricing authority to set funding rates based on the true cost of care.