Change in the Aged Care Industry is on its way, and not soon enough. Australia is looking down the barrel of a surge in our ageing population, and the care systems required to handle this need to be put in place as soon as possible before it’s too late.
Australia’s aged care system is undergoing its most significant overhaul in decades, aimed at improving quality in a sustainable manner, and the ability for older Australians to stay in their homes longer. These changes impact both home care and residential aged care services and respond to recommendations from the Royal Commission into Aged Care Quality and Safety.
The team at My Care Journey are strong advocates for a better aged care system that provides the best care possible into the future for our ageing Australians for decades to come.
With the largest segment of our population, the Baby Boomers, heading into the more senior stages of their lives, making the care system as strong and viable as possible is essential.
Managing Director of My Care Journey Joseph Dimarco says “The ageing demographic of Australia will see the population of over 65’s, double by 2050. It is also projected the population aged over 85 will quadruple. The Australian government currently pays 76% of residential aged care and 95% of home care costs. The Aged Care reforms will shift this model to consumers contributing more to the funding of their aged care, consequently, providers will need to diversify their service offering, increase their efficiency, and focus on customer satisfaction models all of which are positive outcomes for consumers and the Aged Care system.”
So, with changes being announced and on their way in 2025 we thought it would be useful to provide what we hope is a good starting point on the changes, who they do/don’t affect, and how they might impact those starting out on their Aged Care journey.
What are the changes to Aged Care?
The Aged Care Reforms introduce significant changes to improve both home care and residential aged care:
- Support at Home Programme: This program will look to replace the Commonwealth Home Support Program and the current Home Care Package Program.
Support covers clinical care e.g. nursing and occupational therapy, independence assistance e.g. helps with showering, dressing, taking medication, and everyday living e.g. cleaning, gardening, shopping, meal prep.
Home care will now operate on quarterly budgets rather than budgets run on an annual basis. If funds are not spent within the quarter, they will be lost although it also provides provisions to access funds if budgets are spent in that quarter. Additionally, there will be pricing limits and mandatory contributions to manage costs more effectively.
While the government will pay 100% of clinical care costs, what’s not covered are the more everyday living and independence related costs. This means individuals will contribute more than they have previously in other programs to these non-clinical services depending on their financial situation. This will be determined by means-testing based on individual income and assets.
- Residential Aged Care Contributions: Everyday living costs refer to non-medical services, such as meals, laundry, cleaning, and social activities. New entrants to aged care with sufficient means will contribute toward these expenses through means-tested fees. Additionally, they will help cover the cost of their accommodation and non-clinical care (e.g., mobility assistance and personal care).
- Protections for existing or soon to be Residents: A “no worse off” principle ensures that residents already in aged care prior to 30 June 2025 will not have to pay more under the new arrangements. The government will continue to cover the bulk of care costs, with 73% for residential care and 100% for clinical care.
- Supported Decision-Making: A significant aspect of the reforms is the ability for older Australians to appoint a supporter to help them with decision-making, based on the principles of supported decision-making. This ensures that individuals retain autonomy while receiving assistance tailored to their needs—something My Care Journey (MCJ) strongly advocates for and can support.
- Aged Care Quality and Safety: The Aged Care Quality and Safety Commission will gain stronger powers to regulate aged care providers. New quality standards will ensure that providers deliver safe, respectful care, and civil penalties will be imposed on those who fail to meet these standards.
Changes at a glance
IMPORTANT: The protection of the family home in the means test still applies to residential aged care. For residential care, the family home is exempt if a protected person (such as a spouse) still lives there, and even if it’s included for some reason, its value is capped at $206,039. For Support at Home, the family home is generally not counted in means testing, as home care assessments focus more on income and liquid assets.
When do the Aged Care reform changes come into effect?
The reforms begin on 1 July 2025, with transitional arrangements ensuring that current aged care residents will not be worse off. Those already in care by 30 June 2025 will maintain their existing financial arrangements.
Who do the reforms impact?
The reforms impact:
- Older Australians in Home Care: Those currently receiving home care support will transition to the new Support at Home programme, which is expected to benefit around 1.4 million Australians by 2035.
- New Entrants to Residential Care: From July 2025, new residents will face a revised means-testing system that includes additional contributions towards non-clinical care and everyday living expenses.
- Aged Care Providers: Providers will need to meet stricter quality standards and will be required to invest in upgrading residential care facilities.
Am I better or worse off with these changes in Aged Care?
These changes by the government are aimed to make the system fairer and more sustainable by ensuring that those with higher financial means to contribute more will do so, while still protecting vulnerable and lower-income individuals. It’s natural in major reforms like this we see some winners and others that are impacted in a not so positive way.
Winners:
- Fully Supported / Residents: Those with lower incomes and assets, such as full pensioners, will not face additional costs under the new system. In fact, 7 out of 10 full pensioners will see no increase in their contributions.
- Home Care Recipients: Older Australians in home care will benefit from faster access to care, tailored support through eight levels of care classifications (currently 4), and the ability to modify their homes for safety. Australians will see improved access to home modifications (up to $15,000) and faster access to assistive technologies like walkers and wheelchairs.
The Support at Home program will also shorten waiting times and offer tailored care plans to meet individual needs. Support at Home offers additional flexibility, ensuring that more people can remain in their homes for longer, with the government paying 100% of clinical care costs.
The others:
- New Residential Care Entrants: Approximately half of new residents entering care from July 2025 will be required to pay more due to means-tested contributions. For example, those with assets above $238,000 will need to contribute towards everyday living and accommodation costs, including a share of the Hotelling Supplement, which covers meals and other non-clinical services.
- Part Pensioners and Wealthier Individuals: About 1 in 4 part pensioners and self-funded retirees will also likely face higher contributions under the new system. Those with substantial assets or income will be required to contribute up to $130,000 over their lifetime for non-clinical care costs. This has previously been around $80,000. New residents with sufficient assets will contribute more towards their living costs, but the government will still cover 73% of the total cost (previously estimated by the government to have been 75% of the total cost).
Everyday examples
To help paint a more practical picture of how this might look for an everyday senior starting out on the Aged Care Journey, here’s a couple of basic examples of how this may look for the everyday Australian.
John needs Home Care
John, a part-pensioner with assets totalling $250,000, receives home care support for daily tasks like gardening and meal preparation. Under the Support at Home program, John now has to contribute a portion of income towards these everyday living services and costs. Previously, his contributions were smaller, but now, due to means-testing, his out-of-pocket costs increase because he exceeds the asset threshold of $238,000
Susan needs Residential Aged Care
Susan, who has assets worth $400,000 and an income of $120,000 per year, moves into residential care. Under the new rules, Susan is required to contribute to everyday living costs (like meals and laundry) as well as non-clinical care (e.g., assistance with mobility). She also needs to contribute towards the Hotelling Supplement, which she didn’t have to pay under the previous arrangements. Susan’s larger asset base and income mean she will contribute significantly more towards her care than someone with fewer resources.
Where to from here & what do I do if I’m looking at Aged Care?
As Minister for Aged Care Anika Wells said, “These reforms will ensure that aged care in Australia is not only better and fairer but will help more Australians stay in the homes they love longer.
With significant investment in both home and residential care, these reforms aim to create a sustainable system that respects the dignity and rights of older Australians”.
However, they do mean changes for those starting or moving through their Aged Care Journey.
If you want to understand these changes and the impact to you or a loved one, we suggest a few steps to take.
- Seek financial advice. The right advice can mean the best choices are made now and into the future if Aged Care is something you’re needing to consider. Here at My Care Journey, we can put you in touch with Financial Advice that specialises in Aged Care costs and funding.
- If it means you’re potentially paying more into the future, then it becomes even more critical to find the best care provider for your needs. This is where My Care Journey can help by contacting us on 1300 20 11 44 or emailing us at info@mycarejourney.com.au.
In a time of constant changes these reforms can feel unsettling and raise questions (which we hope we were able to answer for you). Remember we’re here to help you through this journey at any time.
