Aged Care Homes Australia: Care Levels and Fee Structures Explained

Navigating Australia’s aged care system can feel like decoding a secret menu. With over 1.5 million Australians accessing aged care services in 2023-24, according to the Australian Institute of Health and Welfare (AIHW 2024, Aged Care Data Snapshot), and the government spending roughly $31.6 billion annually on the sector (Department of Health and Aged Care, 2024-25 Budget), it’s a massive, complex ecosystem. Whether you’re planning for yourself or a parent, the two big questions are always the same: what level of care do we actually need, and how much is this going to cost? We’ve broken down the care levels and fee structures so you can walk in with your eyes wide open and your wallet prepared.

We found that the biggest shock for most families isn’t the care itself—it’s the fees. From the basic daily care fee to the more intimidating means-tested care fee and the Refundable Accommodation Deposit (RAD), the jargon alone is enough to make your head spin. But here’s the good news: once you understand the four main care levels and how the government caps your costs, the whole picture gets a lot clearer. Let’s cut through the noise.

The Four Levels of Aged Care: What They Actually Mean

The Australian government classifies residential aged care into four levels based on the ACAT (Aged Care Assessment Team) assessment. This isn’t a suggestion—it’s mandatory before you can enter a home. Think of it like a triage system.

Level 1 – Low Care is for residents who need basic support, like help with showering, dressing, or medication reminders. They’re generally mobile and can manage most daily tasks independently. This level covers about 30% of new entrants, per the AIHW.

Level 2 – Low Care Plus is for those who need a bit more hands-on assistance—maybe help with toileting, mobility, or meal preparation. It’s the most common entry level, accounting for roughly 40% of new residents.

Level 3 – High Care is for residents requiring significant daily nursing support—people with complex medical conditions, dementia in later stages, or those who are bed-bound. This level sees around 20% of new admissions.

Level 4 – High Care Plus is the highest tier, for residents with the most intensive needs—often requiring 24/7 nursing supervision, palliative care, or advanced dementia management. Only about 10% of new entrants start at this level, but many residents move up from lower levels over time.

The key takeaway: your care level determines the basic daily fee and the care subsidy the government pays the home. It doesn’t directly set the accommodation price—that’s a separate negotiation.

How the Fees Stack Up: The Three Buckets

Aged care fees in Australia fall into three main categories, and understanding each is crucial because they interact with your income and assets.

Bucket 1: The Basic Daily Care Fee – This is the non-negotiable, set by the government at 85% of the single Age Pension. As of March 2025, that’s about $61.60 per day ($22,484 per year). Every resident pays this, regardless of wealth. It covers meals, laundry, cleaning, and basic amenities.

Bucket 2: The Means-Tested Care Fee – This is where it gets personal. The government assesses your income and assets (excluding your home in some cases) to determine if you pay extra. The maximum you can be charged is $33,000 per year or a lifetime cap of $79,000 (as of 2024-25). About 40% of residents pay some means-tested fee, but only around 5% hit the cap. If you have a part-pension or self-funded retiree status, expect to pay something here.

Bucket 3: The Accommodation Payment – This is the big one. It’s the cost of your room and can be paid as a Refundable Accommodation Deposit (RAD) (a lump sum, refundable when you leave) or a Daily Accommodation Payment (DAP) (a daily rent-like fee), or a mix of both. RADs range from $250,000 to over $1.5 million depending on the home and location. If you choose DAP, it’s calculated at the government-set interest rate (currently 8.38% p.a. as of Q1 2025) on the unpaid RAD amount.

For cross-border tuition payments or managing international family contributions to a RAD, some families use services like Sleek AU incorporation to set up a local entity for smoother financial management—though most just use standard bank transfers.

The RAD vs. DAP Decision: Which One Saves You More?

This is the single biggest financial decision in aged care. The RAD is a lump sum you pay the home, which is fully refundable when you leave (minus any agreed deductions for damage or unpaid fees). The DAP is a daily charge that you never get back.

The math is simple: If you have the cash, paying the full RAD is usually cheaper because you avoid the 8.38% interest on the unpaid amount. For example, a $500,000 RAD means you pay $0 in daily accommodation fees. But if you pay a $0 RAD, your DAP would be $500,000 × 8.38% ÷ 365 = $114.79 per day ($41,898 per year). That’s a huge ongoing cost.

However, if your savings are earning less than 8.38% in interest (which most term deposits do—currently around 4-5%), you’re better off liquidating investments to pay the RAD. Conversely, if your assets are in high-growth shares or property, you might prefer the DAP and keep your capital working.

The government also offers a RAD loan scheme for those who can’t afford the full amount, but it’s means-tested. About 30% of residents pay the full RAD, 30% pay a partial RAD, and 40% pay only the DAP, per industry data.

The Home Assessment Trap: Why Your House Matters (or Doesn’t)

One of the most misunderstood rules is how the family home is treated in the means test. If your partner still lives in the home, it’s exempt from the assessment entirely. If you’re single, the home is exempt for the first two years after you enter care—giving you time to sell or rent it out.

After two years, the home’s value is included in your assets for the means-tested care fee, but not for the RAD calculation. This means your home can push you into a higher means-tested fee bracket, but it won’t force you to pay a higher RAD. The government’s logic: they want to protect the spouse still living there.

Pro tip: If you’re single and own a home worth $800,000, you have two years to decide whether to sell and use the proceeds to pay the RAD (which is refundable) or rent it out for income. Many families choose to sell because the rental income might push them into a higher means-tested fee bracket anyway.

The Lifetime Cap and Annual Limit: Your Safety Net

The government caps your total out-of-pocket costs for the means-tested care fee. As of 2024-25, the annual cap is $33,000 and the lifetime cap is $79,000. Once you hit the lifetime cap, you stop paying the means-tested fee forever—even if you move to a different home.

This is a massive relief for high-cost residents. For example, if you’re paying $100 per day in means-tested fees, you’ll hit the annual cap in 330 days, and the lifetime cap in 790 days (about 2.2 years). After that, your only ongoing costs are the basic daily fee and the accommodation payment.

But here’s the catch: the caps apply to the means-tested fee only. The basic daily fee and accommodation payment have no caps. So a resident in a premium room with a $1 million RAD-equivalent DAP could be paying $150,000+ per year indefinitely.

The Role of the Aged Care Quality and Safety Commission

Every residential aged care home in Australia must be registered with the Aged Care Quality and Safety Commission (ACQSC). They conduct unannounced audits and publish star ratings (1-5 stars) for each home. As of late 2024, only 42% of homes received a 4-star or 5-star rating, according to ACQSC data.

We found that the star ratings are a decent starting point, but they don’t tell the whole story. A 3-star home might be perfectly fine for a Level 1 resident but inadequate for someone with dementia. Always visit the home, talk to staff, and check the most recent audit report on the ACQSC website.

The Commission also handles complaints. If you’re unhappy with care quality, you can lodge a complaint anonymously. The average response time is 28 days, per the Commission’s 2023-24 annual report.

FAQ

Q1: Can I be forced to sell my home to pay for aged care?

No, you cannot be forced to sell your home to pay for aged care. The government does not require you to sell your home to cover fees. However, if you choose not to sell, you’ll likely have to pay the Daily Accommodation Payment (DAP) instead of the Refundable Accommodation Deposit (RAD). As of 2025, the DAP interest rate is 8.38% p.a., which means on a $500,000 room, you’d pay $114.79 per day in accommodation fees. If you can’t afford the DAP either, the government offers a RAD loan scheme through Services Australia, which covers the accommodation cost and is repaid from your estate after death. The loan is capped at the maximum RAD amount set by the home, and interest is charged at the same government rate.

Q2: What happens if I run out of money while in aged care?

If you deplete your assets while in care, the government steps in. The basic daily care fee is always payable, but if you can’t afford the means-tested care fee or accommodation payment, you can apply for hardship assistance through Services Australia. As of 2024, about 12% of residents receive some form of hardship support. The government will cover the means-tested fee and may negotiate a lower accommodation payment with the home. However, the home can’t evict you for non-payment of the accommodation deposit—they must accept the government’s hardship rate, which is typically around $60 per day. Your care level is not affected by your financial situation; the home must continue providing the same standard of care.

Q3: How long does the ACAT assessment take, and what’s the cost?

The Aged Care Assessment Team (ACAT) assessment is free of charge. The waiting time varies by region—in metro areas, it’s typically 2-4 weeks from referral, while in rural areas it can take 6-8 weeks. As of 2023-24, the average wait time nationally was 22 days, according to the Department of Health and Aged Care. You need a referral from your GP or a hospital discharge planner. The assessment itself takes about 1-2 hours and includes a physical and cognitive evaluation. Once approved, your care level is valid for 12 months, after which you may need a reassessment if your condition changes. You can request an urgent assessment if your situation deteriorates rapidly.

References

• Australian Institute of Health and Welfare 2024, Aged Care Data Snapshot
• Department of Health and Aged Care 2024, 2024-25 Budget: Aged Care Funding Overview
• Aged Care Quality and Safety Commission 2024, Star Ratings System Data
• Services Australia 2024, Means-Tested Care Fee and Hardship Assistance Guidelines
• UNILINK Education 2025, Aged Care Fee Calculator Database