Planning for aged care: what every Australian family needs to know

More than half (54%) of people living in permanent residential aged care have dementia, according to the Australian Institute of Health and Welfare (AIHW). When cognitive impairment is involved, the ability to make clear, considered decisions can be significantly diminished.

For many families, choices about care are made during a health crisis, under emotional pressure and with an urgency that rarely produces the best outcomes. We see firsthand the value of starting the conversation before families are forced to make important decisions.

Few life transitions are as emotionally challenging or financially complex as moving into aged care. Planning ahead does not mean anticipating the worst. It means giving yourself and the people around you a genuine choice at a time when that choice matters most.

Aged care planning involves assessing care needs, choosing options, organising finances and legal affairs, understanding fees, and evaluating the impact on the person and their family.

Aged care decisions can involve more than choosing the right type of support. Families may also need to consider living arrangements, finances, legal matters and the wishes of the person receiving care.

Starting these conversations early gives families more time to understand their options and make considered decisions. This can be especially important if changes in health or cognitive ability make it harder for someone to communicate their preferences later.

Why planning before a crisis gives families more options

When aged care decisions are made during a health crisis, families may have less time to compare care options, understand potential costs or consider how each choice could affect the wider family.

Planning ahead can create more time to discuss preferences, explore available support and understand the financial implications before decisions become urgent. It can also help ensure the person who may need care has a greater opportunity to be involved in those decisions.

When should a family start planning for aged care?

You can start planning before aged care is immediately needed. Changes in health, mobility or cognitive ability can be useful prompts, as can changes to living arrangements or family circumstances.

Starting earlier does not mean deciding immediately whether someone should receive care at home or enter residential aged care. It means understanding the available options and preparing for decisions that may need to be made in the future.

Why more Australian families will need to plan for aged care

Australia’s ageing population means aged care planning is likely to become relevant to more families in the years ahead. According to the Department of Health, Disability and Ageing, more than 4.2 million Australians are aged 65 or over, representing around 16% of the population, with this proportion projected to increase significantly over the coming decades.

Other ageing populations provide some indication of the challenges this can create. In Japan, where almost one-third of the population is aged 65 or over, an ageing population has placed increasing pressure on the workforce, healthcare and pension systems.

For Australian families, this reinforces the value of planning ahead.

Planning for aged care is not only about paperwork and changing policies. It also involves personal decisions about the type of care you or a family member may need, where that care is provided and how those choices could affect the wider family.

What type of care might be needed?

The right type of care depends on the person's needs and circumstances. Options may include support at home, residential aged care, or respite and other short-term care.

An aged care assessment can help determine which government-funded services a person may be eligible to receive. From there, families can consider their preferences, care needs and available options.

Can a couple stay together if one person needs aged care?

Couples may have different care needs. One partner may need residential aged care while the other is able to remain at home, or both may require different levels of support.

This can raise important questions about where each person will live, whether they can remain close to each other and how care and accommodation decisions could affect their shared finances and retirement planning.

What happens to the family home?

The family home can become an important part of the aged care conversation, particularly if one person moves into residential care while a partner remains at home.

Families may need to consider whether the property should be retained or sold, how it fits into future care funding, and how any decision could affect the person remaining at home.

How will aged care affect the family's overall financial position?

Aged care costs can affect more than day-to-day cash flow. How care is funded may also influence investments, superannuation, property and retirement income, as well as longer-term estate planning decisions.

For couples, it is also important to consider the financial position of the partner who may remain at home. Decisions about paying for care or accommodation can affect the assets and income available to them, so these choices should be considered as part of the family's broader financial position.

Australia's aged care system changed significantly from 1 November 2025. The reforms introduced a new rights-based Aged Care Act and the Support at Home program, changing how some aged care services are accessed, funded and delivered.

What changed under the Aged Care Act 2024?

The Aged Care Act 2024 commenced on 1 November 2025, replacing the previous legislation that governed Australia's aged care system.

The new Act takes a rights-based approach to aged care, with greater emphasis on the rights, needs and preferences of older people receiving funded services. It also introduced changes to areas such as assessment, funding, provider responsibilities and supported decision-making.

What is Support at Home?

Support at Home replaced the Home Care Packages Program and Short-Term Restorative Care Programme from 1 November 2025.

The program has eight ongoing funding classifications, with funding levels based on a person's assessed care needs. It also includes short-term pathways for specific needs, such as restorative and end-of-life care.

From 1 July 2026, annual funding across the eight ongoing classifications ranges from approximately $11,000 to $80,000, with amounts indexed annually.

What is changing in 2026?

Further changes to Support at Home are taking effect during 2026. From 1 October 2026, personal care services will move into the Clinical Supports contribution category. This means these services will be fully funded by the Australian Government, with participants no longer required to make a contribution towards their personal care services.

Because aged care rules and funding arrangements can change, families should check current government guidance when making decisions about care.

What financial information needs to be kept up to date?

Financial circumstances can affect the amount someone pays towards residential aged care. If a resident has completed a means assessment, relevant changes to their personal or financial circumstances generally need to be reported to Services Australia within 28 days.

This may include changes to income, assets, property or relationship circumstances. Keeping this information current helps ensure aged care costs are calculated using up-to-date information.

Aged care costs vary from person to person. What you pay can depend on the type of care you receive, your financial circumstances, your income and assets, and your accommodation arrangements.

A clear view of these factors can help you consider aged care costs as part of your broader financial position, rather than make each decision in isolation.

How are aged care costs determined?

The way aged care fees are calculated depends on whether you receive care at home or move into residential aged care. Your income and assets may also affect how much you contribute towards your care.

Residential aged care costs can include care-related fees and accommodation costs. The fees that apply will depend on your circumstances and the current aged care funding rules.

What are RAD and DAP payments?

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If you move into residential aged care and need to pay for your accommodation, you may have the option to pay a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of both.

A RAD is a lump-sum accommodation payment. A DAP allows you to make ongoing payments instead of paying the full accommodation amount upfront.

Each option can affect your finances differently. A RAD may require funds from savings, investments, superannuation, or property, while a DAP creates an ongoing cash-flow commitment. Your accommodation choice should therefore form part of your broader financial plan.

How do income and assets affect aged care costs?

Your income and assets can influence how much you contribute towards aged care. Assessable finances may include income from investments and superannuation, as well as certain assets.

Means assessment rules can be complex, and every person's circumstances are different. Before you make significant financial changes, consider how the decision could affect both your aged care costs and your broader financial position.

How can the family home affect aged care planning?

The family home can be one of the most significant assets to consider when planning for aged care. However, a move into residential aged care does not automatically mean the home needs to be sold.

Families may choose to retain or sell the property, or consider it alongside other resources available to fund care and accommodation. Its treatment for aged care purposes can also depend on individual circumstances, including whether a spouse or another protected person continues to live there.

What should couples consider when one person needs care?

If one partner enters residential aged care while the other remains at home, both people's financial needs matter.

Accommodation payments, property, investments, and retirement income can affect both the partner at home and the person receiving care. Aged care financial planning should account for both partners' living costs, income needs and longer-term financial position.

What could aged care planning look like for a couple?

Example: Consider a couple where one partner needs to move into residential aged care while the other plans to remain in the family home.

Before deciding how to fund care, they may need to consider the remaining partner’s income, accessible cash, RAD or DAP payments, investments, superannuation and future care needs.

Aged care financial planning and pension advice can help families understand how these decisions interact before making significant financial changes.

What tax issues should families consider?

Centrelink and aged care means testing aside, families should also consider the tax consequences of selling assets to fund aged care.

Under the CGT reforms enacted in 2026, the existing 50% CGT discount will generally be replaced by cost-base indexation for relevant gains from 1 July 2027. This means the tax will apply to the real gain after inflation, rather than to the existing 50% discount. A minimum 30% tax treatment will also apply to relevant capital gains, subject to transitional rules and exclusions.

For families considering whether to sell property or investments to help fund aged care, the timing and tax consequences of an asset sale can therefore form an important part of the broader financial decision.

• Discuss care preferences with the person who may need support.
• Explore home care, residential aged care and short-term care options.
• Arrange an aged care assessment where appropriate.
• Gather details of income, superannuation, investments, property and other assets.
• Estimate potential aged care fees and accommodation costs.
• Consider how care costs may affect cash flow and retirement income.
• Review how the family home fits into the broader financial plan.
• Consider the financial needs of a spouse or partner.
• Review your Power of Attorney and other decision-making arrangements.
• Document healthcare preferences through an Advance Care Directive where appropriate.
• Check that your will and estate plan reflect your current wishes.
• Consider whether aged care financial advice could help before major financial or property decisions.

How do I start the aged care assessment process?

Start by contacting My Aged Care to discuss the care and support you or your parent may need. An aged care assessment looks at current needs and the different types of support that may be suitable. Depending on the circumstances, this may include home support, respite care or ongoing care in an aged care home.

An ACAT assessment is a term many people still use when looking for this process. Your GP, carer or another health professional can also help you prepare for an assessment.

What financial information is needed for aged care?

You may need details about your income, assets, superannuation, investments and property. If you have a partner, their circumstances may also be relevant.

This information can help determine your contribution to government-subsidised aged care. It can also help you consider care options that align with your needs and budget. Your financial circumstances should also form part of broader planning before you make significant decisions about property or other assets.

How much does residential aged care cost?

There is no single cost for residential aged care. What you pay can depend on your financial circumstances, the aged care provider, accommodation arrangements and any additional services you choose.

Costs may include contributions towards care as well as accommodation payments. The Australian Government Department of Health publishes current information about residential aged care fees, while individual providers can outline their accommodation prices and available services.

What are the types of aged care?

Australian aged care includes different types of services based on the level and duration of support a person needs. This can include Support at Home to help you stay in your own home, residential aged care, respite care and short-term pathways such as restorative care or end-of-life care.

An assessment can help identify which care services are available and appropriate for your circumstances.

What changed with aged care in 2026?

The aged care reforms that began on 1 November 2025 continued to affect the way care is funded and delivered throughout 2026. Support at Home now uses eight ongoing funding classifications, alongside short-term pathways for specific care needs.

From 1 October 2026, personal care services under Support at Home move into the Clinical Supports contribution category. These services will be fully funded by the Australian Government rather than requiring a participant contribution.

The families who navigate aged care best are rarely those who act the fastest under pressure. Starting the conversation early, understanding your options before they are needed and having a plan that reflects your wishes can give you and your family greater clarity and peace of mind.

Aged care decisions can affect your care, finances and family. A clear plan can help you approach those decisions with greater confidence when the time comes. Speak to our financial advisory team today to ensure you’re prepared for aged care or retirement.