Big changes ahead for aged care
Australia’s population is ageing rapidly, with the number of people aged over 65 set to more than double over the next four decades. Even more strikingly, the over-85 age group is expected to triple in size.
In response to this demographic shift and following the 2021 Royal Commission into Aged Care Quality and Safety, the aged care sector has been undergoing significant reforms—and more are coming this year.
Major Changes from 1 July 2025
A major milestone is the launch of the new Aged Care Act, coming into effect on 1 July 2025. This updated legislation is designed to ensure both the sustainability and quality of aged care services nationwide.
So far this year, we’ve seen several key announcements, including pay increases for aged care workers and nurses, along with greater government investment in residential aged care facilities.
The Aged Care Taskforce recently projected that the residential care sector will need $56 billion by 2050 to expand and improve infrastructure. Yet, current funding arrangements are falling short—nearly half of providers reported losses in 2022–2023.
To help address these financial pressures, the federal government is offering $300 million in grants to support upgrades and capital improvements across aged care facilities.
Additional changes are also coming, such as increased means-tested contributions from new residents and an adjusted maximum room price that will rise over time in line with indexation.
Despite these changes, Aged Care Minister Anika Wells notes that about half of incoming residents won’t be asked to pay more than they currently do. “For every dollar contributed by an older Australian, the government will provide an average of $3.30 in support,” she explains.
Supporting Ageing at Home
The new Aged Care Act also prioritises helping more people remain in their own homes as they age. A significant part of this shift is the introduction of the Support at Home program, which will replace the current Home Care Packages and Short-Term Restorative Care programs.ii
With $4.3 billion in funding, Support at Home will offer over 300,000 places across the next decade and aims to streamline the process of applying for and receiving care. The program intends to reduce waiting times and make it easier for older Australians to adapt their care as their needs evolve.iii
Services covered by Support at Home include:
Clinical care such as nursing, physiotherapy, and occupational therapy
Personal support for activities like bathing, dressing, and medication management
Domestic assistance with cleaning, shopping, cooking, and gardening
Clinical care costs will be fully covered by the government. For non-clinical services, recipients will contribute a means-tested amount based on income and assets, using the Age Pension test as a guide. The most comprehensive care package will provide up to $78,000 per year in services. Additional funding is available for home modifications, assistive technology, and end-of-life care.
Importantly, a new lifetime cap will apply to all contributions—no one will pay more than $130,000 for aged care, regardless of income, wealth, or the length of time they receive care at home or in a facility.
New Rules for Refundable Deposits
Another key change in the new legislation is around refundable accommodation deposits. Providers will now be required to return lump sum payments within 14 days if a resident passes away or moves to another facility. Interest will continue to accrue on these sums until repayment. Standard deductions are still allowed if they were outlined in the initial agreement.
Reassurance for Existing Residents
Those already receiving home care or living in residential facilities can be assured they won’t be financially disadvantaged. A ‘no-worse-off’ guarantee ensures that under the new framework, current residents will not pay more than they do now.
Navigating aged care—whether for yourself or a loved one—can be complex and emotional. With these reforms on the horizon, now is a good time to understand how they may affect your situation. If you have questions or would like assistance with planning, we’re here to help guide you through the next steps.
