Understanding the finances

When making decisions on where and how to access care, financial decisions are important.

You firstly need to have enough cashflow to meet your ongoing fees and other personal expenses. Once this need has been met, how to structure assets to protect the value of your estate can then be considered.

Putting your plan into place may involve decisions on which assets to keep, which ones to sell and how to invest your savings. This may also include decisions around how to use your home, especially if you are moving and leaving the home empty.

Understanding the finances can be made more difficult by complex terms that might be new to you, and a lot of jargon. We have provided a list of terms that you might come across and their acronyms.

What are you paying for?

Once you have decided where to live and what care you want to access, you need to check how much the costs are for accommodation and for ongoing care. You will also have other personal expenses, health costs and perhaps home maintenance and ownership expenses.  Whether you are continuing to live in your home, or in a retirement community or in residential care, these costs can be divided into three very broad categories:

  1. Accommodation costs
  2. Ongoing care costs
  3. Personal expenses & lifestyle costs.

Government subsidies can make the costs more affordable – as the government will pay part of the costs.

Accessing government subsidies

The cost of care can become more affordable if you can access government subsidies. The subsidies payable will depend on the type of care you access and your financial situation. The table below provides a quick summary of key issues.

Accommodation costsOngoing care feesPersonal & lifestyle expenses
Living in your own home​You can choose to buy or rent a home.

This is a personal expense as costs are not subsidised by government. But if you rent and receive a Centrelink/DVA payment, you might qualify for rent assistance.
You might be able to access private care or government subsidised in-home care.

You pay the full cost of private care, but only part of the cost for the subsidised options based on an income test.
You still need to pay for day-to-day expenses (such as food and electricity), health costs (including health insurance premiums and medications), home maintenance and ongoing costs (such as repairs, rates and insurance) and personal expenses.
Retirement village/ land lease communityUsually you need to buy either the home or the right to occupy a home, but some villages may have a rent option.

This is a personal expense as costs are not subsidised by government.

In a retirement village, if you receive a Centrelink/DVA payment and are considered a non-homeowner, you might qualify for rent assistance. In a land-lease community, even though you might be a homeowner you can still be eligible for rent assistance for the rent you pay on the land.
The operator might offer serviced packages that provide services such as meals, laundry and cleaning. These are private expenses.

You might be able to access government subsidised in-home care instead of the serviced packages, or to top-up the amount of support you receive. You only pay part of the cost of a subsidised option based on an income test.
You still need to pay for day-to-day expenses (such as food and electricity), health costs (including health insurance premiums and medications).

In addition, the operator is likely to charge ongoing fees. In a retirement village these cover maintenance and upkeep. These are private expenses and you should read the contract carefully to understand how the fees are charged and what they cover.
Residential aged care serviceYou will need to pay for the right to occupy your room and to use the amenities provided in communal areas.

Generally this is set by the provider as a lump sum but you will have the right to choose to pay the lump sum (a refundable accommodation deposit – RAD) or a daily fee (a daily accommodation payment – DAP).

The prices vary but you can find them published on the My Aged Care website.

You are effectively finding a new home and so whether you choose to “buy” or “rent”, it is a personal expense. The government will only help make the costs more affordable with different rules for how the price is set and how much you pay, if you are assessed to have low financial capacity (ie a low-means resident).

Find out more
Most people in residential care will have their care costs subsidised by Government.

After entry into permanent care, a care assessment is conducted (called an AN-ACC assessment) to determine your cost of care.

Alongside this, Services Australia (or Veterans’ Affairs) conduct a means-test assessment to work out how much is affordable for you to pay. The rest is paid as a subsidy by the Government to the care provider.

Find out more
The care provider will provide meals, heating/cooling, laundry, and cleaning.

The ongoing fees replace a lot of the daily expenses you were paying while you lived in your own home (or a retirement community).

However, you still need to pay health costs (including health insurance premiums and medications). You will also need some spending money to cover other personal items and incidentals, such as coffees, gifts, outings, hair appointments, magazines etc.

The provider may also offer additional services at an extra daily fee.

In addition, if you still own your former home you may have ongoing costs (such as repairs, rates and insurance).
Note: This table provides a quick summary and may not contain all relevant details. ​

Strategies to help with paying for care

Accessing the government subsidies can reduce the cost payable by you for care. But using your investments and income sources carefully can also help to make care affordable so you can access the care you need.

Some strategies may help to reduce assessable assets and income to maximise Centrelink/Veterans’ Affairs entitlements. Other strategies are aimed at generating sufficient cashflow to meet expenses and fees as they arise and become payable. Careful planning and the use of your resources can help to make care affordable, even when you thought it might be difficult to fund.

Strategies to pay for home care​

Tips for how to pay your home care fees.

Strategies to pay for residential care​

Tips for how to pay your residential care fees.

Low-means assessment & residential care​

How to make care affordable if you have low financial capacity.

Advice & help​

Ideas for where you can get help.