Aged Care Accommodation Reform – Key Changes from 2025

What’s Happened? 

The Australian Government has announced major aged care accommodation funding reforms to improve the financial sustainability of the sector. The reforms include: 

• Increasing the maximum accommodation price requiring approval from $550,000 to $750,000 from 1 January 2025, with annual indexation to be applied from 1 July 2025. 
• Introducing Refundable Accommodation Deposit (RAD) Retention, requiring providers to retain 2% per year (capped at 5 years) from 1 July 2025. 
• Indexing Daily Accommodation Payments (DAPs) for new residents entering after 1 July 2025, with biannual increases based on CPI. 
• A government review of the accommodation supplement and other pricing structures is set over the next two years to assess incentives for quality accommodation and access for low-means residents. 
• a long-term plan to phase out RADs, subject to an independent review in 2029-30, with a proposed transition away from new RADs by 2035. 

The “no worse off” principle applies, meaning these changes will not impact residents who enter aged care before 1 July 2025. 

Why is this Important? 

These reforms aim to stabilise the financial viability of residential aged care providers while ensuring older Australians continue to access high-quality accommodation. 

Providers should prepare for the transition by: 

• Reviewing accommodation pricing models to reflect new caps and indexation. 
• Updating fees and charges and resident agreements to accommodate RAD retention requirements. 
• Ensuring clear communication with residents and families regarding DAP increases and RAD retention. 
• Engaging in the government’s upcoming review to shape the future of aged care accommodation pricing. 

The proposed phasing out of RADs by 2035 is a significant sector shift, and providers should stay informed on government reviews and potential funding alternatives.