Beginners guide to aged care – Part 1: Aged Care Facilities

As Australia’s population continues to age, the topic of aged care is becoming increasingly important.  In this 3-part series, we outline some of the most common accommodation options available to older members of the community: aged care facilities, retirement villages and manufactured home estates.

What is an aged care facility?

Aged cared facilities (commonly known as nursing homes) provide accommodation, and varying levels of care and services for people aged 65 and over (or 50 years and over for Aboriginal and Torres Strait Island people).  In Australia, most aged care facilities are government subsidised with residents generally required to contribute to the fees based on a means test.

There are some private aged care facilities which do not receive government funding.  The fees for these private facilities are more expensive as residents are required to pay the full costs of the services.

In Australia, aged care facilities are regulated by the Aged Care Act 1997 (Cth) which sets out the rules surrounding things like funding, fees, quality of care and the rights of the people receiving care.


A person entering a government funded aged care home is required to be assessed by an Aged Care Assessment Team (ACAT).  The assessment is used to make a recommendation for the type and level of care which will best meet the needs of that person.

People entering private non-government funded aged care facilities are not required to undergo an ACAT assessment.

Costs of aged care facilities

There are a variety of different costs associated with aged care facilities and the amount of these costs depend on the type of aged facility and an assessment of the resident’s income and assets, ie. a means test.

Daily fee

This is a compulsory fee which is not means tested.  It covers daily living expenses such as meals, electricity and laundry. The daily fee is an amount which is equal to approximately 85% of the aged pension.

Means tested care fee

This cost is means tested and determined by Centrelink.  It covers the personal care (such as bathing and dressing) and clinical care (such as nursing services, assistance with medication) services provided by the aged care facility. There are annual and lifetime caps which apply to this fee. As at March 2021 the most an aged care facility can charge you is:

  • $28,338.71 per year; or
  • $68,012.98 in a lifetime.

Accommodation costs

These costs are means tested and determined by Centrelink.  There are a few different options for paying these costs:

  • Lump Sum – This amount is refunded upon the person’s exit from the facility less any agreed deductions. There are two types of lump sums, depending on your means assessment: Refundable accommodation deposit (RAD) where you pay the full amount yourself OR Refundable accommodation contribution (RAC) where the government pays some of the costs;
  • Daily payments. These payments are non-refundable. There are two types of daily payments, depending on your means assessment:  Daily Accommodation Payment (DAP) where you pay the full amount yourself OR Daily Accommodation Contribution (DAC) where the government pays some of the costs; or
  • Combination of lump sum and daily payments.

Additional service fees

This covers services that go beyond the minimum care and service requirements, such as hairdressing.

Important documents and things to consider before entering an aged care facility

A person moving into an aged care facility must be provided with a Residential Care Agreement by the facility.  This is a legally binding agreement between the resident and the facility which sets out things like:

  • The specific care and services which will be provided by the facility
  • Details of the costs payable by the resident
  • Accommodation details
  • The rights and responsibilities of the resident, and the responsibilities owed by the facility
  • Procedures for complaints made by or on behalf of the resident

Each aged care facility’s Residential Care Agreement can be different, and it is important that potential residents understand their legal rights and obligations before entering into the Residential Care Agreement. We recommend that anyone considering entering an aged care facility obtain financial and legal advice before agreeing to enter the facility and before signing the Residential Care Agreement.

For more information please contact our property team at Fox and Thomas.