How to Navigate Aged Care in Australia: Costs, Government Subsidies and What to Do When Mum or Dad Needs Help

By Molly Benjamin, Founder of Ladies Finance Club

Listen to the full podcast here.

On this episode of Get Rich, we're covering a topic we've never actually spoken about at Ladies Finance Club before, and honestly, I think that says something about how most of us approach it. We push it to the side. We tell ourselves there's time. We assume it'll sort itself out when it needs to. But after sitting down with Rachael, co-author of the bestselling book Downsizing Made Simple, I walked away realising just how complex and, frankly, how costly Aged Care Australia can be if you haven't planned for it.

If you're anything like a lot of the women in our community, you might be what Rachael calls a TED, the trusted eldest daughter. She's usually the one who ends up holding the whole thing together when a parent needs care. The assessments, the forms, the costs, the decisions about where mum or dad will actually live out this next chapter. It's a lot to carry, and it often falls on one person's shoulders simply because they're the one who picks up the phone first.

What aged care in Australia actually looks like

Here's something that surprised me. When most of us picture aged care, we picture a nursing home. But Rachael made the point that less than 20 per cent of Australians receiving aged care are actually living in residential aged care. The overwhelming majority are receiving Elderly Care support in their own home, or somewhere close to it. That might mean staying in the family home, or it could mean a granny flat, a retirement village, a land lease community or a townhouse. Home Care can follow you almost anywhere you choose to live.

Rachael's way of putting it stuck with me. Aged care is wherever you want to live, and whatever care you want to receive, delivered there. It's less about ticking a box marked nursing home and more about working out what kind of life your parents want to keep living, and then figuring out how the system can support that.

Breaking down the costs, because it's a lot

This is where things get genuinely complicated, and I don't say that lightly. Rachael broke it into two worlds, the home care world and the residential aged care world, and each one comes with its own maze of fees.

In home care, your clinical care, so things like nursing and physiotherapy, is fully funded by the government. No co-contribution required there. But for independence services, you'll pay somewhere between 5 and 50 per cent depending on your assets and income, and for everyday living services like meal prep or gardening, that co-contribution can range from 17.5 per cent right up to 80 per cent for a self-funded retiree.

Residential aged care works differently again. If someone is classified as low means, generally holding assets below around $216,000, they'll usually have some or all of their accommodation costs subsidised. Most people, though, are what's called market price payers, and they pay the market rate for their accommodation directly to the aged care home.

This is where the RAD and the DAP come in. You can pay for your accommodation as a lump sum, known as the Refundable Accommodation Deposit, or as a daily payment, the Daily Accommodation Payment, calculated on whatever portion of the RAD you haven't paid upfront. And these numbers are not small. The government increased the market price cap last year to $750,000, so in a lot of our capital cities, that's the figure you're looking at. If the aged care home has harbour views, you could be looking at two or three million dollars.

On top of accommodation, there's the ongoing cost of care itself. Everyone pays a basic daily fee, currently around $68 a day. Then there are two means tested fees, a hoteling fee of up to about $22 a day, and a non-clinical care contribution. And if you want extras like a glass of wine with dinner or Foxtel in the room, that usually comes with a higher everyday living fee on top.

Here's the myth Rachael was keen to bust. A lot of us assume that because the system is means tested, you'll never be asked to pay more than you can genuinely afford. That's simply not true. For plenty of families, the cost of care ends up higher than the person's income, which means they're dipping into savings, using a reverse mortgage, tapping the government's home equity access scheme, or downsizing to free up cash.

The government subsidies most people miss

The starting point for absolutely everything is My Aged Care. It's the government body responsible for assessments and information, and it's where any funded support begins. Rachael's advice here was so simple and so smart. Prepare for that assessment like it actually matters, because it does. Think through what your parent genuinely struggles with and be honest about it, rather than doing the classic Aussie thing of saying, oh, I'm fine, I don't need much help.

The reason honesty matters so much is timing. Right now, the gap between assessment and actually receiving services is about a year. If your mum downplays her needs today, she could be significantly under-supported by the time care finally arrives. Rachael described the assessment almost like a passport, and I loved that image. You want as many boxes ticked as possible, because a ticked box doesn't obligate you to use that service, it just means the funding is there and ready if you ever do need it.

To even be eligible, a person generally needs to be over 65, or over 55 if they're Aboriginal or Torres Strait Islander, though the assessment itself is really built around care needs rather than a strict age cutoff.

Retirement planning and the family home

One thing I found genuinely reassuring is how much nuance there is around the family home. So many people assume they need to sell it to fund aged care, and Rachael was clear that this is often the wrong move. Your home is exempt from the aged care assets test for as long as your spouse lives there, and for two years after you move into care if there's no spouse involved, provided a protected person, which can include a spouse, a carer, or in some cases a close relative, is still living there.

Even once your home is included in that means test, it's only counted up to around $216,000. So if your parents' home is worth $1.2 million, roughly a million dollars of that value sits outside the aged care calculation entirely, as long as they keep it. Sell it, and the full amount, wherever it ends up, gets counted. This is exactly the kind of detail a good Financial Planning conversation can uncover, and exactly why speaking to someone who specialises in aged care advice before making a big decision is so worthwhile.

When the call actually comes

I asked Rachael to walk me through the worst case scenario, because I think this is the situation most families actually find themselves in. Dad has a fall. He ends up in hospital. And then you get the call telling you it's no longer safe for him to go home, and you have 48 hours to find a bed you'd be happy with.

In that 48 hour window, the bed you get is whatever bed happens to be empty, and most aged care homes are currently full. Which is exactly why Rachael recommends respite care as a starting point, even well before there's a crisis. Respite is a short term stay, usually two or three weeks, and it's remarkably affordable since there's no accommodation payment and no means tested fees involved. It's also the closest thing to a trial run you'll get, a genuine chance to see what a home is actually like before you're forced to decide under pressure.

Rachael's broader point was one I keep coming back to. Nobody plans for aged care because none of us want to picture our parents needing it. But the families who've at least started the conversation, who've visited a few homes, who understand roughly what their parents' care needs might be, are in a completely different position to the ones getting that call cold. Right now there are around 3,000 older Australians stuck in hospital simply waiting for a bed to become available, which tells you how stretched the system really is.

Three things you can do this week

Start with the hardest part first, which is simply raising the topic with your parents. Ask them what they'd like, whether they've thought about it, whether they'd be open to exploring the options together. Then look at their home through fresh eyes, the eyes of someone who might need care there one day. Are the doorways wide enough? What about stairs? Would care actually be practical in that space? And finally, if you can, visit an aged care home at mealtime. Rachael says it's one of the best ways to get a genuine feel for a place, right down to the food and the mood in the room.

If you're weighing up a provider, ask how many carers service your area and whether there are minimum shift requirements, because a two hour minimum shift just to help someone shower once a day adds up fast. For residential care, look at the star ratings, ask about care minutes per resident, and think honestly about whether your loved one's needs will actually suit the other residents living there, not just whether the location is convenient for visits.

Why this conversation matters now

I'll be honest, my own parents are nowhere near needing this kind of support. If anything they're fitter than they were at fifty. But that's exactly why Rachael said there's no perfect age to start this conversation. Aged care tends to creep up on families quietly, one small favour at a time, mowing the lawn, doing the grocery run, driving to appointments, until suddenly you realise you've been providing informal care for months without ever calling it that.

This episode has completely changed how I think about Retirement Planning, not just for my own future but for my parents' present. I'm going to start having this conversation with my sisters, gently, long before we ever need to. Because as Rachael put it so well, this isn't a conversation to have to someone, it's one to have with them. And that shift in approach, from managing a problem to genuinely including your parents in the decision, might be the most valuable thing to take from this whole episode.

If you want to dig deeper, Rachael and Noel Whittaker's book Downsizing Made Simple has some brilliant free resources and calculators to help you work through the ingoing, ongoing and outgoing costs for your own family's situation. It's a great next step if this episode has stirred something up for you, the way it did for me.

And as always, if you enjoyed this episode of Get Rich, please hit subscribe, share it with a friend, tell the woman next to you at yoga, you know the drill. And if you’re looking for a trusted financial expert to help put any of this into action, check out the new Ladies Finance Club Directory.