Aged Care Costs in Australia 2026: What Retirees and Families Need to Budget For

Aged care is the retirement cost that most Australians dramatically underestimate. While people spend years planning for super drawdowns, Age Pension eligibility, and investment returns, the potential cost of residential aged care sits quietly in the background, largely unplanned for, until a health event makes it suddenly and urgently relevant.

In 2026, the aged care system in Australia is continuing to evolve following significant reforms, and the costs involved in accessing quality residential care are higher and more complex than many families expect. Understanding how aged care is funded before you need it is one of the most important gifts you can give yourself and your family.

The Basic Cost Structure of Residential Aged Care

Residential aged care in Australia involves several different types of fees that apply simultaneously. Understanding each one separately is the starting point for realistic budgeting.

The Basic Daily Fee is a standard charge that all residential aged care residents pay. It is set at 85 percent of the single Age Pension rate and applies to every resident regardless of their financial situation. In 2026 this sits at around $60 to $65 per day for most facilities.

The Means-Tested Care Fee is an additional contribution toward the cost of your care that is assessed based on your income and assets. Not everyone pays this fee and the amount varies significantly depending on your financial situation. The government sets annual and lifetime caps on this fee which provide some protection against unlimited cost escalation.

The Accommodation Cost covers the cost of your room in the aged care facility. This can be paid as a lump sum called a Refundable Accommodation Deposit, as an ongoing daily payment called a Daily Accommodation Payment, or as a combination of both. Accommodation costs vary enormously between facilities and between locations, with high-demand facilities in major cities commanding significantly higher deposits than regional alternatives.

How Your Assets and Income Affect What You Pay

The means-tested component of aged care costs is assessed by Services Australia using a similar but distinct framework to the Age Pension. Both your income and your assets are assessed, and your former family home is treated differently in aged care than in the Age Pension assessment.

For the Age Pension, your primary home is an exempt asset. For aged care means testing, the family home is included in the asset assessment up to a capped value if you are no longer living in it, which is typically the case when you move into residential care unless a protected person such as a spouse continues to reside there.

This distinction is significant because it means retirees who were receiving a full Age Pension because their only major asset was their home may face substantial aged care fees once the home is included in the means test assessment.

Planning Your Aged Care Funding Strategy

The earlier you start thinking about how you would fund aged care if needed, the more options you have. Leaving this planning until a health crisis forces the issue means decisions are made under extreme time pressure with limited ability to consider alternatives.

Key questions to work through in advance include whether you would prefer to remain in your home with in-home care support for as long as possible or move to a residential facility, which aged care facilities in your preferred location you would consider and what their current accommodation deposit requirements are, whether you would pay the accommodation deposit as a lump sum or daily payment and which is financially advantageous in your situation, and how the cost of aged care would interact with any ongoing Age Pension entitlement.

For couples, the situation is further complicated by the fact that one partner may need residential aged care while the other remains at home, creating a situation where the family home cannot be sold to fund care costs without displacing the remaining partner.

Government Support and What It Covers

The government subsidizes a significant portion of aged care costs for all residents, meaning the fees described above represent only your contribution rather than the full cost of care. However, for retirees with moderate to substantial assets, the means-tested contribution can still represent a very significant ongoing expense that needs to be planned for.

My Aged Care is the government’s central platform for accessing aged care assessment and information. An assessment through My Aged Care is the required first step for accessing any government-funded aged care support, whether in-home or residential.

Frequently Asked Questions

Can I stay in my home instead of going into residential care?

Yes. Home care packages funded by the government provide support for older Australians who wish to remain at home. The level of support available through home care packages ranges from basic assistance to quite substantial care packages, though waitlists can be long and the available support may not be sufficient for high care needs.

What happens to a Refundable Accommodation Deposit when I leave the facility or die?

The RAD is refundable in full when you leave the facility or when your estate is settled after death, minus any agreed deductions. It is effectively an interest-free loan to the aged care facility while you are a resident.

Will my Age Pension continue if I move into residential aged care?

Generally yes, though the amount may change as your circumstances are reassessed. The Accommodation Cost you pay may affect the means test assessment and therefore your payment rate.

Is there a limit on how much I can be asked to pay for aged care?

Yes. Annual and lifetime caps on the means-tested care fee provide protection against unlimited costs. Once you have paid the lifetime cap amount, you will not be required to pay further means-tested care fees regardless of how long you remain in care.