Most Australians entering residential aged care pay three core fees: a basic daily fee (set at 85% of the single Age Pension), a means-tested care fee based on income and assets, and an accommodation payment negotiated with your provider. Current dollar amounts are published on My Aged Care. Understanding how each fee is calculated – and your rights around them – can save you thousands of dollars per year.
What are the three main aged care fees?
Navigating aged care costs can feel overwhelming, but the Australian Government structures residential aged care fees into three distinct categories. Once you understand what each one covers, the system becomes far more manageable.
Basic Daily Fee (BDF): This is the everyday living contribution – think meals, laundry, and utilities. Every permanent resident pays this fee, regardless of their financial situation. Means-Tested Care Fee (MTCF): This is an additional contribution towards your care costs, calculated by Services Australia based on your income and assets. Not everyone pays this fee – it depends entirely on your financial position. Accommodation Payment: This covers the cost of your room. Depending on your means assessment, you may pay the full negotiated price, a government-subsidised price, or nothing at all if you qualify for full government support.These three fees replaced the older fee structure following the 2023–2024 aged care funding reforms, and 2026 figures reflect updated indexation under the Aged Care Act 2024. Always request a personalised fee estimate from Services Australia before signing any residential agreement.
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Basic daily fee: what you'll pay in 2026
The basic daily fee is set by the Australian Government at 85% of the single rate of the Age Pension and indexed twice yearly. The current daily and annual amount for permanent residents is published on My Aged Care – aged care home costs and fees.
This fee applies universally – whether you are a high-care resident in a metropolitan facility or in a rural community aged care home. You cannot be charged more than the capped rate without separate agreement, and the fee covers:
- Meals and beverages - Laundry and linen services - Heating, cooling, and utilities - Cleaning of shared and personal spaces - Basic nursing care and personal support
Older Australians frequently spend many years in some form of aged or disability-related care – see the ABS Disability, Ageing and Carers survey for current duration data. Even small daily fee differences compound significantly over a multi-year stay, making comparison shopping across providers genuinely worthwhile.
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Means-tested care fee: how it's calculated
The means-tested care fee (MTCF) is where the real complexity – and the real cost variation – begins. Services Australia assesses both your income and your assets to determine how much, if anything, you contribute beyond the basic daily fee.
Annual and lifetime caps apply to the means-tested care fee. The current cap amounts are published by Services Australia and indexed each year – see the aged care means assessment page. Once you reach either cap, you pay no further means-tested care fees, even if you remain in care for many years.
Your assessable income includes the Age Pension, superannuation drawdowns, rental income, and financial investment returns. Your assessable assets include bank accounts, shares, and (in some circumstances) the value of your former home – though a two-year exemption applies if a protected person, such as a spouse or dependent child, remains living there.
The Australian Taxation Office (ATO) data shared with Services Australia is used in this assessment, so accuracy in your tax returns matters. If you believe your assessment is incorrect, you have the right to request a review.
For those planning ahead, speaking with an accredited aged care financial adviser before entering care is strongly recommended. Many families are surprised to learn that modest asset restructuring – done transparently and legally – can meaningfully reduce ongoing MTCF liabilities.
See our cost guide for worked examples and income/asset threshold tables.
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Accommodation payments: RAD, DAP, or a combination
Accommodation payments are perhaps the most misunderstood component of aged care fees. You and your provider negotiate a room price, and you then choose how to pay it.
There are three payment methods:
- Refundable Accommodation Deposit (RAD): A lump-sum payment, similar to a bond. It is fully refunded when you leave or pass away (less any agreed deductions). The maximum RAD a facility can charge without government approval is set under the Aged Care Act and indexed periodically – current threshold is published by the Department of Health and Aged Care. - Daily Accommodation Payment (DAP): Instead of a lump sum, you pay a daily rental-style fee. The DAP is calculated by multiplying the RAD by the Maximum Permissible Interest Rate (MPIR), which is set quarterly by the Department of Health and Aged Care. - Combination: You pay part of the RAD as a lump sum and the remainder as a reduced DAP.
Converting a full RAD to a full DAP via the current MPIR can amount to tens of thousands of dollars per year in non-refundable accommodation payments. Run the DAP calculation using the current MPIR before deciding between lump sum and daily payment.
Providers must publish their room prices on the My Aged Care website, making comparison straightforward. If a provider cannot supply a signed Accommodation Agreement before or on your entry date, they cannot legally charge you an accommodation payment.
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2026 fee comparison: three aged care scenarios
The table below illustrates the structural difference between three common financial profiles. Dollar amounts depend on the current basic daily fee, current MPIR, current means-test thresholds and your individual assessment – always run the numbers against current Services Australia and My Aged Care figures before deciding.
| Profile | Basic Daily Fee | Means-Tested Fee | Accommodation (DAP) | |---|---|---|---| | Full government support (low income, low assets) | Yes | Nil | Government-subsidised | | Partial contribution (moderate assets) | Yes | Partial | Partial DAP or RAD | | Full fee-payer (high assets and income) | Yes | Higher (subject to annual cap) | Full DAP, RAD or combination |*Indicative comparison only. See Services Australia aged care means assessment for current thresholds and caps.*
For a fully tailored breakdown, compare best aged care providers in Sydney and request individual room price guides directly from shortlisted facilities.
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Protections, hardship, and fee transparency
The Aged Care Act 2024 (which replaced the 1997 legislation) introduced stronger protections for residents, including mandatory fee transparency, a new Statement of Rights, and enhanced hardship supplement provisions for those who genuinely cannot afford the means-tested care fee.
If your financial circumstances deteriorate – for example, if the family home is eventually sold and assets rise above a previous threshold – you can request a new income and assets assessment at any time. Conversely, if assets are depleted, your means-tested care fee can be reduced.
All providers listed in the My Aged Care directory are required to publish their maximum accommodation prices, and independent comparisons are available through our methodology page so you understand how we evaluate transparency and value.
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Tips for managing aged care costs
A few practical strategies can help families navigate costs more confidently:
1. Apply for a means assessment early. Services Australia can take several weeks to process. Applying before a care need arises gives you more time and options. 2. Consider paying a partial RAD. Retaining liquidity while reducing the daily DAP can improve estate outcomes. 3. Review the MTCF annual cap. Once you approach the cap, request confirmation from Services Australia in writing – overpayments do occur. 4. Understand the home exemption rules. The family home may be exempt from the assets test in certain circumstances – get professional advice before selling. 5. Use My Aged Care's fee estimator. The online tool provides a reasonable indicative assessment before a formal application.
Learn how we evaluate providers in our methodology guide.
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Frequently asked questions
Q: Can an aged care provider charge whatever they like for a room? A: No. Providers must publish prices on My Aged Care, and any RAD exceeding the legislated threshold requires approval from the Department of Health and Aged Care (see the aged care fees and payments page for the current threshold). Prices must be transparent and agreed in writing before entry. Q: Is the basic daily fee tax-deductible? A: Generally no – the basic daily fee is treated as a personal living expense and is not deductible for the resident or their family. Some care-related expenses may qualify under specific ATO rulings; consult a registered tax agent. Q: What happens to my RAD if the provider closes or goes bankrupt? A: RADs are protected under the Aged Care Act. The Australian Government guarantees refund of RADs if a provider cannot repay them, providing important consumer protection for residents and families. Q: What if I can't afford the accommodation payment? A: If your means assessment confirms you cannot afford the accommodation payment, the government pays it on your behalf. You will be placed in a supported resident room and charged only the basic daily fee (and any applicable MTCF up to your capped amount).---
Sources
- My Aged Care – aged care home costs and fees: myagedcare.gov.au/aged-care-home-costs-and-fees - Services Australia – Aged care means assessment: servicesaustralia.gov.au/aged-care-means-test - Department of Health and Aged Care – Aged care fees and payments: health.gov.au/aged-care-fees - Aged Care Quality and Safety Commission: agedcarequality.gov.au - AIHW – Aged care: aihw.gov.au/aged-care - Aged Care Act 1997 (Cth): legislation.gov.au
Information in this article is general and current as at 19 May 2026. Verify with your aged care provider, Services Australia, ACQSC or the linked authorities before relying on it.
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