How the new Aged Care Act impacts advisers

Australia’s aged care system is about to change in ways that will materially affect retirement plans, cash-flow strategies and advice conversations.

A new Aged Care Act commences on 1 November 2025, introducing increased rights for older Australians and a strengthened regulatory model. Most importantly, though, it brings changes to the contributions clients will be asked to pay for their care, particularly under the new Support at Home program.

For financial advisers, these changes require new knowledge and skills but also offer a business growth opportunity. 

Why this matters now: demographics and longevity risk

The demand for aged care is increasing as our population ages – for example, Home Care recipients more than tripled between 2017 and 2024, from 71,900 to 275,000 recipients.

These trends compound the complexity of aged care decisions and accelerate the need for advice on later-life planning and aged care. More than ever, financial advisers need to effectively manage longevity risk, sequencing risk and frailty risk for older clients. 

The big changes at a glance

The aged care system is undergoing widespread changes; processes, governance, older people’s rights, provider obligations, staffing and funding of care services will all be impacted. 

From an advice perspective, the key changes commencing from 1 November 2025 include:

• Commencement of a new, rights-based Aged Care Act and strengthened Aged Care Quality Standards. Clients accessing care services can expect clearer service agreements, improved complaints pathways and more measurable quality standards. 
  
  
• Support at Home will replace the Home Care Packages program, with a significant change in contributions payable by the recipients as the Government shifts a greater share of the cost to users. 
  
  
• Changes to residential care contributions (fees) across accommodation, daily living and care services, which are likely to result in higher costs for clients: 
  
  
• Accommodation costs: new entrants from 1 November 2025 will have retention amounts deducted from any lump sum Refundable Accommodation Deposits (RADs) paid for up to five years, and the Daily Accommodation Payment (DAP) will be indexed by CPI twice a year.  
  
  
• Daily living: funding of the daily living expenses has been subsidised by the government through a Hotelling Supplement, but liability for this payment may shift to the resident (as a Hotelling Contribution) based on means testing. 
  
  
• Care fees: the means-tested fee will be replaced by a new non-clinical care contribution with a higher dollar lifetime cap and an overall four-year limit. On a positive note, fees for higher quality or additional services shift to an optional Higher Everyday Living Fee. 

Change always takes a while to get used to, of course, but these fee changes are even more complex due to grandfathering provisions. 

For residential care, permanent residents (as at 31 October 2025) will continue having fees assessed under the current (old) rules. People receiving (or approved for) a Home Care Package as at 12 September 2024 are grandfathered with lower Support at Home contributions, but are also protected when they later enter residential care. 

Advisers will need to determine which category a client falls into and whether they are assessed under old rules, new rules or a hybrid of old and new rules. We can’t just forget the old rules as they’ll carry forward with us for the foreseeable future.

Advice impacts to anticipate

The magnitude and impact of these changes mean clients will have to plan for their full retirement, including the frailty period – not just the early active years.

Financial advisers who fail to include these discussions and impacts in their financial planning processes will fail Standard 6 of the Code of Ethics:

Standard 6: An adviser must take into account the broad effects arising from the client acting on your advice and actively consider the clients broader, long-term interests and likely circumstances.

It’s time for advisers to ensure that:

1. Earlier care planning is included as part of retirement planning services. Clients are likely to remain at home for longer with Support at Home, and not just use it as a compressed transition into residential care. Advice should map an end-to-end care journey. 
   
   
2. Changing cash-flow patterns are identified and managed during the different phases of retirement – active years, quiet years and frailty years. The change to fees is likely to increase the regular expenses for daily support as a client ages.
   
   
3. Residential care funding strategies are revised, as the new fee structure will reshape total cost. Clients comparing whether to pay a RAD or a DAP will need to weigh up retention, indexation, liquidity needs and opportunity costs. 

The opportunities for advice business growth

With change comes opportunity. And the opportunity arising from these changes is the chance to build better relationships with clients and their families and achieve business growth. 

This includes relationships not only with your older clients, but also with their families, which provides the opportunity to attract the next generation as ongoing clients in their own right. 

The combination of an ageing client base and increasing use of care services means aged-care planning is no longer a niche proposition – it’s mainstream. Advisers should consider how to elevate aged care as a core retirement advice stream within their business model. 

This doesn’t mean every adviser needs to become an expert. But every advice business does need a solution – whether that’s building in-house capabilities or creating external partnerships for a full or partial outsourcing arrangement. 

Consider the following practical steps to get you started:

• Map your client base: flag clients who are over 70 (and carers) for a care-readiness review
• Refresh advice docs: update SOA templates and fact-finds to reference the new rules
• Undertake training to bring your knowledge and practical skills up to date
• Communicate with and educate clients through client education tools such as newsletter articles, seminars and fact sheets.

For advisers, this is the ideal opportunity to embed aged care planning into your core retirement proposition – using better modelling, clearer client education and robust partnerships.

Starting now ensures your clients will approach their older years with clarity and an effective plan.