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Aged Care Funding Changes Explained in Plain English (Part 2)

Part 2: Explaining the Calculations Related to Residential Aged Care Funding

In part one of this series, we looked at an overview of the three major changes to residential care funding that will take effect July 1, 2014. We discussed the choice that new residents will have between a lump sum Residential Accommodation Deposit (RAD), a periodic payment known as a Daily Accommodation Payment (DAP) or a combination of both. We also noted that the calculation of individual funding is based on the resident’s income and asset levels. In this article, we will explain those calculations in more detail.

New residents have 28 days after they move in to decide on their method of payment.

Fees are broken into:
•    Entry Fees
•    Basic Daily Care Fee
•    Ongoing Care Fee
•    Extra Service Fees

Let’s start with the basics that are applicable to everyone, and move on from there.

Basic Daily Care Fee: $16,555 per annum, which is equivalent to 85% of Basic Aged Pension, is paid by everyone.

Next, we look at something called the Means Tested Amount. This is the calculation that determines the resident’s ability to pay, and exactly how much.

Means Tested Amount:

Income Test Contribution


Asset Test Contribution

50% of assessable income over income free threshold of $22701 for singles and $22322 for member of a couple

17.5% of assessable assets between $40500 and $144500


1% of assessable assets between $144,501 and $353,500


2% of assessable assets exceeding $353,501

(Former home included to max value of $144500; excluded if “protected person” lives there (spouse, carer or close relative)

The Means Tested Amount is used to determine a resident’s Entry Fee and the Ongoing Care Fee.

The Entry Fee is also called an accommodation payment. An accommodation payment is the name for the RAD or DAP or combination of both. It is payable by the resident if the Means Tested Amount is greater than $18,200. If it is less than $18,200, an accommodation contribution may be payable.

The Ongoing Care Fee is calculated as the lower of:

  • Means Tested Amount minus $18,200
  • Annual cap of $25,000
  • Lifetime cap of $60,000

Extra Service is a fee to cover Government approved extra service bed or any optional extra services available in a standard facility.

These calculations are complex and we recommend hiring a professional to advise you on your calculations and subsequent decision-making process. For a comprehensive summary of these calculations with examples, visit

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