Aged care reforms from 1 November 2025

Date

What they mean for your estate plan (RAD and DAP explained)

Aged care is one of the most common reasons families end up making big financial decisions quickly. That might be because someone needs more help at home, or because a move into residential aged care becomes urgent.

From 1 November 2025, Australia introduced major aged care reforms that can affect:

  • how long someone stays at home before moving into residential care, and
  • how much money is available later for beneficiaries under a Will.

This guide outlines what changed from 1 November 2025.

Jurisdiction

What applies across all Australian states and territories

Aged care funding and accommodation charging rules are Commonwealth rules, administered through national systems (for example My Aged Care) and apply Australia-wide. The reforms discussed in this article (Support at Home, RAD retention, DAP indexation) are therefore applicable to all states and territories.

What is state and territory based

Your estate planning documents are governed by state and territory laws, and document names and roles can differ. The effect is practical: the right document in one jurisdiction may have a different name or scope elsewhere.

Background: the two main aged care paths

Most people interact with aged care in one of two ways.

Help at home

This is where services come to you. It can include domestic help, personal care, nursing and allied health, and home modifications.

From 1 November 2025, the Australian Government introduced Support at Home, which replaced the Home Care Packages Program and the Short-Term Restorative Care Programme.

Residential aged care

This is when someone moves into an aged care home. Costs usually include:

  • a basic daily fee,
  • possibly means-tested contributions, and
  • accommodation costs, which is where the terms RAD and DAP come in.

RAD and DAP explained

When you move into residential aged care, you may need to pay for accommodation, depending on the outcome of your assessment.

What is a RAD

RAD stands for Refundable Accommodation Deposit.

  • It is a lump sum paid upfront to the aged care provider for accommodation.
  • It is generally refundable when you leave care, subject to permitted deductions and, for eligible new entrants under the 1 November 2025 arrangements, the retention rules explained below.

What is a DAP

DAP stands for Daily Accommodation Payment.

  • It is a daily amount paid over time instead of (or as well as) a lump sum.
  • It is not refundable, because it is paid as you go.

You can mix the two

Many residents pay a combination of RAD and DAP (for example, a smaller lump sum plus a smaller daily amount). My Aged Care provides a practical overview of accommodation costs and options.

What changed from 1 November 2025

Change 1: Support at Home replaced key in-home programs

Support at Home started on 1 November 2025 and replaced Home Care Packages and Short-Term Restorative Care.

Why this matters for estate planning:

  • More people may stay at home longer, often with higher ongoing service coordination and costs.
  • A trusted person may need authority to organise services, sign agreements, and manage payments if capacity declines.

Change 2: New rules for some residential accommodation payments

If someone first enters residential aged care on or after 1 November 2025 and is on the 1 November 2025 accommodation arrangements, two changes are particularly important.

RAD retention (lump sum deposits)

From 1 November 2025, retention amounts are deducted from eligible RADs and RACs (refundable accommodation contributions).

My Aged Care explains that the amount retained is calculated at 2% per annum, applied to the daily RAD or RAC balance, with deductions made regularly, and it can apply for up to 5 years for new entrants under the relevant arrangements.

Therefore, even if you expect “the RAD comes back later”, the amount ultimately refunded may be reduced where retention applies.

DAP indexation (daily payments)

The Department of Health states that Daily Accommodation Payments (DAPs) will be indexed from 1 November 2025, and providers will index the payment they charge twice a year for residents on the 1 November 2025 accommodation arrangements.

This means, if you pay by DAP (in full or part), the daily cost may increase over time.

Why these changes matter for your estate plan

Even a well-written Will can be undermined if the family has to make urgent decisions while someone is alive but no longer able to manage their affairs.

Aged care commonly triggers:

Big cash movements

  • Paying a RAD may require selling investments or the family home.
  • Choosing DAP creates an ongoing cash flow commitment, and from 1 November 2025 it may be indexed for eligible residents.

Family home decisions

Families often end up debating:

  • Do we sell the home to fund a RAD?
  • Do we keep it and pay DAP from income?
  • Do we rent it out?

These are not just financial questions. They create legal and administrative tasks, especially if there is a mortgage, a co-owner, or a blended family.

Capacity and authority issues

If the person entering aged care loses capacity, someone needs legal authority to:

  • access bank accounts,
  • deal with providers, and
  • sign agreements and, if necessary, sell or lease property.

Expectation gaps about “the inheritance”

Adult children sometimes treat the RAD as “basically refundable” and mentally earmark it as an inheritance. For eligible residents on the new arrangements, retention means the refund may not match that expectation.

The family home: avoid the rushed decision

If you have never dealt with aged care, it is easy to hear “RAD” and jump straight to “we have to sell the house”. Sometimes selling is the right move, sometimes it is not.

A sensible approach is to separate three questions:

  1. What is the care pathway over the next 6 to 24 months?
    Support at Home may be sufficient for now.
  2. What is the funding strategy?
    Compare the practical impact of full RAD, full DAP, or a combination. My Aged Care’s accommodation explainer is a good starting point.
  3. Who has the legal authority to act?
    If the person has capacity, they can sign documents themselves. If not, the relevant authority must be in place.

Practical checklist: what to do if aged care is likely

  1. List assets and liabilities
    Home ownership, mortgages, bank accounts, investments, super, loans.
  2. Confirm you have authority to act
    Identify which state or territory rules apply and ensure you have the right financial and health decision documents for that jurisdiction.
  3. Understand RAD and DAP options and the new changes
    If residential entry is likely, make sure the family understands RAD, DAP, and the post 1 November 2025 changes (retention and indexation for eligible residents).
  4. Prepare for the home decision
    If selling or renting may be needed, consider speaking with your estate agent and property lawyer.
  5. Set expectations early
    Explain that aged care costs can reduce what ultimately passes through the estate, even when a lump sum RAD is paid.
  6. Review your Will
    Aged care commonly changes the practical shape of an estate (for example, selling the home earlier than expected). Make sure your Will still reflects the outcomes you want.

Disclaimer

This article provides general information only and does not consider your personal circumstances. Aged care arrangements can be complex and depend on individual facts and provider agreements. Document names and legal requirements for powers of attorney and health decision-makers vary by state and territory.

LifeDocs

If aged care is on the horizon for you or a parent, getting the right documents in place early can prevent delays and disputes when decisions need to be made quickly.

LifeDocs can help you prepare:

  • a Will, and
  • the right state or territory-specific financial and health decision documents.

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