Entering residential aged care can be a significant financial decision, particularly for retirees with limited income and assets. For people with lower financial means, the Australian Government provides additional assistance with accommodation costs. Understanding how the means assessment works and what fees may still be payable can help families plan with greater certainty.
What is a low means resident?
When someone enters permanent residential aged care, Services Australia assesses their income and assets to determine their financial position. This assessment establishes whether the resident qualifies for low means status and whether they are eligible for Government assistance with their accommodation costs.
Low means status is determined based on the resident’s financial circumstances at the time they enter the aged care home. Importantly, once established, their low means status does not change simply because their financial circumstances subsequently improve. However, changes in income or assets can affect the amount of fees or accommodation contribution they pay.
What does the means assessment look at?
The assessment considers a person’s income and assets. This can include bank accounts, investments, property, superannuation and other financial interests. The family home can also be relevant, depending on the circumstances of the resident and whether a protected person continues to live there.
The assessment is administered by Services Australia for most people, while the Department of Veterans’ Affairs administers assessments for eligible DVA clients. Once the assessment is completed, Services Australia provides a fee advice letter setting out the fees and contributions that apply.
What fees does a low means resident pay?
Being classified as low means does not mean that all aged care fees are waived.
Generally, every resident pays a basic daily fee. This contributes towards everyday living expenses such as meals, cleaning, laundry and utilities. The basic daily fee is set at 85% of the single basic Age Pension rate.
For residents entering care under the arrangements introduced on 1 November 2025, additional means-tested contributions may apply depending on their income and assets. These include the hotelling contribution and, for some residents, the non-clinical care contribution. Residents whose income and assets are below the relevant thresholds can have these costs fully covered by the Government.
A low means resident may also be asked to pay an accommodation contribution. Depending on their circumstances, they may instead pay nothing towards accommodation, with the Government providing assistance to the aged care provider.
How are accommodation costs paid?
Where an accommodation contribution applies, it can generally be paid as a lump sum, daily payments or a combination of the two. The appropriate arrangement will depend on the resident’s circumstances and the agreement reached with the aged care provider.
This is an important financial planning consideration. Before committing to an accommodation payment, families should consider the resident’s available cash, ongoing income requirements, investment strategy and the financial needs of any spouse who remains living at home.
A simple example
Consider a full Age Pension recipient with relatively low assets and income who enters residential aged care.
Under the current Government example, a full pensioner with $15,000 of assets and annual income of $32,000 is below the relevant income and asset thresholds. The resident does not pay means-tested contributions or an accommodation payment, with the Government covering the accommodation costs. The resident continues to pay the basic daily fee.
This example demonstrates why completing the means assessment before entering care can be valuable. It provides clarity about what the resident will be expected to contribute and what assistance may be available.
What happens if circumstances change?
Residents must keep their financial information up to date. Under the current rules, residents are required to report relevant changes to their personal or financial circumstances within 28 days. Changes can result in fees or contributions being recalculated.
For families, this means that aged care financial planning should not necessarily be a one-off exercise. Significant changes such as selling the family home, receiving an inheritance or changing investment arrangements may affect the amount the resident contributes.
Planning ahead
For low means residents, the means assessment can significantly reduce the amount they need to contribute towards accommodation and, depending on their circumstances, means-tested fees.
However, families should consider the aged care decision in the context of the resident’s overall financial position. Cash-flow requirements, the treatment of the family home, investment assets, Centrelink entitlements, accommodation arrangements and the needs of a spouse can all be relevant.
Obtaining the means assessment and understanding the resulting fee advice letter before entering care can provide valuable certainty and help families make informed decisions about how to fund the transition to residential aged care.
Important: Aged care rules, thresholds and fee rates are subject to change. This article is general information only and does not take into account an individual’s personal circumstances. Professional financial advice should be obtained before making significant decisions about aged care funding or the restructuring of assets.
If you or a family member would like to discuss what the current aged care changes may mean for your broader financial circumstances, contact the team at Paris Financial on (03) 8393 1000 to have a chat
