If you or a loved one is moving into aged care, you’ve probably noticed that room prices are going up. In fact, they’ve already increased significantly in 2025 – and more changes are on the way.
Prices are rising
Since the start of 2025, the average cost of a room in aged care has gone up by about $46,000. This brings the average refundable accommodation deposit (RAD) to $572,589 as of July 2025 – up from $526,859 in December 2024. That’s an increase of 8.7%.
If you choose not to pay the lump sum RAD and instead pay the daily accommodation payment (DAP), this could make the ongoing fees higher too (depending on interest rates) – potentially adding thousands of dollars each year in daily “rent”.
Why the increase?
There are a couple of key reasons for these rising prices:
- The RAD approval threshold has increased – on 1 January 2025, the government raised the RAD threshold from $550,000 to $750,000 (now indexed to $758,627). RADs can be higher than $750,000, but providers need approval before they can charge higher amounts.
- Providers are under pressure – rising operating costs have pushed many aged care providers to increase their prices.
Since January, around 1,200 residential aged care homes have increased room prices – and not just the most expensive ones. Even lower-cost rooms have seen price hikes. That said, not all providers raised their prices. Interestingly, more than 80 providers have reduced the highest price in their facilities.
What’s next?
Higher room prices mean you may need to use more of their savings or income to cover aged care costs.
And from 1 November 2025, a big change is coming. Anyone who moves into care after this date and pays a RAD, will have 2% of that amount deducted each year, for up to 5 years. That means you could lose up to 10% of your RAD over time. This amount won’t be refunded to your estate.
If instead you choose to pay the DAP, the cost will go up every six months (March and September) in line with inflation.
How does it work?
Let’s look at three sample situations:
- Adam moved into care in December 2024 and agreed to pay a room price of $526,000. He will get back the full amount of any RAD paid when he leaves care (minus any fees he has asked to be deducted along the way).
- Annabelle moved into care in July 2025 and agreed to a room price of $572,000. Her RAD is fully refundable as well, but if she chose to pay the DAP, this would be a bit cheaper than Adam’s because interest rates have dropped over the year. But if the interest rates had gone up (or stayed the same), her daily fee would be higher.
- Arturo moves in after 1 November 2025. He also agrees to a room price of $572,000. But under the new rules, he will lose 2% per year from any RAD paid (up to 10% in total over five years). If he chooses to pay the DAP instead, the amount payable will increase every six months with inflation.
What should you do?
The rules are set by the government, so you can’t avoid paying for your room in care. However, some people with lower financial means may qualify for a subsidised room.
What’s most important is to understand your options and costs, and how they affect your financial future. Everyone’s situation is different, so getting advice from a licensed independent financial planner can really help – especially with decisions about how to pay, how much to pay, and how this affects your estate and long-term finances.
If you need to move into care now, doing it before 1 November 2025 might help you avoid the new RAD deductions and save money in the long run. But rooms are hard to find and competition is high.
If you want to find out more for your situation, call us on 1300 451 339 to arrange an appointment.
IMPORTANT INFORMATION: This document has been prepared by Periapt Advisory Pty Ltd, ABN 67 648 208 253 AFSL 542418, based on our understanding of the relevant legislation at the time of writing. The information is of a general nature only and has been prepared without consideration of any particular individual’s objectives, financial situation, or needs. Before making any decisions, we recommend you consider independent financial advice. Current at 13 October 2025.
