Means-Tested Care Fee in Aged Care: Complete 2026 Guide
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Note: Home Care Packages were replaced by the Support at Home program from November 2025. References to Home Care Packages in this guide now apply to Support at Home.
If you or a loved one is entering aged care, you have probably come across the term “means-tested care fee” and wondered what it means for your finances. This is one of the most misunderstood parts of the aged care system, and the uncertainty can be stressful during an already difficult time.
The good news is that the system is designed with protections. Not everyone pays this fee, and there are caps to limit how much you will ever pay. This guide breaks down everything you need to know about the means-tested care fee in plain language, with real examples and current 2025-26 thresholds.
Want a quick estimate of your aged care costs? Use our aged care fees calculator to see what fees may apply to your situation.
What is the means-tested care fee?
The means-tested care fee is an additional contribution that some aged care recipients pay toward the cost of their care. It sits on top of the basic daily fee that everyone in aged care pays.
This fee is not a flat amount. It is calculated individually by Services Australia based on your assessable income and assets. The higher your means, the more you may be asked to contribute, up to certain caps.
The means-tested care fee applies to both:
- Home care (Support at Home, formerly Home Care Packages Levels 1 to 4)
- Residential aged care (nursing homes and aged care facilities)
If your income and assets fall below certain thresholds, you will not pay this fee at all. Full Age Pension recipients with minimal other income and assets are generally exempt.
How it fits into the overall fee structure
The Australian aged care fee structure has several components. Understanding where the means-tested care fee fits helps you see the full picture:
| Fee type | Who pays | Purpose |
|---|---|---|
| Basic daily fee | Everyone | Contribution to daily living costs (meals, utilities, laundry) |
| Means-tested care fee | Only those above income/asset thresholds | Contribution to care costs based on capacity to pay |
| Refundable accommodation deposit (RAD) | Residential care recipients (not supported residents) | Accommodation payment, refundable when you leave |
| Daily accommodation payment (DAP) | Residential care recipients who choose daily payments | Alternative to RAD, paid as a daily rental-style fee |
| Extra services fee | Optional | Premium services like better meals, larger rooms |
The means-tested care fee is the one that causes the most confusion because it varies from person to person. Two people in the same aged care facility can pay very different amounts based on their financial circumstances.
How is the means-tested care fee calculated?
Services Australia uses a combined income and assets test to determine your fee. You do not calculate this yourself. When you apply for aged care, My Aged Care and Services Australia will conduct a financial assessment.
The income test
Your assessable income includes:
- Age Pension payments (or equivalent DVA payments)
- Superannuation income streams (account-based pensions, annuities)
- Employment income (wages, salary, self-employment)
- Investment income (rent, dividends, interest)
- Deemed income from financial assets (using the government’s deeming rates, not actual returns)
- Foreign income and pensions
- Income from trusts or companies where applicable
Deeming is an important concept. The government assumes your financial assets (bank accounts, shares, managed funds, superannuation in account-based pensions) earn a set rate of return regardless of what they actually earn. For 2025-26:
| Deeming rate | Singles threshold | Couples (combined) threshold |
|---|---|---|
| Lower rate: 0.25% | First $60,400 | First $100,200 |
| Upper rate: 2.25% | Above $60,400 | Above $100,200 |
This means if you have $200,000 in the bank earning 4.5% interest, the government does not use your actual interest. Instead, they deem a portion at 0.25% and the rest at 2.25%.
The assets test
Your assessable assets include:
- Financial assets (bank accounts, shares, managed funds, bonds)
- Superannuation (in account-based pension phase)
- Investment properties
- Motor vehicles, boats, caravans
- Business assets
- Personal effects above a certain value
- Gifted assets (subject to deprivation rules if gifted within five years)
Key exclusions from the assets test:
- Your home (with important conditions; see the section on home treatment below)
- Funeral bonds (up to the allowable limit, currently $15,000 per person)
- Prepaid funeral expenses
- Accommodation bonds/RADs paid to an aged care facility (for residential care)
- Special disability trusts in some circumstances
Combined assessment
Services Australia takes both your income test result and your assets test result and applies the one that produces the higher fee. This is similar to how the Age Pension income and assets tests work, but in reverse: instead of reducing a payment, it increases a fee.
Income and asset thresholds for 2025-26
The thresholds determine whether you pay a means-tested care fee and how much. These are indexed each year on 20 March and 20 September.
Home care thresholds
For Support at Home (formerly Home Care Packages), the means-tested care fee thresholds are:
| Situation | Income-free threshold (per year) | Asset-free threshold |
|---|---|---|
| Single, homeowner | $32,878 | $45,400 |
| Single, non-homeowner | $32,878 | $170,700 |
| Couple (combined), homeowner | $32,878 each | $45,400 each |
| Couple (combined), non-homeowner | $32,878 each | $170,700 each |
If your assessable income is below the income-free threshold and your assets are below the asset-free threshold, you will not pay a means-tested care fee.
Residential care thresholds
For residential aged care, the thresholds are:
| Situation | Income-free threshold (per year) | Asset-free threshold |
|---|---|---|
| Single, homeowner | $32,878 | $197,735.20 |
| Single, non-homeowner | $32,878 | $322,035.20 |
| Couple (combined), homeowner | $32,878 each | $197,735.20 each |
| Couple (combined), non-homeowner | $32,878 each | $322,035.20 each |
Note that the asset thresholds for residential care are higher than for home care. This reflects the different cost structures between the two types of care.
How the fee amount is calculated
Once your income or assets exceed the free thresholds, the means-tested care fee is calculated as follows:
- Income above the threshold: 50% of income above the income-free area (up to a certain level), reducing to 25% above a higher threshold
- Assets above the threshold: A formula based on the value of assets above the asset-free area, calculated at approximately 17.5% of the asset value divided by 364 days
The higher of the income-tested fee or the asset-tested fee becomes your means-tested care fee.
Annual and lifetime caps
One of the most important protections in the aged care system is the cap on means-tested care fees. No matter how high your income or assets, there is a limit to what you will pay.
| Cap type | Amount (2025-26) |
|---|---|
| Annual cap | $33,309.20 |
| Lifetime cap | $79,942.08 |
How the caps work
- The annual cap limits how much you pay in means-tested care fees in any 12-month period. Once you reach this cap, you stop paying the means-tested care fee for the rest of that period.
- The lifetime cap limits the total amount of means-tested care fees you will ever pay across your entire time in aged care. Once reached, you will never pay the means-tested care fee again, even if you change providers or move between home care and residential care.
- The caps are cumulative. Fees paid in home care count toward your caps in residential care, and vice versa.
- Only the means-tested care fee counts toward the caps. The basic daily fee, accommodation payments, and extra services fees are separate and do not count.
What happens when you hit a cap
When you reach the annual cap, Services Australia will notify your aged care provider. Your provider will stop charging you the means-tested care fee for the remainder of that 12-month period. The government increases its subsidy to your provider to make up the difference.
When you reach the lifetime cap, the same thing happens permanently. You continue receiving care, but the means-tested care fee drops to zero for the rest of your life.
Home care vs residential care differences
While the means-tested care fee applies to both home care and residential care, there are some differences worth understanding.
| Feature | Home care | Residential care |
|---|---|---|
| Basic daily fee | Lower (currently $12.75/day) | Higher (currently $61.96/day) |
| Means-tested care fee | Same calculation method | Same calculation method |
| Asset-free threshold | Lower | Higher |
| Accommodation costs | Not applicable | RAD, DAP, or combination |
| Same annual/lifetime caps | Yes | Yes (cumulative across both) |
| Home treatment in assets test | Generally excluded (you live there) | Capped at $197,735.20 if applicable |
In home care, you remain living in your own home, so your home is naturally excluded from the assets test. In residential care, the treatment of your home depends on whether a “protected person” still lives there (more on this below).
The means-tested care fee calculation method is the same for both. If you move from home care to residential care, any means-tested fees you have already paid count toward your lifetime cap.
Worked examples
These examples show how the means-tested care fee works for different financial situations. All figures are approximate and based on 2025-26 rates.
Example 1: Full Age Pension recipient (Margaret)
Situation:
- Single, aged 78
- Receives the full Age Pension ($28,514 per year)
- Owns her home (value: $650,000)
- Has $35,000 in savings
- Entering a Support at Home package (Level 3 equivalent)
Assessment:
- Income: $28,514 (below the income-free threshold of $32,878)
- Assets: $35,000 (below the asset-free threshold of $45,400 for a homeowner)
Result: Margaret pays no means-tested care fee. She only pays the basic daily fee of $12.75 per day ($4,653.75 per year).
Margaret’s home is excluded from the assets test because she lives there while receiving home care.
Example 2: Part Age Pension recipient (Robert and June)
Situation:
- Married couple, both aged 82
- Robert is entering residential aged care
- June remains living in the family home (value: $850,000)
- Combined assets: $380,000 (excluding the home)
- Combined income: $52,000 per year (part pension plus super income stream)
- Robert’s individual income: $26,000
Assessment:
- The home is excluded from the assets test because June (a “protected person”) still lives there
- Robert’s assessable income: $26,000 (below his income-free threshold of $32,878)
- Robert’s assessable assets: $190,000 (his share, below the asset-free threshold of $197,735.20 for a homeowner)
Result: Robert pays no means-tested care fee or a very small amount. He pays the basic daily fee and will need to arrange accommodation payments (RAD or DAP) separately. See our RAD guide for more on accommodation costs.
Example 3: Self-funded retiree (David)
Situation:
- Single, aged 75
- Does not receive the Age Pension
- Owns his home (value: $1.2 million)
- Has $800,000 in superannuation (account-based pension)
- Draws $55,000 per year from super
- Has $120,000 in savings and shares
- Entering residential aged care; no protected person in the home
Assessment:
- David’s home is included in the assets test (no protected person living there), but capped at $197,735.20
- Total assessable assets: $197,735.20 (capped home value) + $800,000 (super) + $120,000 (savings/shares) = $1,117,735.20
- Assessable income includes deemed income from financial assets plus actual super income
Income test calculation:
- Financial assets for deeming: $920,000
- Deemed income: $60,400 x 0.25% + $859,600 x 2.25% = $151 + $19,341 = $19,492
- Total assessable income: approximately $55,000 + deemed adjustments
- Income above free area: substantial
Assets test calculation:
- Assets above the free area: $1,117,735.20 - $197,735.20 = $920,000
- Asset-tested fee: approximately 17.5% of $920,000 / 364 = approximately $442 per day
Result: David would pay a significant means-tested care fee, but it is capped at the annual cap of $33,309.20 per year (approximately $91.50 per day). Once he has paid $79,942.08 in total means-tested care fees (the lifetime cap), he stops paying this fee entirely.
This is why the caps matter. Without them, David’s fee could be much higher. The system ensures that even self-funded retirees are protected from unlimited costs.
Comparison summary
| Scenario | Annual income | Total assets (excl. home) | Home included? | Means-tested care fee |
|---|---|---|---|---|
| Margaret (full pensioner) | $28,514 | $35,000 | No (lives there) | $0 |
| Robert (part pensioner, couple) | $26,000 | $190,000 (his share) | No (spouse lives there) | $0 or minimal |
| David (self-funded retiree) | $55,000+ | $920,000 | Yes (capped) | Up to $33,309/year (capped) |
How the family home is treated
The treatment of your home in the means-tested care fee assessment is one of the most common questions families have. The rules differ depending on your care type and living situation.
Home care
If you are receiving a Support at Home package, your home is always excluded from the assets test. This makes sense because you are living in it.
Residential care
If you are entering residential aged care (a nursing home), your home is treated as follows:
| Situation | Home treatment |
|---|---|
| A “protected person” lives in your home | Fully excluded from assets test |
| No one lives in your home | Included, but capped at $197,735.20 |
| You rent out your home | Included (capped), plus rental income is assessable |
| You sell your home while in care | Sale proceeds become financial assets (fully assessable) |
Who is a “protected person”?
A protected person is someone who was living in your home when you entered residential care. This includes:
- Your spouse or partner
- A dependent child
- A close relative who has lived with you for at least five years and who receives an income support payment (such as the Age Pension, Disability Support Pension, or Carer Payment)
- A carer who has lived with you for at least two years and who receives an income support payment
If a protected person lives in your home, it is completely excluded from the means-tested care fee assessment, regardless of its value.
Important considerations about the home
- Do not rush to sell your home. Many families feel pressure to sell quickly to fund aged care. In many cases, keeping the home (especially if a partner still lives there) is the better financial outcome because it is excluded or capped in the assessment.
- Renting out your home makes it an income-producing asset. The rental income becomes assessable income, and the home’s value (capped) remains in the assets test.
- Gifting your home or transferring it to family members may trigger deprivation rules if done within five years of entering care. Services Australia may still count the value as if you still own it.
Financial hardship provisions
If you are struggling to pay your means-tested care fee, the government offers a financial hardship supplement.
When hardship provisions may apply
- You have been assessed as needing to pay means-tested care fees
- Your assets are primarily tied up in your home (which you cannot easily sell)
- You have limited liquid assets and income
- Paying the fee would leave you unable to meet basic living expenses
- Unexpected changes in your financial circumstances (for example, investment losses or a partner’s illness)
How to apply for hardship assistance
- Contact Services Australia on 1800 227 475 to discuss your situation
- Complete a financial hardship application with supporting documentation
- Services Australia will review your case and may reduce or waive the means-tested care fee
- The hardship supplement is reviewed periodically (usually every 12 months)
What the hardship supplement covers
The financial hardship supplement can reduce your means-tested care fee partially or fully. The government pays the difference to your aged care provider, so your care is not affected.
You can also ask your aged care provider about payment plans or fee arrangements. Many providers are willing to work with residents and home care recipients to find manageable payment structures.
How to reduce your means-tested care fee
While you cannot avoid the means-tested care fee if your income and assets exceed the thresholds, there are legitimate strategies to manage it.
Ensure your assessment is accurate
- Check that Services Australia has the correct information about your income and assets
- Make sure all applicable exemptions have been applied (home, funeral bonds, special disability trusts)
- If your circumstances have changed (for example, your partner has moved into your home), notify Services Australia to update your assessment
Understand the timing of your entry into care
- The means-tested care fee is calculated based on your circumstances at the time of your assessment
- If you are a couple and one partner enters care, the assets split between you can affect the assessment
- Seek financial advice before making major financial decisions like selling property or withdrawing super
Consider the caps
- If you are a self-funded retiree who will reach the annual or lifetime cap quickly, the total cost is predictable
- Once you hit the lifetime cap of $79,942.08, you never pay the means-tested care fee again
- This can be factored into your overall aged care financial planning
Get professional financial advice
Aged care financial planning is a specialised area. An accredited aged care financial adviser can help you:
- Model different scenarios (keeping vs selling the home, RAD vs DAP, drawdown strategies)
- Understand the interaction between Age Pension entitlements and aged care fees
- Structure your finances to minimise fees while maintaining your quality of life
- Plan for the long term, including the impact of the lifetime cap
Key changes and updates for 2025-26
The aged care system underwent significant reforms under the new Aged Care Act that took effect on 1 July 2025. Key changes affecting the means-tested care fee include:
- Increased transparency: Providers must give you a clear fee schedule before you enter care
- Improved hardship provisions: The hardship application process has been simplified
- Annual indexation: Thresholds and caps are adjusted twice yearly (March and September) to reflect changes in costs
- No Worse Off principle: If you were already receiving aged care before 1 July 2025, transitional arrangements ensure you are not financially disadvantaged by the new rules
Keep an eye on the Services Australia website for the latest threshold updates, or check our aged care fees calculator which is updated regularly.
Frequently asked questions
What is the means-tested care fee in aged care?
The means-tested care fee is an additional fee that some aged care recipients pay based on their income and assets. It applies to both home care and residential aged care and is calculated by Services Australia using an income and assets assessment. Not everyone pays this fee. It only applies if your means exceed certain thresholds set by the government.
Does everyone pay the means-tested care fee?
No. The means-tested care fee only applies if your income and assets exceed certain thresholds. Full Age Pension recipients with minimal assets typically do not pay this fee. The basic daily fee is the only fee that applies to everyone in aged care.
How is the means-tested care fee calculated?
Services Australia assesses your income (including deemed income from financial assets) and the value of your assets. They apply the income test and assets test separately, then use whichever produces the higher fee. Your home is generally excluded from the assets test if your partner or a dependent still lives there.
Is there a cap on the means-tested care fee?
Yes. There is both an annual cap (approximately $33,309 per year in 2025-26) and a lifetime cap (approximately $79,942). Once you reach the annual cap, you stop paying for the rest of that 12-month period. Once you reach the lifetime cap, you never pay the means-tested care fee again. These caps protect people from paying excessive fees over time.
Can I get the means-tested care fee reduced?
Yes. You can apply to Services Australia for a financial hardship supplement if you cannot afford the fee. You should also ensure your income and assets assessment is accurate and up to date. If your circumstances change (for example, a change in income or a partner moving into your home), contact Services Australia to request a reassessment.
Does my home count in the means-tested care fee assessment?
It depends. For home care, your home is always excluded because you live there. For residential care, your home is excluded if a “protected person” (such as your spouse, dependent child, or qualifying carer) still lives there. If no protected person lives in your home, it is included in the assets test but capped at $197,735.20.
What happens if I sell my home while in aged care?
If you sell your home while in residential care, the sale proceeds become financial assets. These are fully assessable under the assets test (no cap applies to cash or investments). This could increase your means-tested care fee. It is important to get financial advice before selling.
Is the means-tested care fee the same for home care and residential care?
The calculation method is the same, but the asset-free thresholds differ. Residential care has higher asset-free thresholds than home care. The annual and lifetime caps are the same and are cumulative across both types of care. Any means-tested fees paid in home care count toward your caps if you later move to residential care.
How often is the means-tested care fee reviewed?
Services Australia reviews your fee when your financial circumstances change or when the thresholds are indexed (usually in March and September each year). You can also request a review at any time if your income or assets have changed significantly.
March 2026: Ministerial Investigation Into Premium Service Fees
On 16 March 2026, the Aged Care Minister announced an investigation into claims that some aged care providers are charging premium fees for basic services that should be covered under standard care arrangements. The Minister specifically named Opal Healthcare as one provider under scrutiny, calling the practice “disgusting sidestepping” of aged care regulations.
While the means-tested care fee is calculated by Services Australia and is separate from provider-charged fees, this investigation highlights the importance of understanding exactly what services are covered by your assessed fees. Providers should not be charging separately for basic care services that are already funded through government subsidies and the fees you pay (basic daily fee and means-tested care fee).
If you believe you are being charged inappropriately for services that should be included in your standard care package, lodge a complaint with the Aged Care Quality and Safety Commission on 1800 951 822. The Minister emphasized that Australians expect and deserve dignity in aged care, not exploitative pricing practices.
Source: ABC News, 16 March 2026
Next steps
Understanding the means-tested care fee is an important part of planning for aged care, whether you are looking at Support at Home packages or considering residential care. The key takeaways are:
- Not everyone pays the means-tested care fee. It depends on your income and assets.
- Annual and lifetime caps protect you from unlimited costs.
- Your home is excluded or capped in most circumstances.
- Financial hardship provisions exist if you are struggling to pay.
- Professional financial advice can help you plan and potentially reduce your fees.
Navigating aged care fees can feel overwhelming, but you do not have to figure it out alone. MD Home Care connects you with experienced aged care providers across Australia who can help you understand your fee obligations and find the right care arrangement for your situation.
Call 1800 953 253 to find the right aged care provider through MD Home Care, or explore our aged care services directory to browse providers in your area.
You can also read our related guides to build a complete picture of aged care costs:
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