The recent aged care reforms in Australia introduced significant changes to funding, fees and service delivery in residential care. These adjustments stem from the Royal Commission into Aged Care Quality and Safety, which exposed underfunding and inconsistencies, and aim to make the system more sustainable amid an ageing population.
Central to the transition are the no-worse-off principle and grandfathering rules, intended to shield existing users from immediate financial disadvantages. In reality, however, the application of these protections has proven uneven, leaving some residents and families facing unexpected pressures or limitations as the system shifts.
The no worse off principle is designed to ensure that people already receiving aged care services before the reforms do not face higher contributions or reduced support due to the new arrangements. It applies broadly to those in permanent residential care before 1 November 2025, or with a Home Care Package approval or receipt as of 12 September 2024, when the legislation was introduced to Parliament.
The intent is to provide continuity and certainty, particularly for vulnerable older Australians who may have planned their finances around the previous rules. In practice, though, the principle’s reach depends heavily on individual circumstances, and transitional complexities have led to confusion and, in some cases, outcomes that feel less protective than promised.
Grandfathering rules provide the mechanism for this protection, distinguishing between accommodation payments and ongoing resident contributions. Residents admitted to permanent residential care on or before 31 October 2025 are fully grandfathered.
Their accommodation fees, such as refundable accommodation deposits or daily accommodation payments, remain free from new retention deductions and indexation. Their resident contributions, including any means tested care fees, stay under the old lifetime cap, previously indexed at around $130,000.
This full grandfathering offers substantial continuity for long term residents, though it also means they may forgo potential future benefits if the new system delivers improvements in care quality or oversight.
For individuals approved for a Home Care Package on or before 12 September 2024 who later enter permanent residential care after 1 November 2025, grandfathering is only partial.
Ongoing resident contributions are protected under the no worse off principle, so they continue paying means tested fees aligned with pre reform levels rather than the new hotelling supplement contribution for basic living expenses or non clinical care contribution for additional support.
However, accommodation payments shift to the reformed model. This exposes residents to retention amounts deducted from refundable accommodation deposits or refundable accommodation contributions over up to five years, as well as indexation on daily accommodation payments. While this partial approach recognises prior home care involvement, it has drawn scrutiny for potentially eroding lump sum deposits faster than expected, affecting estate planning or financial security during an already vulnerable transition.
Respite care does not influence grandfathering status. Whether entered before or after key dates, it has no bearing on protections for permanent arrangements.
This rule clarifies a frequent point of uncertainty but also highlights how tightly eligibility is tied to specific entry or approval timelines.
Grandfathered residents can choose to opt into the new contribution rules, including the hotelling supplement contribution and non clinical care contribution, which come with caps and time limits. While this may suit some changing needs, the decision is irreversible.
Residents who remain in the same facility cannot opt into new accommodation rules alone, as grandfathering continues to apply unless they move. Moving to a new provider requires an all or nothing opt in for both contributions and accommodation. Extended absences of more than 28 days, such as hospital stays, can also result in the loss of accommodation grandfathering.
These options offer flexibility but require careful consideration, as opting in may increase costs in certain circumstances despite potential service enhancements.
The reforms introduce monthly retentions from accommodation payments and indexation to better reflect provider costs and support long term sustainability of the sector. For new or transitioning residents, the hotelling supplement contribution and non clinical care contribution are phased in to cover non clinical aspects of care, with caps designed to limit lifetime exposure.
The government presents these measures as necessary to fund improved oversight and quality amid rising demand. However, broader commentary has raised concerns that the changes operate more as a revenue measure, shifting greater financial responsibility onto individuals, particularly those with means.
Reports of confusion, reduced care hours during transitions, and added pressure on families suggest the no worse off intent has not consistently translated into equitable real world outcomes, especially for those moving from home care to residential care or facing increases under means testing.
These rules represent an attempt to balance sustainability with fairness, but their layered application means outcomes can vary significantly. Residents, families and advisers are encouraged to consult Services Australia, My Aged Care, or legal and financial professionals to assess individual circumstances, understand opt in implications and stay informed as the reforms continue to roll out.
As implementation progresses, the true measure of success will be whether promised protections hold up amid ongoing workforce, funding and service delivery challenges across the aged care sector.
See … now isn’t that an easier-to-understand, simpler system … NOT !!!!!!!!!!!
It’s a system designed by people who never have to actually live the rules they make …
So true!!