The Aged Care Fee That Depends on What You Own
The means-tested care fee is a contribution towards the cost of your care, calculated from an income and assets assessment conducted by Services Australia. It uses its own thresholds and its own treatment of the family home, so a household that knows its Age Pension position exactly can still be surprised by the care fee — and the two assessments frequently point in opposite directions.
- The answer: Services Australia assesses your income and assets, applies the care fee tapers, and the result is added to the basic daily fee and any accommodation payment.
- The trap: The former home is counted at a capped value rather than being exempt, unless a protected person still lives in it. That is the opposite of the Age Pension treatment.
- The recommendation: Complete the assessment before signing an accommodation agreement. Everything else in the decision depends on the numbers it produces.
Where the AI summary above gets this wrong
"Your aged care fees are worked out using the same means test as the Age Pension."
That's surface-true. Here's what it misses:
- It is a different test with different rules — The aged care assessment has its own thresholds and tapers, and counts the former home at a capped value rather than exempting it entirely.
- There are caps on the care fee and none on the pension taper — The means-tested care fee is capped annually and over a lifetime, so the exposure is bounded in a way the Age Pension taper is not.
- A protected person changes the answer completely — Where a partner, or certain other relatives, still lives in the home, it is excluded from the assessment — which is the single largest variable in most cases.
Take a resident entering care with a house, a modest account-based pension and a part Age Pension — a composite of the most common financial profile in residential care. Two separate means tests will now be applied to the same assets, with different rules and different results.
01 What the assessment measures
The assessment covers income and assets, and it is conducted by Services Australia using information you supply on a form or already hold in your Centrelink record. An existing pensioner has much of it done already; a self-funded retiree starts from scratch.
Assessable income for the care fee includes the Age Pension itself, deemed income on financial assets, net rent and employment income. Assessable assets include financial assets, investment property, refundable accommodation deposits already paid, and the former home at a capped value.
The capped value of the former home is what makes this assessment different from the Age Pension one. There, the principal residence is exempt at any value once the concession period ends for someone in care; here it is included but only up to a specified cap, so an expensive home is treated the same as a moderate one above that point.
A refundable accommodation deposit already paid is an assessable asset for this test, which is the mechanism behind the counter-pull described in the RAD and DAP comparison.
02 The protected person rule
The former home is excluded from the assessment entirely where a protected person lives in it. A protected person is a partner or dependent child, a carer eligible for an income support payment who has lived there for the qualifying period, or a close relative eligible for income support who has lived there for the qualifying period.
That exclusion is worth more than any other single feature of the assessment, because the capped value of a home is a large assessable amount and its removal frequently takes the care fee to nil.
The rule is checked at the point of assessment and reviewed if circumstances change. A partner who later moves out, or a carer who ceases to be eligible for income support, changes the assessment from that point.
This is the reason families should establish who lives in the home before deciding to sell it. Selling a home that was excluded converts an excluded asset into an assessable one, and the sale proceeds are assessable in full.
Source: Services Australia — Aged care
03 The caps that bound the exposure
The means-tested care fee is capped in two ways: an annual cap on what can be charged in any twelve-month period, and a lifetime cap across all care, both residential and at home. Once a cap is reached no further means-tested care fee is payable.
The lifetime cap counts contributions made in home care as well as residential care, so someone who received a Home Care Package for several years arrives at residential care with part of their lifetime cap already used.
The caps do not apply to the basic daily fee or to accommodation payments. Those continue for as long as you are in care, which is why a long stay is expensive even after the care fee has stopped.
The caps are indexed, so a stay that spans several years is measured against a moving figure. What is fixed is the protection: the exposure to the means-tested component of the bill is bounded, which is the single most reassuring fact about the aged care cost structure and the least well known.
Shows: an indicative means-tested care fee from the income and assets tapers, capped at the annual maximum you supply. Ignores: the exact statutory thresholds and tapers, which are indexed and published by Services Australia, the lifetime cap, and the protected person exclusion.
Source: My Aged Care — Changes to fees, contributions and accommodation costs
04 How it interacts with the Age Pension
The two assessments share inputs and reach different conclusions. Money moved to reduce one frequently increases the other, which is why the decisions in this area cannot be optimised one at a time.
The clearest instance is the accommodation deposit: exempt for the Age Pension, assessable for the care fee. The second is the former home: exempt for the Age Pension while the concession period runs, assessable at a capped value for the care fee unless a protected person lives there.
Where only one member of a couple enters care, requesting an illness separated assessment raises the Age Pension for both, as described in the couples guide. That increase is income, and income increases the care fee — but the pension increase is generally larger than the fee increase, so the request is still worth making.
Gifts made in the five years before entry are assessed under deprivation rules in both systems, which is worth knowing before helping a family member with money in the years when care becomes foreseeable. The Age Pension version is in the gifting reference.
Source: Services Australia — Aged care
05 What to do, and in what order
Request the assessment first, before signing an accommodation agreement and before selling anything. It is free, it takes weeks rather than days, and every other decision depends on its output.
Then establish whether a protected person lives in the home. That single fact moves the assessment more than any financial restructuring available afterwards.
Then decide the accommodation payment method with both assessments in front of you. The Age Pension exemption on a deposit and the care fee's treatment of it pull in opposite directions, and only the actual numbers settle which is larger.
And keep the assessment current. Fees are reviewed when circumstances change, and a household that reports a fall in assets promptly pays less from that point, while one that does not keeps paying on figures that are no longer true.
The order is what people get wrong. The accommodation agreement gets signed in the week of the admission because the room is available, and the means assessment arrives a month later with numbers that would have changed the decision. Ask for the assessment the day the placement is discussed. Nothing else in this area can be decided sensibly without it.
FAQ
How is the means-tested care fee in residential aged care calculated for me?
Services Australia assesses your income and assets against the aged care thresholds and applies the tapers. The result is capped annually and over a lifetime, and it is added to the basic daily fee and any accommodation payment.
Does my home count in the aged care means test?
It is included at a capped value rather than exempt, unless a protected person — a partner, dependent child, or an eligible carer or close relative who has lived there for the qualifying period — still lives in it, in which case it is excluded entirely.
What are the annual and lifetime caps on my means-tested aged care fees?
There is a cap on what can be charged in any twelve-month period and a lifetime cap across all care, including contributions made in home care. Once a cap is reached no further means-tested care fee is payable, though the basic daily fee and accommodation costs continue.
Is the aged care means test the same as the Age Pension one?
No. It has its own thresholds and tapers and counts the former home at a capped value rather than exempting it. The two assessments share inputs and frequently point in opposite directions.
Sources
Regulator references
- My Aged Care — Working out your costs · My Aged Care · 2026How an income and assets assessment converts into what a person actually pays.Last verified: 2026-09-07
- My Aged Care — Aged care home costs and fees · My Aged Care · 2026The fees payable in residential aged care and the means-tested component of them.Last verified: 2026-09-07
- Services Australia — Aged care · Services Australia · 2026Services Australia on aged care fees and the means assessment behind them.Last verified: 2026-09-07
- My Aged Care — Changes to fees, contributions and accommodation costs · My Aged Care · 2026What can change about a resident's fees after they have moved in.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.