Understanding Income & Means Assessments
in Aged Care

Navigating aged care can feel complicated, especially when it comes to finances. And one of the key pieces of the puzzle is the income and means assessment. In short, this determines how much you’ll contribute towards care, and how much subsidy you may receive. Let’s break it down: what it is, why it matters, how it works, and what you need to know if you (or a loved one) are preparing for aged care.

What is an Income & Means Assessment?

This assessment is a formal review of your financial situation, covering two main elements:

Income: This includes regular payments such as pensions, payments from superannuation, investment earnings, or rent.

Means (Assets): This refers to the value of what you own; bank accounts, shares or other investments, property, vehicles, and personal items.

Together, these provide a full view of your ability to contribute to aged care costs. The goal is fairness, ensuring people who can afford more do so, while protecting those with fewer resources.

Why Is It Necessary?

The assessment serves several key purposes:

Fairness: It ensures that those with greater financial capacity contribute more, and those with modest means are given more support.

Sustainability: With an ageing population and greater demand for aged care services, the system needs to remain financially viable. The assessment helps allocate subsidies where they’re most needed.

Transparency: It gives individuals clarity around what they’ll need to pay, and what the government will subsidise.

Who Has to Do One?

If you’re accessing government-subsidised aged care services, you will generally need to complete an assessment of your income (and in some cases assets), so the government can determine how much you should contribute and how much subsidy you’ll receive.

Let’s take a closer look:

Residential Aged Care: If you move into a permanent aged care home (a Commonwealth-funded place), you must undergo a ‘means assessment’ (income + assets) to determine your eligibility for subsidies, accommodation contributions, and means-tested care fees.

Home Care Packages (Support at Home from Nov 1, 2025): If you receive a government-subsidised package of in-home care, you will have an income assessment to determine if an income-tested care fee applies.

Respite Care: For short-term or emergency residential care (respite), a full means assessment is not always required. However, if you wish to apply for financial hardship assistance, a means assessment may be necessary

If you are fully self-funding (that is, you are paying the full cost of your care and not seeking any government subsidy), an assessment may not be required. But this depends on your circumstances and whether you later access a subsidised place or service.

**Note: Under the new Aged Care Act 2025 (commencing 1 November 2025), there will be updated income and asset thresholds and new fee structures. However, the broad rule that an assessment is required for subsidised care, remains.

How It Works:  Residential Aged Care

When entering a residential aged care facility, the assessment is more detailed, covering both income and assets. Some key points:

Income: All types of regular income are assessed (e.g., pensions, superannuation, investment returns, rental income). The first step is to check whether the person is in the ‘income free area’. As of 20 Sept 2025, for a single person the income free threshold is $34,762.00 per annum.

Assets: All assessable assets are included (bank/savings, investments, real estate other than the home exemption, vehicles, super balances, etc.).

The family home / home exemption cap: The principal private residence is treated differently. If a ‘protected person’ (for example the partner, a dependent child, or a carer receiving income support) continues to live in the home, the home may be fully exempt from the asset assessment. If there is no protected person living in the home, the value of the home is capped. For each person, this cap is $210,555.20 as at 20 Sept 2025.

Couple treatment / shared assets: If two people are a couple, their combined income and assets are assessed, then divided appropriately (generally 50/50) for the means assessment. Also if an asset is legally owned by one person, but is treated as jointly owned (e.g., shared bank account) then half of its value may be attributed to each person.

Outcome / Fee Advice Letter: After the means assessment is completed (typically by Services Australia or Department of Veterans’ Affairs for DVA clients), the resident and the provider receive a ‘Fee Advice Letter’ that states:

• Whether the resident must pay means-tested fees
• How much the resident must contribute towards accommodation costs
• The basic daily fee amount; and other fees/costs.

How It Works: Home Care

If you’re accessing in-home services, the income assessment focuses on income (not full means/ assets) and determines whether you’ll pay an additional income-tested care fee on top of the basic daily fee.

Key items:

The assessment is usually done by Services Australia, unless you receive a means-tested payment from the Department of Veterans’ Affairs (DVA).

All forms of regular income are included: pensions, superannuation, investment returns, rental income.

Couples: Half of the combined income of the couple is used in the assessment, regardless of which partner earned it, and regardless of whether they are living together or separated for health reasons. The assessment result is valid for 120 days. If your situation changes (marital status, finances) or if there’s a delay in entering care, you might need a new assessment.

How the Fees Work

Here’s how the various fees in aged care are influenced by the assessments:

Basic Daily Fee: A standard charge everyone pays for everyday living costs in residential aged care, regardless of financial capacity.

Income-Tested Care Fee: In home care this applies if your income is above a certain threshold.

Means-Tested Care Fee: In residential care, this is calculated based on your income + assets (means assessment) and may lead to higher fees if you have substantial assets.

Accommodation Costs: Determined by the means assessment. Some may pay the full cost of their room, others may get government subsidies depending on their assessed means.

Tip: If you’re a full Age Pension recipient and your income/assets have already been updated with Centrelink recently, you may not need to fill out the full Income & Assets (SA369) form again. You may simply update via your Centrelink online account or contact them directly.

What’s Changing Under the New Aged Care Act (from 1 November 2025)

As part of the reforms under the new Aged Care Act 2025:

What stays the same:

The core features of the residential aged care means assessment won’t change. Income and assets considered, and family home treatment remains.

What is changing:

New income and asset thresholds will apply from 1 Nov 2025.

The ‘hotelling supplement’ (the extra cost for higher quality rooms/accommodation) will become means-tested. Meaning, some residents will contribute rather than the government covering it fully.

A new ‘means-tested non-clinical care contribution’ will be introduced, with daily and lifetime caps to limit what residents pay.

Who’s not affected:

Residents who entered under the previous (1 July 2014) arrangements and remain on those terms will continue with the existing arrangements (including existing caps).

New Reporting Requirements

From 1 Nov 2025, both providers and residents will have mandatory reporting obligations to keep financial information updated for means assessments.

For many families the world of aged care fees, subsidies, income/ asset tests and new legislation can feel overwhelming. But by understanding how the income and means assessment works, what it examines, how it affects your fees, and what’s changing, you’ll be much better equipped to plan and budget. The upcoming changes in November 2025 mean it’s timely to review where you stand, ask questions, and get clarity on what your contributions might be.

Reach out to Aged Care Decisions to resolve any doubts or concerns you might have in the lead up to the New Aged Care Act.

Visit https://agedcaredecisions.com.au or call 1300 775 870