Home Equity Release and Aged Care in Australia: A Complete 2026 Guide

Aged care is one of the largest financial challenges facing Australian retirees — yet most people are unprepared for the true cost. The Basic Daily Fee for residential aged care is currently $65.55 per day (around $23,900 per year), and that’s before accommodation costs. Refundable Accommodation Deposits now average over $570,000 nationally, with some Sydney and Melbourne facilities demanding well above that.

For the majority of retirees, their most significant asset is their home. Releasing equity from that home — in the right way — can be the key to funding quality aged care on your own terms, without having to sell the family home outright.

Understanding the True Cost of Aged Care in Australia

Aged care costs vary significantly depending on the type and level of care you need. Here are the key scenarios most retirees face:

Staying in your own home: Remaining at home with professional support is the preference for most Australians as they age. Costs can include government co-contributions toward in-home support services, private top-up services such as cleaning, gardening and meal delivery, and home modifications to improve accessibility and safety (such as ramps, grab rails, or bathroom modifications). Depending on the level of support needed, out-of-pocket costs can range from a few thousand dollars per year for light assistance, to $40,000 or more annually for high-level in-home care.

Moving into a residential aged care facility: For those who require a higher level of care, residential aged care involves a more complex fee structure with three main components:

• Refundable Accomodation Deposit (RAD): A lump sum paid to the facility for your room. RADs are refundable in full when you leave. The national average is currently over $570,000, with premium facilities in major cities often exceeding $1,000,000.
• Daily Accomodation Deposit (DAP): An alternative to paying a full RAD, the DAP is an ongoing daily fee equivalent to interest on the unpaid RAD amount. You can also choose to split the cost between a partial RAD and a reduced DAP.
• Care Fees: These include the Basic Daily Fee (currently $65.55 per day, indexed to the Age Pension) and means-tested care fees based on your income and assets.

Understanding these costs upfront and planning how to fund them is essential to securing the care you want.

What the Government Covers and What It Doesn’t (2026 Update)

Australia’s aged care system underwent its most significant reform in decades on 1 November 2025. If you have been researching aged care funding previously, it is important to be aware that the landscape has changed materially. Here is what the current system looks like:

Support at Home Program
The Support at Home Program replaced the former Home Care Packages system from 1 November 2025. It provides government funded support for Australians who wish to remain living independently at home. The new program uses eight funding classifications (compared to the old four-level package system), with government contributions ranging from around $11,000 per year at the entry level up to approximately $78,100 per year for those with the highest assessed needs.

A Key improvement under the new system is that clinical services including nursing, physiotherapy, podiatry and other allied health supports are now fully government funded with no means tested contribution required from the recipient. Independence and everyday living services remain means tested, with your personal contribution depending on your income and assets.

Residential Aged Care Subsidies
The government contribute to the cost of residential aged care through a means-tested care subsidy paid directly to the facility. The amount depends on your assessed care needs, income and assets. Importantly, for anyone entering residential aged care after 1 November 2025, a revised fee structure now applies including a 2% per annum retention on Refundable Accomodation deposits capped at 10% over five years.

The “No Worse Off” Principle
If you were already receiving a Home Care Package, or were approved for one before 12 September 2025, you are protected by the governments “no worse off” commitment. this means your existing fee arrangements will not increase as a result of the November 2025 reforms.

Age Pension
The Age Pension remains available as a means tested income support payment for eligible retirees, currently up to $1,149.00 per fortnight for singles and $1,732.20 per fortnight for combined couples (as at early 2026, indexed twice yearly). It can help cover ongoing co-contributions, particularly for those in lower-cost support arrangements.

Home Equity Access Scheme (HEAS)
The government’s Home Equity Access Scheme allows eligible homeowners to draw income payments of up to 150% of the Age Pension rate per fortnight as a loan secured against their property. While very cost effective, it has limited capacity to deliver meaningful lump sums and may not be sufficient to fund accommodation deposits or significant care costs.

Government supports are valuable but they rarely cover everything. The gap between what the government funds and teh actual cost of quality care is often significant, particularly for those seeking private or premium facilities, or who want to remain in the family home and require a high level of support. This is where home equity release can play an important role.

For the most current information on government aged care supports, visit the My Aged Care government portal at myagedcare.gov.au.

These supports can help reduce the financial burden of aged care costs. However, they may not cover all expenses, and eligibility criteria apply. For more information on Government supports in aged care refer to the My Aged Care government portal.

How Home Equity Release Can Help Fund Aged Care

Home equity release products can provide the funds needed to bridge the gap between government support and the real cost of aged care. The right product depends on your specific aged care needs, your preferences around staying at home versus moving into a facility, and how much equity you want to preserve for your estate. Here is how the main options compare:

• Life Estate: A Life Estate allows you to sell your home to an accredited investor while retaining a legally protected right to remain in it for life. Because it unlocks the maximum amount of equity, typically 50% to 80% of your home’s value depending on your age, it is the most powerful tool for funding significant aged care costs. If you later need to move into residential aged care, you retain the right to rent out your property and use the rental income to contribute toward your facility costs. This gives you an ongoing income stream even after leaving the home. There are no debts, no accumulating interest, and no repayments required.
• Downsizing: Selling your current home and purchasing a smaller, less expensive property releases the equity difference as a cash lump sum. This can fund in-home support at your new property and, if your care needs later increase, you may have sufficient equity remaining in the new home to sell it and fund a move into residential aged care. Downsizing works best when you are comfortable with a change of home and lifestyle, and when the gap between your current and new property values is meaningful.
• Reverse Mortgage: A reverse mortgage allows you to borrow against your home’s equity while continuing to live in it, with no repayments required during your lifetime. It can work well for funding ongoing in-home care costs. However, because interest compounds over time, the amount available to fund residential aged care later may be significantly reduced. Reverse mortgages also typically offer smaller initial lump sums than a Life Estate, generally up to 30% of the property’s value.
• Home Reversion: Home reversion schemes involve selling a percentage of the future sale proceeds of your home in exchange for a lump sum today. They can help fund in-home care, but the maximum equity accessible is generally limited to around 40% of the property’s value. The proportion of sale proceeds retained by the provider can make this a costly option over time, particularly if property values rise significantly.

How Aged Care Means Testing Interacts with Home Equity Release

An important and often-overlooked consideration is how your choice of home equity release product interacts with the aged care means test, which determines how much you personally contribute toward care costs.

Your home is generally exempt from the aged care means test while you or a partner continues to live in it, and for up to two years after you leave for residential care. However, the way proceeds from a home equity release are treated can affect your means-tested fees.

Lump sum proceeds from home equity release — whether from a Life Estate, reverse mortgage, or downsizing — become assessable assets once received, and can increase your means-tested care contributions. However, smart financial planning can help manage this impact. For example, eligible retirees can contribute up to $300,000 (per person) of home sale proceeds into superannuation via the Downsizer Contribution scheme. Once in super, these funds can generate tax-free income in pension phase and may be assessed differently under the means test depending on your age and circumstances.

The interaction between home equity release, aged care means testing, and the Age Pension is complex. We always strongly recommend seeking advice from a licensed financial adviser with aged care planning expertise before making any decisions.

Aged Care Costs at a Glance: What Different Levels of Support Cost

The table below illustrates typical aged care costs and how different levels of home equity release can help bridge the funding gap. These are indicative ranges only, actual costs depend on your individual means assessment, location, and facility choice.

Scenario	Typical Annual Out-of-Pocket Cost	How Home Equity Release Can Help
Low level support at home	$2,000-$8,000	A small equity release comfortably covers annual co-contributions.
High level support at home	$15,000-$40,000	A moderate equity release sustains ongoing care costs over many years.
Residential aged care (standard room)	$40,000-$65,000 / Year + RAD	Large equity release required plus annual cashflow costs; Life Estate unlocks the most capital.
Residential aged care (premium/private)	$80,000-$120,000 / Year + RAD	Very large equity release required; Life Estate proceeds are often best suited to fund both the RAD and ongoing fees.

Note: All figures are indicative. Seek professional advice for your individual circumstances.

Frequently Asked Questions

Making the Right Decision for Your Aged Care

Choosing how to fund aged care is one of the most significant financial decisions a retiree and their family will make. The stakes are high, both financially and emotionally, and the right answer is different for everyone.

What matters most is that you are clear on your goals for aged care, understand your options and take into account the government supports available to you and how these can interact with different home equity release products. We always advocate for individuals to seek professional finance and legal advice prior to committing to any course of action.

At Life Estate, we are here to help you understand where home equity release fits in your aged care plan and to make sure you are achieving the best outcome possible if a Life Estate is right for you.