Subsidy reductions for residential aged care

What are subsidy reductions?

A reduction is an amount that we subtract from the basic subsidy amount and some supplements paid to a residential aged care provider on a resident’s behalf.

In most cases, this reduction accounts for fees paid by residents.

When subsidy reductions apply

The types of subsidy reductions in residential aged care:

• compensation payment reduction
• extra service reduction for certain residents who entered care before 1 July 2014
• income tested fee reduction for residents on pre-1 July 2014 fee arrangements
• means tested care fee reduction for residents on 1 July 2014 fee arrangements
• means tested contributions reductions for residents on 1 November 2025 fee arrangements.

Services Australia will apply relevant reductions when you claim for subsidy payments.

Compensation payment reduction

A resident can get an entitlement to compensation through a settlement, judgement or reimbursement arrangement. This may be for situations like an injury or illness from a workplace or car accident.

If the compensation covers some of the cost of their care, a reduction applies. Services Australia will deduct the compensation amount from the basic subsidy for that resident.

What you need to do:

• If an older person is entering your residential care home and has a compensation entitlement, fill out question 12 of the Aged Care Entry Record Form.
• If an existing resident gets an entitlement to compensation, contact Services Australia.

We (or Services Australia) will tell you and the compensation payer the amount of the reduction. You can invoice the compensation payer directly for the reduction amount.

If you have questions, contact Services Australia.

Extra service reduction

The residential aged care subsidy is reduced for residents paying extra service fees who entered care before 1 July 2014.

The basic subsidy is reduced by 25% of the extra service fee for the place.

The maximum amount you can charge that resident is the fee for the extra service place plus the subsidy reduction amount.

Extra service agreements must end by 31 October 2026 and the extra service reduction will only apply to then.https://www.health.gov.au/our-work/residential-aged-care/charging/higher-everyday-living-additional-and-extra-service-fees 

Income tested fee reduction

Some residents on the pre-1 July 2014 fee arrangements can be asked to pay you an income tested fee.

Services Australia calculates the maximum income tested fee based on an assessment of a person’s income.

The subsidy and https://www.health.gov.au/our-work/residential-aged-care/funding/supplementssupplements for that resident are reduced by the amount payable as an income tested fee.

You do not need to do anything. Services Australia will automatically deduct the income tested fee from the subsidy you receive for that resident.

Means tested care fee reduction

Some residents on the 1 July 2014 fee arrangements can be asked to pay you a means tested care fee.

Services Australia calculates the maximum means tested care fee based on their means assessment (income and assets) and cost of care.

The subsidy and supplements for that resident are reduced by the amount payable as a  means tested care fee.

You do not need to do anything. Services Australia will automatically deduct the means tested care fee from the subsidy you receive for that resident.

Means tested contributions reductions

Some residents on the 1 November 2025 fee arrangements can be asked to pay you a means tested hotelling contribution and non-clinical care contribution.

Services Australia calculates a resident’s contributions based on their means assessment (income and assets).

The subsidy and supplements payable for the resident are reduced by the contribution amounts payable by the resident.

You do not need to do anything. Services Australia will automatically deduct the means tested contributions from the subsidy you receive for that resident.

Contacts