About the transition to payment on services delivered
The new payment system will make it easier for you to reconcile advances and entitlements.
Payment on services delivered aligns residential aged care subsidies with other government payments. It does not change the amount of any subsidy entitlements you receive.
In response to provider feedback, the government has deferred the previously announced start date.
Current providers will transition from 1 July 2027 with their advance payments at the start of each month reduced by an extra 4.17% with increasing arrears paid after the end of each month.
Gradual transition means you will have more time to adjust to existing reforms and the new Liquidity Standards in the Aged Care Quality and Safety Commission’s Financial and Prudential Standards.
Current payment process
You are currently paid an advance at the start of each month. Advances are based on an average amount per place per day in an aged care home from two months prior. Advance payments are based on an estimate that cannot take into account events during the month that will affect funding, including:
- leave taken by residents
- care minutes provided
- percentage of residents eligible for accommodation supplement
- admissions and discharges
- number of respite care days provided.
After the end of each month, you lodge a claim for subsidy including events such as those described above, and any necessary funding adjustments are made for that month. The amount that was paid in advance is reconciled with the actual entitlement for that month.
An immediate arrears payment is issued if the advance was less than the entitlement. If the advance was more than the entitlement, an overpayment is recovered from the next advance.
How the payment changes will work
Aged care homes will transition over two financial years starting on 1 July 2027 and ending on 30 June 2029.
During the two-year period, the amount of the advance paid for each aged care home at the start of each month will be gradually scaled down by an extra 4.17% each month. The arrears payment amount will:
- be calculated and immediately issued once the monthly claim for the aged care home has been lodged and processed
- continue to equal any difference between the advance paid and the actual entitlement amount.
New aged care homes will be fully paid in arrears from the time they start operation, on or after 1 July 2027, without any advance payments.
There will not be a long gap between payments as:
- advance payments will be paid at the start of each month, and you will lodge your claim after the end of each month
- if your claim was for less than the actual entitlement, you will receive an arrears payment as soon as the claim is processed
- if your claim was for more than the actual entitlement, the amount overpaid will be recovered from the next advance payment
- advance payments will gradually decrease, while payment on services delivered will gradually increase until 100 per cent of funding is paid on services delivered by July 2029.
Benefits of this change
This change removes the need to:
- monitor your payments against services delivered
- account for under and over payments, which can be as high as 10 percent of total monthly payments.
No new claim process
You will still lodge a claim with Services Australia at the end of each calendar month.
This change does not impact the subsidy entitlements of any aged care resident. It also does not affect the amount paid to any residential aged care provider.
The government will continue to pay providers for all services they deliver, which in the 2024-25 financial year totalled $24 billion for residential aged care subsidies and supplements, an increase of 12.8% over the previous year.
During the transition period between 1 July 2027 to 30 June 2029, arrears payments will still be issued to providers if the amount paid in advance was less than the provider’s actual entitlement for that month.
Payments affected by the transition
This change simplifies the payment of residential aged care subsidies and supplements.
