The Short Answer
The Age Pension covers most of the basic daily fee — but that is only one of the three main aged care costs. The means-tested care fee and accommodation payments (RAD or DAP) are not covered by the pension and must come from other income, savings, or family support.
For a full-rate pensioner with minimal assets, the basic daily fee will consume about 80% of their pension, leaving very little for personal expenses. Additional costs (means-tested fee, accommodation) depend on assessed income and assets.
The Basic Daily Fee and Your Pension
Every residential aged care resident pays the basic daily fee, regardless of income or assets. It is set by the government at 85% of the single basic Age Pension rate:
| Amount (2025–26) | |
|---|---|
| Basic daily fee | $61.96/day ($22,615/year) |
| Full single Age Pension | $28,514/year |
| Pension remaining after basic daily fee | $5,899/year ($16.16/day) |
The $16.16/day remaining is intended for personal expenses — toiletries, clothing, phone bills, and personal items. There is no separate “pocket money” allowance from the government.
The Means-Tested Care Fee — On Top of the Basic Daily Fee
The means-tested care fee (MTCF) is an additional charge based on your assessed income and assets. It is calculated by Services Australia using the formula:
- 50% of assessable income above $32,249.60/year, plus
- 17.5% of assessable assets above $55,000 (single)
For a full-rate pensioner receiving $28,514/year with no other income, their income is below the threshold — so the income component of the MTCF is $0. This is by design: the thresholds are set so that people on the pension alone don’t pay an income-based means-tested fee.
However, if they have assets above $55,000 (savings, super, investments, or a non-exempt home), the asset component will apply. For example:
- $100,000 in assets: ($100,000 − $55,000) × 17.5% = $7,875/year in MTCF
- $200,000 in assets: ($200,000 − $55,000) × 17.5% = $25,375/year in MTCF
- $300,000 in assets: ($300,000 − $55,000) × 17.5% = $42,875/year (but capped)
The MTCF is subject to an annual cap of $33,309.23 and a lifetime cap of $78,526.04. Once the lifetime cap is reached, the means-tested fee stops permanently.
Accommodation Costs — The Big-Ticket Item
The accommodation payment is separate from both the basic daily fee and the means-tested fee. It can be paid as:
- A Refundable Accommodation Deposit (RAD) — a lump sum (typically $200,000–$550,000, refunded on departure)
- A Daily Accommodation Payment (DAP) — an ongoing daily charge based on the RAD amount and the MPIR interest rate
- A combination of both
The Age Pension does not cover accommodation payments. If your parent has limited assets, they may be classified as a “low means” resident, in which case the government caps their daily accommodation contribution at a maximum amount (currently around $61.96/day) and subsidises the rest.
How Your Pension Changes When You Enter Care
The base Age Pension continues, but some supplementary payments stop or change:
| Payment | What happens |
|---|---|
| Basic Age Pension | Continues at the same rate |
| Pension Supplement | Reduced — the basic amount continues but the additional amounts for utilities cease (~$900/year lost) |
| Energy Supplement | Stops (~$366/year lost) |
| Rent Assistance | Stops (you’re no longer paying private rent) |
| Commonwealth Seniors Health Card benefits | Continue |
Net effect: the pension income in care is roughly $1,200–$2,000 less per year than what you received at home, depending on which supplements you were receiving.
Notify Services Australia when entering residential care. They will adjust payments automatically once notified, but failing to report the change promptly can result in overpayment debts.
Couples: The Illness-Separated Pension Rate
When one member of a couple enters residential aged care while the other remains at home, the couple may be eligible for the illness-separated pension rate. This pays each person at the single pension rate instead of the couple rate:
| Couple rate (each) | Illness-separated rate (each) | Increase | |
|---|---|---|---|
| Annual pension | $21,507 | $28,514 | +$7,007/year each |
Combined, the couple receives about $14,014 more per year than they would on the standard couple rate. This additional income can make a significant difference to affordability.
You must apply for the illness-separated rate — it is not automatic. Contact Services Australia and advise them of the separation due to illness or infirmity.
For more details, see our Aged Care for Couples guide.
Worked Example: Full Pensioner Entering Care
John is a single full-rate Age Pensioner ($28,514/year). He has $80,000 in savings and super. His home is valued at $500,000 and will be left vacant. He enters a facility with a RAD of $350,000 in metropolitan Melbourne.
Year 1 (home exempt)
- Basic daily fee: $22,615
- MTCF (assets only): ($80,000 − $55,000) × 17.5% = $4,375
- MTCF (income): pension below threshold = $0
- Accommodation: classified as low means (assets under $76,000 + RAD refusal option) — maximum accommodation contribution ~$22,615/year
- Total estimated cost: ~$49,605/year
- Pension income: $28,514 (less supplements lost ≈ $27,300 effective)
- Shortfall: ~$22,305/year drawn from savings
What If the Pension Is Your Only Income?
If the Age Pension is your parent’s only income and they have very limited assets (under ~$55,000), they will pay:
- The basic daily fee ($22,615/year) — unavoidable
- Little or no means-tested fee — assets and income are both below thresholds
- Government-assisted accommodation — eligible for low-means accommodation support
In this scenario, the pension does largely cover the costs, but there is very little left for personal expenses. Families often supplement with small contributions for clothing, outings, and personal items.
Key protections: The government ensures that no one is turned away from residential aged care due to inability to pay. If your parent cannot afford the fees, they are still entitled to a place. Facilities receive a government subsidy for residents who are assessed as low-means.