$3B aged care boost begins build push – and bigger reform looms

A $3 billion aged care package aims to get new beds built – but a major review released today makes clear the task is far bigger.

The Federal Government has moved to kickstart construction with a package designed to unlock residential capacity as pressure mounts on the system and the long-awaited Accommodation Review lands.

At the centre of the announcement is a commitment to deliver 5,000 additional residential aged care beds per year, alongside Support at Home changes and targeted funding for higher-need residents.

A Residential Aged Care Market Report, released by Colliers in November last year and compiled by Boxwell & Co’s Darren Lynch, reveals the sector added only 578 new residential aged care places in FY25, far below the projected increase in demand of more than 9,000 residents. Aged care occupancy was nearing 100%.

The package, detailed by Health and Aged Care Minister Mark Butler in an address to the National Press Club, is positioned as the Government’s first formal response to the Independent Review of Residential Aged Care Accommodation Pricing led by Nigel Ray and Nicole Sutton.

A first step on supply

The Government said the funding is designed to kickstart construction and improve financial viability, particularly for providers caring for lower-means residents.

Key measures include:

• Targeted capital subsidies for builds and refurbishments;
• An increase and restructure of the Accommodation Supplement, including higher payments for homes with more than 60% supported residents; and
• A pipeline target of 5,000 new beds annually.

The Review itself – published today (Wednesday, 22 April) – warns the system needs to deliver more than double that rate of growth to keep pace with demand, highlighting the scale of the challenge facing the sector.

Support at Home reset

As The Weekly SOURCE reported earlier today, the Government will invest $1 billion to remove co-contributions for key personal care services under Support at Home.

Showering, dressing and continence care will now be treated the same as clinical care – free at the point of use. However, the changes will only commence from October this year – five months away.

The package also includes:

• $200 million for 20 new Specialist Dementia Care units
• Expansion of the Hospital to Aged Care Dementia Support Program

The measures are aimed at easing pressure across both aged care and hospitals, as higher-acuity residents increasingly drive demand.

Minister Butler also pledged that the Government will “accelerate the release of and expand access to more Support at Home places”, with more details to be released in the Budget.

Review points to deeper structural reform

While today’s announcement focuses on targeted funding, the Accommodation Review goes further – calling for a fundamental redesign of how aged care accommodation is financed.

Its recommendations include:

• A $2 billion per year interest-free loan scheme to unlock development;
• Ongoing capital subsidies tied to supported residents;
• Major expansion of capital grants for thin markets; and
• Pricing reform to reduce reliance on RADs and stabilise cashflows.

The Government said it will consult further with the sector on these broader reforms.

Funding reality bites

The announcement comes as the Government signals a more constrained fiscal environment, with Minister Butler also outlining significant changes to the National Disability Insurance Scheme (NDIS) and emphasising the need for “honesty about where taxpayer dollars are best spent.”

The package will be partly funded by cutting higher private health rebates for over-65s and redirecting the savings into aged care – underlining a shift toward reprioritisation rather than new spending.

Further aged care measures will be outlined in the May Budget, with full costings to be released at that time.

More analysis of the Accommodation Review – and what it means for providers, investors and supply – will be in tomorrow’s edition of The SOURCE.