Understanding the new Aged Care Act: A new era for aged care in Australia

Australia’s new Aged Care Act came into effect on 1 November 2025

The new rights-based Aged Care Act was originally scheduled for implementation on 1 July 2025 but delayed to finalise preparations.

This delay has been welcomed across the sector, the additional time allowing providers to better prepare for the significant compliance burden the reforms introduce.
It also allowed the government time to pass the Aged Care and Other Legislation Amendment Bill 2025 and publish the Aged Care Rules 2025.

This legislation is both a challenge and an opportunity for aged care providers, as it necessitates major operational changes while setting the stage for innovation and improvement in the sector.
 

Key impacts for aged care providers

Rebuilding public trust

One of the most pressing issues exposed by the Royal Commission was the widespread erosion of trust in aged care providers.

The new Aged Care Act aims to rebuild this trust by accepting key recommendations from the Royal Commission into Aged Care Quality and Safety. The new Act replaces previous legislation with a comprehensive framework that prioritises consumer rights, safety and quality of care.

• Mandatory public reporting on care outcomes and funding usage ensures providers are held accountable. Families can use the Star Ratings system to make more informed choices, leading to increased trust in the system.
• The rights-based framework gives older Australians a stronger voice, reinforcing their role as active participants in their care plans rather than passive recipients.

By aligning service delivery with community expectations, the sector has an opportunity to repair its reputation and rebuild confidence among older Australians and their families.

Charter of Aged Care Rights and person-centred care

The introduction of a Charter of Aged Care Rights codifies key principles, ensuring all older Australians have access to safe, dignified and equitable care. Unlike previous frameworks, this rights-based approach is binding, emphasising self-determination, social inclusion and protections against neglect and abuse.

• Providers will need to actively demonstrate how their services uphold these rights, from care planning to daily operations.
• Advocacy bodies and regulators will play a stronger role in monitoring compliance with the Charter.

Strengthened quality and safety standards

The Act imposes strict mandates around care quality and safety that providers will need to meet. Key changes include:

Mandatory care minutes

Each resident must receive an average of 215 minutes of care per day, including 44 minutes with a registered nurse (RN). An RN must also be available on-site 24/7. From April 2026, some care funding will be linked to the delivery of care minutes.

Providers will need to maintain clear records of care minutes and RN rostering and report them in their quarterly financial reports. The Care Minutes Performance Statement must be externally audited.

Quality Standards and Star Ratings

All government-funded aged care providers must be registered and meet the updated Aged Care Quality Standards. Providers will be audited against the new standards and receive a graded assessment based on their performance. The new quality standards include improved infection control, environmental maintenance and nutrition standards.

The grade a provider receives will affect their Star Rating, which is visible on the My Aged Care Website/find a provider tool.

• Facilities will need to revamp staffing models and training programs to meet these benchmarks.
• Non-compliance could lead to severe penalties, including loss of accreditation.

Enhanced accountability measures

Transparency is central to the new legislation. Providers must adhere to robust governance standards, including public reporting on care outcomes and clearer accountability for board members and executives.

• Enhanced whistleblower protections and stricter incident reporting requirements aim to foster a culture of safety and openness.
• Providers will need to establish internal mechanisms to ensure compliance, mitigate risks, and demonstrate accountability

Encouraging innovation and technology adoption

The Act creates an environment conducive to innovation, encouraging providers to adopt new technologies and care models. The government has shifted to digital reporting platforms, which providers will need to ensure staff are trained to use. 

• Tools for remote monitoring, electronic care records, and real-time reporting will streamline care delivery and enhance consumer satisfaction.
• Data-driven insights can enable providers to offer customised services that meet individual needs, setting a new standard for consumer engagement.

The shift to digital reporting is intended to improve transparency, streamline compliance, and enable regulators to monitor sector performance more effectively. Providers must ensure their IT infrastructure is secure, scalable, and capable of meeting these new obligations.

Embracing innovation will differentiate providers and ensure their services remain competitive in a reformed marketplace.

Revised funding mechanisms

The Act introduces a nuanced funding model that blends government subsidies with means-tested contributions from users.

• Financial planning will be critical for providers to maintain sustainability under the new arrangements.
• Smaller and regional providers may require targeted support to adjust to these changes.

Refundable Accommodation Deposits

One of the most significant financial reforms under the new Act involves changes to Refundable Accommodation Deposits (RADs) and Refundable Accommodation Contributions (RACs). 

From 1 November 2025, providers will be permitted to retain 2% of the RAD or RAC annually for up to five years, capped at 10% of the total deposit. This retention is calculated daily and deducted regularly, and is not refunded when a resident leaves care. For example, a RAD of $500,000 would allow a provider to retain up to $50,000 over five years. 

This retention applies to residents who enter aged care on or after 1 November 2025 under the new fee arrangements, as well as those who enter under the 1 July 2014 arrangements after 31 October 2025 or following a break in care of more than 28 days. 

It also applies to individuals who were receiving a home care package or were on the national priority list as of 12 September 2024, provided they meet the above criteria. 

Residents under the 1 July 2014 accommodation arrangements who pay a RAD or RAC—even after 1 November—are not subject to retention.

Providers must calculate and deduct retention amounts accurately, record them in their refundable deposit register, and clearly disclose these policies in accommodation agreements. In addition, providers holding RADs must maintain 35% of their annualised cash expenses and an additional 10% of their refundable deposit liabilities. 

Even providers that do not hold refundable deposits must comply with the 35% cash expense threshold. 

Challenges and opportunities

While the reforms promise better outcomes for older Australians, they also present a complex set of challenges and opportunities for aged care providers. In this section, we delve into the operational, financial, and cultural challenges providers face, while also highlighting the opportunities for those who adapt proactively to the new era of aged care.

Operational shifts: Workforce requirements will increase significantly, necessitating investments in recruitment, training, and retention. Providers must meet mandatory care minutes and staffing ratios while ensuring service quality remains high.

Financial considerations: Compliance with the new Act could drive up costs due to higher workforce demands, infrastructure upgrades, and technology adoption. The government’s support for small providers and rural facilities will be vital to sustaining equitable care.

Innovation as a catalyst: The reforms incentivise innovation, encouraging providers to embrace technology for remote monitoring, personalised care, and efficiency. Leveraging data analytics to track care outcomes can enhance transparency and service delivery.

Cultural change: Adopting a consumer-first mindset is essential. This requires shifting from transactional care delivery to relationship-based models that prioritise dignity, trust, and consumer voice.

Regional and small-scale provider challenges

While the Act introduces comprehensive reforms, smaller providers, particularly in regional areas, face unique challenges:

• Meeting enhanced staffing and infrastructure requirements may strain smaller operations.
• Targeted subsidies and support programs will be essential to prevent the closure of regional and community-based services, which are critical for underserved populations.

Embracing the change

The new Aged Care Act is a milestone in ensuring that aged care in Australia meets modern standards of dignity, safety, and quality. While its implementation will undoubtedly challenge providers, it also offers a framework for innovation and improvement. Those who embrace these changes proactively will not only comply with the law but also redefine the care experience for older Australians.

RSM has a dedicated Aged Care team with capabilities that range from audit and compliance support to financial management and business advice to holistic digital transformation and systems integration support. Whatever you need, we are here to support you through this transition.