Aged Care Reform Is Coming: Is Your Finance System Ready?

Aged Care Reform Is Coming: Is Your Finance System Ready?

Big changes are on the horizon for Australian residential aged care providers. From 1 July 2025, Chapter 4 of the new Aged Care Act 2024 will come into force. This will reshape how providers manage funding and resident payments.

The Aged Care Taskforce has played a crucial role in shaping these reforms, offering recommendations to improve funding arrangements and quality standards in aged care services.

At first glance, these changes might seem like a simple policy update or an IT change. In reality, they carry significant operational, financial, and compliance implications for aged care facilities, especially if your systems and processes are not equipped for the transition. The Department of Health and Aged Care will oversee these reforms to ensure that providers meet the new guidelines and quality standards.

Introduction to Aged Care Reforms

The Australian government has introduced substantial reforms to the aged care system. These changes aim to improve the quality and accessibility of aged care services for older Australians. The reforms also highlight the important role of carers and emphasise the need for families to be actively involved in the care process.

These changes are especially critical given Australia’s ageing population. Demand for services is growing, and there is an urgent need for sustainable funding models. The new Aged Care Act, effective from 1 July 2025, focuses on person-centred care, transparency, and accountability. These reforms respond directly to the Royal Commission into Aged Care Quality and Safety, which called for a more compassionate and sustainable system. The changes will affect residential aged care, home support services, and the broader aged care sector.

Understanding the Aged Care Bill

The Aged Care Bill, passed on 25 November 2024, is a cornerstone of the reforms. It replaces the outdated Aged Care Act 1997 and introduces a new framework focused on quality, safety, and transparency.

A key feature is the new Single Assessment System, which will streamline assessments and ensure people receive appropriate support. The Bill also establishes the Aged Care Pricing Authority to set fair prices for services.

Legislative Framework

The new Aged Care Act provides a compassionate, person-centred foundation for aged care delivery. It replaces the current legislation from 1 July 2025. The Act aims to ensure older people receive high-quality care with a strong emphasis on safety and accountability. It includes the creation of a pricing authority to ensure pricing is transparent and fair across the sector.

The Cost of Getting It Wrong

Failing to comply with the new funding requirements can lead to serious issues. These include financial inaccuracies, non-compliance, reputational damage, and even missed government subsidies. Manual workarounds and last-minute fixes create pressure for both your team and the residents.

Residents will need to contribute a percentage of their income or assets to care costs. This makes accurate financial management essential for compliance.

Getting the basics right, like applying the correct daily fees is critical. Chapter 4 introduces new contribution types, billing structures, and caps. These must be implemented correctly to avoid losing resident trust, failing audits, or disrupting cash flow.

What’s Changing with Aged Care Reforms?

While the Aged Care Act 2024 is wide-ranging, this article focuses on the funding changes in Chapter 4. From 1 July 2025, providers must:

• Replace the existing Means Tested Care Fee with the new Hotelling Supplement and Non-Clinical Care Contribution.
• Manage automated indexation of the Daily Accommodation Payment (DAP) twice per year.
• Process 2% per annum retentions on accommodation deposits.
• Track and report new contribution caps, such as the $130,000 cap over four years.

These changes affect finance workflows, billing runs, client setup processes, and reporting systems.

Quality and Standards

Quality is central to the reforms. The new Act strengthens the Aged Care Quality Standards and introduces a clear framework for delivering safe, high quality care.

The new Support at Home program will offer restorative care services, helping older Australians regain independence. Oversight will be handled by the Aged Care Quality and Safety Commission. A new rating system will increase transparency and help consumers assess provider quality.

An Independent Health and Aged Care Pricing Authority will ensure consistent and fair pricing across both residential and home support programs.

Assessment and Funding

A streamlined, equitable assessment and funding process is being introduced. A single assessment process will evaluate each person’s eligibility, carried out by teams of healthcare professionals.

Funding will be means-tested, requiring individuals to contribute based on income and assets. The government will continue to fund residential care, home care, and respite services. A new equipment loan scheme will help fund assistive technology and home modifications, supporting independent living at home.

Service Delivery

The new model puts individuals at the centre of care. The Support at Home program will fund services like personal care, domestic assistance, and respite, delivered by a diverse network of providers.

A national priority system will ensure timely care based on need. A new quarterly budget model will provide consistent funding, and a revised quality standards framework will guide performance assessment across all care types.

Is Your Current Finance System Equipped for the Aged Care Reform?

Ask your finance and billing team the following questions:

• Can we segment residents by entry date (before or after 1 July 2025) and apply the correct funding rules?
• Does our software support Hotelling and Non-Clinical Care Contributions, including means testing and daily caps?
• Can we automatically and accurately manage retentions from deposits?
• Will our DAP rates update correctly in March and September without manual input?
• Can we track each resident’s progress toward contribution caps in real time?
• Are our reports compliant and ready for audit under the new structure?

Managing quarterly budgets is essential. Your system must ensure compliance, accountability, and proper allocation of care funding.

If any of the answers to these questions is “no” or “I’m not sure,” action is needed well before July 2025.

Governance and Conduct

The reforms require aged care providers to strengthen governance. Providers must have a governing body and report on governance arrangements.

A new Code of Conduct outlines expected standards for organisations and workers. Providers must report on financial performance and share service information publicly.

An equipment loan scheme will also offer access to assistive technologies and home modifications, improving residents’ independence and quality of life.

Don’t Wait for the Deadline

Don’t leave this to the last minute. You do not want to be scrambling in June 2025 to interpret legislation or patch together spreadsheets and workarounds.

The Department of Health and Aged Care will publish new budget amounts in March 2025. These updates will have significant implications for home care recipients moving into the Support at Home program.

Now is the time to make sure your software and systems are ready.

Implementation and Timeline

The reforms will roll out in stages:

• July 2024: The Single Assessment System begins its phased rollout.
• March 2025: Budget updates will be released.
• 1 July 2025: The new Aged Care Act and Aged Care Pricing Authority go live.
• 2026: A new national rating system is introduced.

New means testing arrangements and a national priority system will ensure faster, fairer access to services.

The Solution: Inerva Cloud ERP + Resident Select

Meeting the requirements of the new Aged Care Act 2024 demands more than manual processes and outdated software. That’s where our purpose-built solutions come in: Inerva Cloud ERP and Resident Select. These are designed specifically for Australian residential aged care providers.

Together, they streamline operations from first enquiry to final claim. This reduces compliance risk and frees up your team to focus on what matters most: quality care.

Resident Select: Smarter Admissions and Quoting

Start your resident journey with confidence. Resident Select supports admissions teams with:

• Quick, compliant quoting tools.
• Customised funding and payment options.
• Automated creation of compliant resident agreements.
• User-friendly workflows that reduce onboarding delays.
• Transparent fee breakdowns to build trust with families.

It’s everything you need to provide clarity and consistency from day one.

Inerva Cloud ERP: Full Operational Control

Once residents are onboarded, Inerva Cloud ERP takes care of the rest. It brings all your care, financial, and operational systems into one platform. Inerva is already aligned with the new reforms and includes modules for:

• Resident Administration. Set up residents using compliant templates.
• Billing and Finance. Manage billing, retentions, contributions, and DAP indexation with transparency.
• Subsidy and Claims. Automate subsidy updates and funding reconciliation.
• Compliance Reporting. Track caps and produce audit-ready reports.
• Payroll and Rostering. Align staff hours with care minute requirements.
• General Ledger Integration. Ensure financial accuracy across the organisation.

And best of all, updates are automatic. You are always ready for the next regulatory change without lifting a finger.

Ready to Future-Proof Your Finance?

If you’re not confident your current finance system will support you through these changes, now is the time to take action. Inerva Cloud ERP is ready when you are.

Adapting to the new Support at Home program is crucial to ensure compliance and provide high-quality care. Let’s make sure you’re not just compliant. Let’s ensure you are ahead of the game.

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