Why your aged care could cost more than a Ferrari

1 month ago 8

Opinion

January 20, 2026 — 1.33pm

While many people baulk at the price tag on a luxury car, for many Australians, the most expensive purchase they will ever make isn’t a Ferrari – it’s aged care.

Across most capital cities, the price of a typical aged care bed now comes with a lump sum of around $750,000. Some beds are cheaper, particularly those with shared bathrooms, in regional areas or older homes. Others, in premium locations with hotel-style amenities, can exceed $3 million. There’s a wide range – but even the “mid-range model” is far from cheap.

The Ferrari 296 GTS is priced at $688,000, which is still cheaper than the cost of aged care.

Whether you pay your accommodation cost as a lump sum Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two is up to you. If you pay the full lump sum, there is no DAP.

The lump sum is refunded when you leave, less a retention fee of 2 per cent, per annum, capped after five years. Stay five years or more, and 10 per cent will be deducted – on a $750,000 bed that’s $75,000 gone, and on a $3 million bed that’s $300,000 gone.

If you don’t pay some (or all) of the lump sum, you pay a Daily Accommodation Payment (DAP). The DAP is calculated on the unpaid amount at a government set interest rate, currently 7.65 per cent.

On a $750,000 room, the DAP is around $157 a day, or $57,375 a year. On a $3 million room, it is a staggering $629 a day. Unlike a fixed-rate loan, the daily payment is indexed twice a year in line with CPI, so it increases over time.

Very few Australians have budgeted for a Ferrari. Yet for many, aged care will cost just as much – and sometimes more.

But your accommodation cost is only one piece of the puzzle. On top of that, everyone pays the basic daily fee, set at 85 per cent of the single age pension – currently about $66 a day, or roughly $24,000 a year.

Then there’s the hotelling contribution, a means tested fee which covers things like meals, cleaning and laundry that can be up to $22 a day, or $8085 a year.

Beyond that is a non-clinical care contribution, which is also means tested. This pays for personal support such as showers, mobility assistance and lifestyle activities and is capped at $105 a day, or $38,435 a year.

The icing on the cake is the higher everyday living fee, which is an optional fee, that enables you to receive a higher standard of services such as meals, wine, hairdressing and entertainment.

Put it all together, and the numbers escalate quickly. A $750,000 room by daily payment can cost you nearly $130,000 a year. If you stay for the average time of 34 months, you are looking at more than $360,000, or about enough to buy yourself a brand new Ferrari Roma.

If it’s a $3 million room, you’re looking at more than $300,000 a year and $852,000 over the average stay – comfortably enough to purchase a 296 GTS with a bit left over for some bells and whistles. And this is the price before you pay for any personal expenses or extras.

Don’t assume the lifetime cap will save you. The $135,319 lifetime cap only applies to your non-clinical care contribution. Once you reach it, the accommodation costs, basic daily fee and hotelling contribution keep rolling on. And don’t think you need to be a millionaire to pay full tote odds. You can hit the caps with under $1 million of assets, and that includes any RAD you pay.

Very few Australians have budgeted for a Ferrari. Yet for many, aged care will cost just as much – and sometimes more.

Rachel Lane is the author of Downsizing Made Simple, a book and website aimed at demystifying downsizing.

Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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