Home Care Income-Tested Fees: How to Avoid Overpaying

When applying for a Home Care Package (HCP), it’s important to know what an income-tested fee (ITF) is, how it’s applied, and what exactly to be mindful of when moving forward.

1. What Is An Income-Tested Fee (ITF)?

When you receive a Home Care Package (HCP) in Australia, the government subsidises the majority of the costs.

However, if you have sufficient income, you may be asked to pay an income-tested care fee, or plainly put, an ‘income-tested fee (ITF)’ on top of the basic daily fees.

This fee is not fixed – it depends on your personal financial situation. The amount is worked out through an income assessment conducted by Services Australia (or the Department of Veterans’ Affairs, if applicable).

2. Who Pays Income-Tested Fees?

When applying for a Home Care Package (HCP) in Australia, income-tested fees (ITFs) are paid by applicants who meet government criteria based on their personal income and assets. These income-tested fees form part of the contribution that eligible applicants are required to make towards the cost of their aged care services.

Here’s a breakdown of how income-tested fees (ITFs) work:

• Income and Asset Assessment: The government uses an assessment process to determine a participant’s ability to contribute to the cost of care. This is based on a person’s income and assets, including savings, investments, and property. This assessment is conducted by Services Australia, which provides a rate for the income-tested fee.
  
• Who Pays Income-Tested Fees: Individuals who are assessed to have a higher income or more assets will be required to contribute towards the cost of their care under the Home Care Package (HCP) program. This contribution is calculated according to their income and asset levels.
  
• How Are Income-Tested Fees Calculated: Income-tested fees are calculated based on two separate criteria:
  • For income: The fees are based on the person’s assessable income, which is determined through the income test. Those with higher income are asked to contribute more, while those with a lower income may pay less or no income-tested fee.
  • For assets: If the person has significant assets, they may also be required to pay an additional contribution toward their care. 
    
• Income-Tested Care Fee: The fees may vary depending on the level of the Home Care Package (which ranges from Level 1 to Level 4, see our complete guide to Home Care Packages here) and the individual’s income.
  
• The Lifetime Cap on Income-Tested Fees: There is a cap on the amount that a person can pay for income-tested fees. Once a person reaches this cap, they will no longer have to contribute further for that year.
  • As of July 1, 2025, income-tested fees are capped at a total lifetime amount of $82,347.13, which means, once you reach this lifetime cap – you’ll no longer have to pay any further income-tested fees.
  • To find out more about income-tested fees and their specific amounts pertaining to each economic level (low-income, middle-income, and high-income bracket), please see our in-depth guide here.

In general, income-tested fees are applied as follows:

• There is no income-tested fee for those with a low income or low amount of assets.
• An income-tested fee applies to individuals with moderate to high income and/or assets.

Overall, income-tested fees are generally paid by those who have a higher income or significant assets. The Australian government sets these fees to ensure that those with the financial ability, contribute to the cost of their care.

Eligible care recipients are notified of their income-tested fees during the Home Care Package process and can seek assistance if needed. CareAbout Australia provides this assistance free of charge, simply contact us here or call 13 13 00 and our dedicated team will be able to assist you.

3. Common Misunderstandings About Income-Tested Fees in Aged Care

When applying for a Home Care Package (HCP) in Australia, and having to deal with income-tested fees (ITFs) as part of this process:

Eligible care recipients may overpay in several areas due to:

• Misunderstanding Income-Testing: Applicants may not fully understand how the income-tested fee is calculated. The government applies this fee based on income, but it can be easy to overestimate income or misinterpret the income thresholds. This can lead to overpayment because the wrong fee tier is selected. 

• Unclear Financial Assessments: Sometimes, the financial assessment provided by My Aged Care is not detailed enough, leaving individuals and families alike to feel unsure about how to properly allocate their income, assets, and expenses. This lack of clarity can lead to paying a higher fee than necessary. 

• Underestimating Government Subsidies: Sometimes, eligible home care package recipients don’t fully understand the subsidies that may reduce their overall fee, such as the government’s contribution to the care package. Overlooking available subsidies can lead to overpaying for services, especially when under the assumption, that everything’s to be paid out of pocket.

• Not Reviewing Fee Changes: Income-tested fees can fluctuate based on changes in income or assets. Individuals may not regularly update their income details or may not be aware of changes in fee structures, leading to continued overpayment even when their financial situation has changed. 

• Not Optimising Package Usage: Sometimes, care recipients don’t use the full capacity of the Home Care Package (HCP) they’re paying for. For example, they might only use a small portion of their allocated hours or services, but they still pay the full package cost. Not optimising package usage can lead to feeling like they’ve overpaid for unused services. 

• Not Comparing Providers: Some applicants may not shop around or compare providers to ensure they’re getting the best value for money. Not all providers offer the same services for the same cost, and individuals may end up overpaying if they don’t do the research – that’s where CareAbout comes in, we’re here to do the comparison for you. Simply give CareAbout a call, and we can help you free of charge.

• Failing to Take Advantage of Fee Caps: There are caps on how much someone can pay for their care package based on their income. Some families might not be aware of these caps and end up paying more than they should. 

When applying for a Home Care Package, it’s essential to carefully review your financial assessment. Ensure you understand the different fee components, particularly income-tested fees, and regularly monitor any changes in your circumstances. If your income has changed, or you’ve sold an asset, there’s no reason to continue paying higher contributions than necessary.

The government applies income-tested fees based on your income, but it’s easy to misinterpret income thresholds or overestimate your income. This can result in paying more than required if the wrong fee tier is applied. Remember, your tier is automatically selected based on your income, so it’s important to stay on top of any changes to avoid overpayment.

4. What Is the Current Income Tested Care Fee in Australia?

According to My Aged Care, as of 1 July, 2025, the following income tested care fee applies:

• Full pensioners and individuals with an income of up to $34,005.40 are exempt from paying an income-tested care fee.
  
• You may be required to pay up to $18.85 each day if:
  • You are single, and earning over $34,005.40.
  • You are part of a couple, living together, and are earning more than $26,301.60.
  • You are part of a couple, living apart due to illness, and are earning more than $33,277.40.

• You may be required to between $18.85 to $37.70 each day if:
  • You are single, earning over $65,416.00.
  • You are a part of a couple, living together, and are earning more than $49,977.20.
  • You are a part of a couple, living apart due to illness, and are earning more than $64,688.00.

An exact income-tested fee is calculated by Services Australia. It’s important to note, your income tested care fee can change if your financial situation changes at the time of receiving care, which you can learn more about through My Aged Care here.

Questions? We’re Here to CareAbout You.

We get it. Sometimes reading guides upon guides still won’t answer all of your questions, but that’s okay. Our team’s here to answer your queries, and to help you get the support you need – whether it’s for yourself, or for someone you love –

At CareAbout, we help both individuals and families to navigate their way through the aged care system:

• We explain how support works, in clear, friendly terms (with no jargon or complex terms used)
  
• We 1:1 match you (or your loved one) with a provider who factors in who you are, what your personal preferences are, and your daily routine/s
  
• We make sure you (or your loved one) remains in the driver’s seat—after all, it’s your care
  
• We help to keep you informed with the latest industry news and guides, and to feel empowered (because we understand how this care journey can affect everyone involved)

And we provide this service completely free – simply call us today at 13 13 00 to open the conversation.

We’re here to CareAbout you—and at no cost.