What is the means-tested care fee?
The means-tested care fee (MTCF) is an additional contribution toward the cost of aged care, charged on top of the basic daily fee. It is calculated by Services Australia based on a formal assessment of your income and assets — together, these determine how much extra you pay.
Not everyone pays it. People with low income and modest assets may pay $0. People with significant assets may pay up to the annual cap of $32,719 per year. But no matter how high your income or assets, the MTCF is always capped — there is an annual limit and a lifetime limit of $78,526, after which the fee drops to zero permanently.
The MTCF is the most variable component of aged care costs and the hardest to understand. This guide walks through the calculation step by step. If your parent has $300,000 in assessable assets and is on the full Age Pension, their MTCF will be approximately $42,088 per year — but capped at $32,719. Here is how we get that number.
Who pays it?
The MTCF only applies if your income or assets exceed government-set free thresholds. If both fall below these thresholds, your MTCF is $0.
| Threshold | Single | Couple (combined) |
|---|---|---|
| Income free area | $31,140/yr | $54,756/yr |
| Asset free area | $59,500 | $84,500 |
For couples, the combined income and assets are halved, and the halved amounts are tested against the single-person thresholds. This typically results in a lower MTCF than if the person entering care were assessed as a single person.
Most full Age Pensioners receive $29,754 per year — below the single income free area of $31,140. For them, the income contribution to the MTCF is $0, and the fee is driven entirely by their assets.
The income test
The income test calculates how much of your income above the free area contributes to the MTCF. The formula is:
Example: Income of $45,000/yr (single)
- Excess income: $45,000 − $31,140 = $13,860
- 50% of excess: $6,930 per year ($18.99 per day)
What counts as assessable income? The Age Pension, superannuation pension payments, investment income (dividends, interest), rental income from investment properties, and employment income. Lump-sum super withdrawals that are not pension payments are generally not counted as income (though they may increase your assets).
The assets test
The assets test calculates how much of your assets above the free area contribute to the MTCF. The formula is:
Example: Assessable assets of $350,000 (single)
- Excess assets: $350,000 − $59,500 = $290,500
- 17.5% of excess: $50,838 per year ($139.28 per day)
What counts as assessable assets? Superannuation balances (including accumulation accounts), bank accounts, term deposits, shares, managed funds, investment properties, and — in some cases — the family home. Assets that arenot counted include household contents, personal effects, a motor vehicle, and a prepaid funeral (up to certain limits).
How the two tests combine
Services Australia calculates the income contribution and the asset contribution separately. The two results are then added together to produce the uncapped MTCF. This total is then subject to annual and lifetime caps.
MTCF (final) = whichever is lower: the uncapped amount or the annual cap ($32,719)
Example: A single person with $45,000 income and $200,000 in assets:
- Income contribution: ($45,000 − $31,140) × 50% = $6,930
- Asset contribution: ($200,000 − $59,500) × 17.5% = $24,588
- Combined: $6,930 + $24,588 = $31,518 per year (below the cap)
For full Age Pensioners whose income is below $31,140, the income contribution is $0 — so the MTCF equals the asset contribution alone. This is why many guides simplify the MTCF as “the assets test,” but strictly both tests are always run and added together.
Annual and lifetime caps
The government caps the means-tested care fee to ensure no one pays a disproportionate amount. There are two caps — one annual and one lifetime — and understanding them is important for long-term financial planning.
| Cap | 2025-26 amount | What it means |
|---|---|---|
| Annual cap | $32,719/yr | Maximum MTCF payable in any one financial year |
| Lifetime cap | $78,526 | Cumulative total across all aged care services ever received |
If your parent pays the maximum annual MTCF of $32,719, the lifetime cap of $78,526 is reached in approximately 2 years and 5 months ($78,526 ÷ $32,719 ≈ 2.4 years). After that, the MTCF drops to $0 permanently — a significant reduction in ongoing costs for residents who stay longer than this.
Worked example: single person
Let's walk through a complete MTCF calculation step by step for a single person with significant assets.
Step 1: Income contribution
($29,754 − $31,140) × 50% = negative result → $0. Robert's income is below the free area, so the income test contributes nothing.
Step 2: Asset contribution
($450,000 − $59,500) × 17.5% = $390,500 × 0.175 = $68,338 per year.
Step 3: Combine and cap
Income contribution ($0) + Asset contribution ($68,338) = $68,338. This exceeds the annual cap of $32,719, so the MTCF is capped at $32,719 per year($89.64 per day).
| Test | Calculation | Annual amount |
|---|---|---|
| Income contribution | ($29,754 − $31,140) × 50% | $0 |
| Asset contribution | ($450,000 − $59,500) × 17.5% | $68,338 |
| Combined (uncapped) | $0 + $68,338 | $68,338 |
| MTCF payable | Capped at annual maximum | $32,719 |
What this means for Robert
Robert will pay $32,719 per year in MTCF, on top of the basic daily fee ($23,203). His total care fees (excluding accommodation) are approximately $55,922 per year. The full Age Pension ($29,754) covers roughly half of this — the remainder must come from his assets.
At the maximum annual rate, Robert will reach the lifetime cap of $78,526 in approximately 2 years and 5 months. After that, his MTCF drops to $0 — reducing his ongoing care costs by $32,719 per year for the remainder of his stay.
Worked example: couple
When one partner in a couple enters care, combined income and assets are halved before being tested against the single-person thresholds. This typically results in a lower MTCF.
Step 1: Halve the combined amounts
- Income attributed to Susan: $44,864 ÷ 2 = $22,432
- Assets attributed to Susan: $400,000 ÷ 2 = $200,000
Step 2: Income contribution
($22,432 − $31,140) × 50% = negative → $0. Susan's attributed income is below the single-person free area.
Step 3: Asset contribution
($200,000 − $59,500) × 17.5% = $140,500 × 0.175 = $24,588 per year.
Step 4: Combine and cap
Income ($0) + Assets ($24,588) = $24,588 per year ($67.36 per day). This is below the annual cap of $32,719, so no cap applies.
| Step | Calculation | Annual amount |
|---|---|---|
| Income contribution | ($22,432 − $31,140) × 50% | $0 |
| Asset contribution | ($200,000 − $59,500) × 17.5% | $24,588 |
| MTCF payable | $0 + $24,588 (below cap) | $24,588 |
What this means for Susan
Susan pays $24,588 per year in MTCF — noticeably less than the $32,719 cap. This is because the couple's assets are halved for assessment ($200,000 instead of $400,000), and Susan's attributed income is below the free area. If Susan were assessed as a single person with $400,000 in assets, her MTCF would be $32,719 (capped).
The family home exemption
Whether the family home counts as an assessable asset is the single most common source of confusion in aged care fees — and it can make a difference of tens of thousands of dollars per year in the MTCF. The rules depend on who is living in the home and what happens to it after the person enters care.
- Partner still living there: The home is exempt from the asset test indefinitely. It does not count toward assessable assets at all.
- Vacated but not rented: The home is exempt for up to 2 years from the date of entry into care. After 2 years, its value is included in the asset test.
- Rented out: The home is included in assessable assets immediately. The rental income is also counted as assessable income — so renting the home increases the MTCF via both the income and asset tests.
- Sold: The sale proceeds count toward assessable assets from the date of sale. This can significantly increase the MTCF if the proceeds push assets above the cap threshold.
The timing of home-related decisions (selling, renting, or leaving vacant) has a direct impact on aged care fees. See our detailed family home guide for strategies and scenarios.
Common mistakes
These are the most frequent errors families make when trying to understand or reduce the means-tested care fee:
- Assuming the home is always exempt. It is not — the 2-year rule applies if the home is vacated, and renting the home removes the exemption immediately.
- Gifting assets to family members before entering care. Centrelink counts gifts over $10,000 in a single financial year (or $30,000 over a rolling five-year period) as still belonging to the person. This rarely reduces fees.
- Not requesting the fee advice letter. Services Australia will issue a formal fee assessment — you should request this before accepting a place at any facility so you know exactly what the MTCF will be.
- Forgetting the lifetime cap includes home care. If your parent paid MTCF during a home care package, that amount counts toward the $78,526 lifetime cap. Always check cumulative totals with Services Australia.
- Not reassessing after major asset changes. If you sell the family home, receive an inheritance, or draw down significant super, your MTCF may change. You can request a reassessment from Services Australia at any time.
Next steps
The means-tested care fee can feel overwhelming, but you do not need to calculate it by hand. Here is how to get clarity on your specific situation:
- Get a personalised estimate — use our free aged care cost calculator to see an estimate of the MTCF based on your income and assets.
- Request a means assessment from Services Australia (phone 1800 227 475). This is the official assessment that determines your actual MTCF — the fee advice letter is the definitive document.
- Read the related guides for topics that affect your MTCF: the family home, couples rules, or the full fee overview.
- Consider a financial adviser if your situation involves significant assets, a family home, or couple-specific complications. An accredited aged care financial adviser can model different scenarios and may identify strategies to reduce the MTCF.