Answering: Granny flat or aged care? What does keeping a parent close actually cost in Victoria?
Estimated reading time: 9 min read
Keeping a parent close in Victoria is a family cost, not a property-investment product. Residential aged care asks for a RAD that now leaks 2 per cent a year for up to five years, plus a basic daily fee of $66.80 from 1 July 2026, and, depending on means, hotelling and non-clinical care contributions. Staying close asks for a liveable place plus paid hours the family cannot cover, in a system where the latest official report puts the median elapsed time from application to commencement of ongoing Support at Home at 297 days. Compare those stacks with an adviser and a solicitor. BY can design the dwelling. We cannot advise on fees, pensions or tax.
This is usually not a spreadsheet people want. It is a parent who is not safe on the stairs, a sibling argument about what the family can manage, and a fear of sending someone away too soon or promising a home the family cannot staff.
Both fears are real. Residential care may be the right setting when clinical need exceeds what a house and a family can hold. A granny flat may be an option when the parent can still live with some independence, close but not on top of each other. Which of those describes your parent is a conversation for the family, the GP and the aged-care assessors, not for an architect. Mixing the two up is how people spend the wrong money. Figures below are general information, indexed, and not personal financial, legal or aged-care advice.
Key Insights
- 1 July 2026 residential care: basic daily fee $66.80; hotelling $22.15; non-clinical cap $107.32 a day / $137,917.01 lifetime or four years.
- New RADs from 1 November 2025: 2 per cent a year retention, up to five years. Max RAD without IHACPA approval: $789,686.
- AIHW: median stay in permanent residential care 20.1 months (2024–25). Do not multiply fees by five without saying so.
- Support at Home levels 1–8: $11,010.01 to $80,137.12 a year (1 July 2026). Median elapsed time from application to commencement for ongoing Support at Home: 297 days (Q4 Wait Times Report, period 1 April–30 June 2026), a figure that includes assessment and referral stages. About 100,191 people were waiting for an ongoing place (Q3 2025–26 program data).
- Granny-flat pension and CGT rules exist. They are not BY’s advice. Informal handshake deals are where families get hurt.
| Cost piece | Residential aged care (1 July 2026 unless noted) | Keeping a parent close |
|---|---|---|
| Capital | RAD, max $789,686 without IHACPA approval; 2% p.a. retention up to 5 years from 1 Nov 2025 | Construction on land you already have; project-specific, no published national figure |
| Everyday living | Basic daily fee $66.80; hotelling $22.15 where it applies | Household bills, still yours |
| Care | Clinical care government-funded; non-clinical cap $107.32/day, lifetime $137,917.01 or 4 years | Support at Home levels 1–8, or private hours |
| Time | Median stay 20.1 months (AIHW, 2024–25) | Median elapsed time to commence ongoing Support at Home: 297 days (report for 1 Apr–30 Jun 2026) |
| Formality | Provider accommodation agreement | Written family agreement; pension/tax are the adviser’s |
Keep reading for full details below.
Table of Contents
- What residential aged care actually charges in 2026
- What staying close costs while you wait for, or instead of, residential care
- The family maths, without pretending a flat pays for the carers
- Do it formally, then design the place, and know the limits
What residential aged care actually charges in 2026
The Department of Health’s Schedule of fees and charges for residential care from 1 July 2026 is the primary source. Indexed. Re-check the PDF after 30 September 2026.
For residents on the 1 November 2025 arrangements:
- Basic daily fee: $66.80 a day (85 per cent of the single basic age pension; about $24,382 a year).
- Hotelling contribution: $22.15 a day, where means testing applies it.
- Non-clinical care contribution: daily cap $107.32; lifetime cap $137,917.01 or four years, whichever first.
- Maximum RAD without IHACPA approval: $789,686. Home exemption cap for means assessment: $214,884 (My Aged Care, as at 20 March 2026).
From 1 November 2025, providers deduct a retention amount from eligible new RADs: 2 per cent a year, daily, for up to five years, not refunded. On a $500,000 RAD that is about $10,000 in the first year on a declining balance; on $750,000, about $15,000. Department figures, not BY’s.
Add the pieces for your parent. We will not publish a “typical Melbourne all-in.” Because no official source provides one, compare the published components for your parent.
AIHW GEN: median stay in permanent residential care in 2024–25 was 20.1 months. If someone is multiplying an annual fee by eight, put that median on the table, and say that half of residents stay longer. Medians are not promises about your parent.
What staying close costs while you wait for, or instead of, residential care
Support at Home replaced Home Care Packages from 1 November 2025. Eight ongoing classifications, current as of 1 July 2026, indexed each July (includes care-management allocation):
| Classification | Quarterly budget | Annual amount |
|---|---|---|
| 1 | $2,752.50 | $11,010.01 |
| 2 | $4,112.84 | $16,451.35 |
| 3 | $5,634.20 | $22,536.81 |
| 4 | $7,617.13 | $30,468.51 |
| 5 | $10,182.38 | $40,729.53 |
| 6 | $12,341.32 | $49,365.27 |
| 7 | $14,915.00 | $59,660.00 |
| 8 | $20,034.28 | $80,137.12 |
Carry-over of unspent funds is capped at $1,000 or 10 per cent a quarter. Contribution rules sit on the Department’s page.
The wait is what turns a household into a project. The Aged Care Act 2024 Wait Times Report for quarter 4 (the second report, published 11 August 2026; period 1 April to 30 June 2026) puts the median elapsed time from application to commencement of ongoing Support at Home at 297 days, and is explicit that elapsed time includes assessment, referral and service-commencement stages, not only system-managed waiting. The Support at Home program’s Q3 2025–26 data report separately recorded about 100,191 people waiting for an ongoing place. The better part of a year, end to end. A reason to think about the dwelling before the crisis week. Interim funding at 60 per cent of the classification can be assigned when waits run long; it is not a full substitute.
If you pay privately, you are in the market. Hourly rates vary by provider, qualification and time of day, nursing care is priced well above general caregiving, and live-in care is priced differently again. There is no official Melbourne rate to quote, so get local quotes for the actual hours your parent needs. A granny flat does not erase those hours. It can change who is in the room when the paid carer is not.
The family maths, without pretending a flat pays for the carers
The honest frame, and the only one we will write:
1. Different capital is at risk. A RAD is money sitting with a provider, now leaking 2 per cent a year for up to five years, on top of daily fees. A small dwelling on a child’s existing block is construction on land you already own. We will not quote an unverified build-cost band as a government figure. Your QS and builder will price the site.
2. Proximity may defer some paid hours. It does not replace 24-hour care. How much paid support a parent needs is a care assessment, not a floor plan, and we will not put a number on what family next door can absorb. High-care clinical need still outruns most homes. When that day comes, residential care is not a failure of the flat.
3. Asset and tax rules are other professions. Services Australia assesses granny-flat interests; in the ordinary case, paying for construction or a lifetime right in a principal home is not deprivation, and the value is generally the amount paid. A reasonableness test applies in particular cases. DSS tells people to get advice first. My Aged Care caps the former home at $214,884, or fully exempts it with a protected person in occupation. Selling the home to fund a RAD is a different picture. From 1 July 2021 the ATO exempts creating, varying or ending a written, binding, non-commercial granny-flat arrangement from CGT where the person has reached pension age or needs disability assistance. Market rent is commercial. That is the ATO’s rule, not a BY tax position, and not Barbara’s advice. Stamp duty on a transfer is SRO territory we will not narrate. Accountant and solicitor. We do not claim a granny flat pays for itself, and we do not sell yield on a parent’s room.
Do it formally, then design the place, and know the limits
The ALRC’s Elder Abuse: A National Legal Response (Report 131, 2017) is the document not to skip. Informal arrangements end, in its case studies, with eviction and lost savings. The ATO’s own wording: formal arrangements “reduce the risk of financial abuse or exploitation of older individuals.” The written agreement is protection, and separately what the CGT exemption requires. BY does not draft it.
If, after the advisers have spoken, the family still wants a dwelling: design it so they can actually live there (our granny flats page covers the planning rules and the value conversation); plan the build with the published Support at Home wait times in mind rather than starting at the crisis; and know the stop rule when care outruns the house.
BY Projects is a Victorian architecture practice for substantial, complex work. Greater Shepparton (20 community housing units) and Wangaratta (13) are civic record, not an aged-care licence. If a dwelling is the decision, a 45-minute Feasibility Session: Barbara sketches while you talk, on the actual backyard.
Closing
Different products, different stages of need. Compare published fees, RAD retention, Support at Home budgets, wait times and private hours, then stop asking an architect to be a financial adviser. If you are keeping a parent close, do the agreement properly and design the place. Our process · aged care architects.
Frequently Asked Questions
Q: Is a granny flat cheaper than aged care in Victoria?
A: It depends on care need and how long the arrangement lasts. Count construction and paid hours, not only the build. Median residential stay 20.1 months; median elapsed time to commence ongoing Support at Home 297 days. We will not declare a winner. Get advice on the actual assessment.
Q: Can we use a house sale to fund the flat?
A: Maybe. Selling changes the means picture. My Aged Care and the Social Security Guide are the sources. Adviser territory. BY will not walk a sale.
Q: Does a granny flat mean they will never need residential care?
A: No. High-care need can exceed a home. A well-designed flat is for the independent years, not a substitute for a clinical facility.
Q: What can an architect usefully do?
A: Whether the site can hold a liveable dwelling, before construction money. Fees, pensions, CGT and the agreement belong elsewhere. Feasibility Session if it is becoming a building.
Want to Learn More?
General information only. Seek licensed financial, legal and aged-care advice. About the practice: 35-plus years, Victorian work. If you have decided to build, the companion piece is how to design it so they live well.
Citations
- Schedule of fees and charges for residential care, Australian Government Department of Health, Disability and Ageing. 1 July 2026 basic daily fee, hotelling, non-clinical caps, MPIR, max RAD. https://www.health.gov.au/resources/publications/schedule-of-fees-and-charges-for-residential-care
- RAD and RAC retention, Department of Health, Disability and Ageing. 2% p.a. retention from 1 November 2025, up to five years. https://www.health.gov.au/our-work/residential-aged-care/charging/refundable-accommodation-deposit-and-contribution-rad-and-rac-retention
- Funding classifications for Support at Home, Department of Health, Disability and Ageing. Levels 1–8 amounts current as of 1 July 2026. https://www.health.gov.au/our-work/support-at-home/funding-for-support-at-home/funding-classifications-for-support-at-home
- Aged Care Act 2024 Wait Times Report, second report (quarter 4), Department of Health, Disability and Ageing. Published 11 August 2026; period 1 April–30 June 2026. Median elapsed time from application to commencement for ongoing Support at Home: 297 days (the earlier period was retrospectively revised to 344 days); the report notes elapsed time spans assessment, referral and commencement stages. https://www.health.gov.au/resources/publications/aged-care-act-2024-wait-times-report-residential-care-and-support-at-home-second-report-quarter-4?language=en
- Support at Home Program Data Report, Q3 2025–26, AIHW GEN. Source of the ~100,191 people waiting for an ongoing place. https://www.gen-agedcaredata.gov.au/getmedia/88363448-d30b-4958-8823-df697cb5f769/Support-at-Home-Program-Data-Report-Q3-2025-26-corrected
- Elder Abuse: A National Legal Response (Report 131, 2017), Australian Law Reform Commission. The case-study record behind the formal-agreement advice. https://www.alrc.gov.au/publication/elder-abuse-a-national-legal-response-alrc-report-131/
- People leaving aged care, AIHW GEN. Median stay in permanent residential care 20.1 months (2024–25). https://www.gen-agedcaredata.gov.au/topics/people-leaving-aged-care
- 4.6.4.50 Granny flats, Social Security Guide (DSS). No age or family-relationship test; value generally the amount paid; reasonableness test in particular cases. https://guides.dss.gov.au/social-security-guide/4/6/4/50
- Granny flat arrangements and CGT, Australian Taxation Office. Cited as ATO law, not as BY or Barbara’s advice. https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/granny-flat-arrangements-and-cgt
