Aged care bookkeeping sits at the intersection of government funding compliance, trust account management, and the standard small-business accounting obligations most bookkeepers are familiar with. Whether your client operates a residential facility, a home care provider, or a day respite centre, the bookkeeping complexity is driven primarily by the funding model — and since the Aged Care Act and the Support at Home program (replacing Home Care Packages from July 2025) reshape the revenue structure regularly, keeping up requires deliberate attention.
The Funding Structure
Aged care revenue in Australia comes from three main sources, and the bookkeeping treatment differs for each:
Government subsidies — the bulk of residential care income arrives as the Basic Daily Care Fee supplement, the Means Tested Care Fee offset, and various care subsidies paid fortnightly by Services Australia. These are GST-free income (they are government grants for care services). They must be matched to the approved care recipient count each fortnight; discrepancies trigger a reconciliation obligation with Services Australia.
Accommodation payments — the Refundable Accommodation Deposit (RAD) and the Daily Accommodation Payment (DAC) are the two forms of accommodation contribution. The RAD is a lump sum that must be held in a separate account and refunded (less any permitted deductions) when the resident leaves. It is not income; it is a liability. The DAC is a daily fee calculated on the unpaid RAD balance — this is income and is subject to GST (it is not GST-free as it is not a health care service).
Resident fees — the Basic Daily Fee (currently set as a percentage of the single aged pension) is paid by the resident and is income. Top-up fees for additional services may or may not attract GST depending on whether they relate to care services (GST-free) or hotel-style services like pay TV and hairdressing (taxable).
Refundable Accommodation Deposits: A Common Source of Errors
The RAD is one of the most frequently mishandled items in aged care bookkeeping. Common errors include:
- Recording the RAD as income when received
- Failing to segregate RAD funds in a dedicated bank account as required by the Aged Care Act
- Not tracking the agreed drawdown schedule (residents can elect to draw down the RAD as a DAC instead, reducing the balance)
- Failing to calculate the daily accommodation payment on the correct balance after drawdowns
- Missing the refund obligation and timeline when a resident departs or passes away
The Department of Health publishes the Maximum Permissible Interest Rate (MPIR) quarterly, which is used to calculate the daily accommodation payment on any unpaid RAD balance. Bookkeepers should have this rate in their calendar and update the fee schedule at each change.
Home Care Packages and Support at Home
Home Care Packages (HCPs) were administered as unspent funds held in trust — the care recipient's unspent balance was legally their money, not the provider's income. From July 2025, the Support at Home program replaces HCPs and shifts to a different budget and accountability model. Providers receive monthly budget notifications; the bookkeeping requirement is to ensure expenditure is correctly categorised against the approved budget and that any unspent budget is reported to Services Australia.
Providers must account separately for:
- Care management fees (capped as a percentage of the package value)
- Support coordination costs
- Direct care service costs
- Provider administration overhead (subject to government caps under some programs)
Any money held on behalf of a consumer in a trust-like structure retains its character as the consumer's funds until spent on approved services.
GST in Aged Care
GST in aged care is non-trivial because a residential facility typically makes both GST-free and taxable supplies — sometimes from the same physical space. The GST-free supplies are the health care and care services (nursing, personal care, allied health); the taxable supplies are the accommodation-style services.
Calculating the correct input tax credit entitlement requires an apportionment method. The ATO's Goods and Services Tax Ruling GSTR 2006/3 (Health Services) and GSTR 2004/1 (Food) are relevant. Most aged care providers use a percentage-based apportionment agreed with their tax agent — get this apportionment in writing so it is defensible on audit.
The RAD itself: because it is not consideration for a supply (it is a deposit/loan), it falls outside the GST system entirely. It does not generate an input tax credit and does not affect the apportionment calculation.
Resident Trust Accounts
Beyond the RAD, some residential facilities operate a petty cash or "comfort fund" on behalf of residents who cannot manage their own finances. These are trust funds: the provider holds the money on behalf of the resident and has a fiduciary duty not to commingle it with operating accounts.
Best practice is a dedicated trust bank account for resident personal funds, a register of each resident's balance, and monthly reconciliation of the register against the bank account. When a resident leaves or passes away, any unspent personal funds must be returned to the resident or their estate promptly. The Aged Care Quality and Safety Commission can audit these records.
Payroll Complexity
Aged care staff are typically covered by the Aged Care Award or the Nursing Homes Award, both of which include complex penalty rates, allowances, and shift arrangements. The sector also has significant part-time and casual workforces, which creates superannuation tracking complexity (particularly for casual employees whose earnings cross the $450 threshold inconsistently — noting that the $450 threshold was removed from 1 July 2022, meaning all aged care employees now accrue super from the first dollar earned).
From 1 July 2024, the Fair Work Commission's requirement for a 15% pay increase for direct care workers was progressively funded by the government — the government subsidy for this increase is income, but the bookkeeper must ensure the increased wage cost and the corresponding subsidy are both correctly captured so the provider can demonstrate to funders that the subsidy was passed through to workers.
Financial Reporting and Audits
Residential aged care providers receiving Commonwealth funding must submit annual financial reports to the Department of Health in the prescribed format. Larger providers (turnover above the threshold) require audited financial statements. The chart of accounts must align with the department's prescribed classifications — bookkeepers working in this sector need a copy of the department's reporting templates.
The Aged Care Quality and Safety Commission also conducts financial viability assessments and may request management accounts, cash flow forecasts, and evidence of RAD fund segregation at any time. Having a clean, well-documented set of accounts is essential for passing these assessments without a qualified finding.