Retirement Village vs Residential Aged Care: Legal and Financial Differences in Victoria

Comparison at a glance

Retirement villages: contract and legal features

A retirement village is a lifestyle and property arrangement, not aged care. Residents typically hold an occupancy right (a lease, licence, unit-trust interest or strata title) rather than owning the underlying land in the way an ordinary homeowner does. The relationship is governed by:

• a residence contract with the operator;
• a separate service or management agreement;
• village rules; and
• the Retirement Villages Act 1986 (Vic) and its regulations.

The commercial structure is front-loaded (an ingoing contribution) and back-loaded (a deferred management fee deducted from the exit entitlement, plus refurbishment and resale costs). For the full framework, see our Victorian retirement villages guide and our article on retirement village contracts explained.

The Retirement Villages Amendment Act 2025 (Vic) reforms the state framework in stages. Most major reforms commenced on 1 May 2026, while the prescribed standard-form contract and the remaining staged regulatory changes commence on 1 September 2026. Some reforms — such as updated disclosure and dispute-resolution changes — apply to all residents regardless of when their contract was signed, while others — including some exit-entitlement and refurbishment provisions — apply only to contracts entered on or after 1 May 2026. Pre-existing contracts are not simply left untouched by the amending Act; each provision must be checked against its own commencement and application rules. Always confirm the operative version of the residence contract and the Act at the date of the decision being made.

Residential aged care: agreement and cost features

Residential aged care is Commonwealth-regulated care for people who need help with personal care and daily living. Providers must be approved and are regulated by the Aged Care Quality and Safety Commission. The main documents are:

• a residential aged care service agreement covering services, fees, rights and complaints (for agreements entered before 1 November 2025, a transitional resident agreement may still apply); and
• a separate Accommodation Agreement covering the accommodation price and whether it is paid as a RAD, DAP or combination.

Ongoing costs are the Basic Daily Fee (set as a percentage of the age pension) and — for new residents whose fee-arrangement date is on or after 1 November 2025 — a Hotelling contribution (s.278) and a Non-clinical care contribution (s.279), each assessed by Services Australia. Clinical care is fully Commonwealth-funded. Residents whose fee-arrangement date sits before 1 November 2025 continue under the earlier means-tested care fee under savings provisions, and residents under the pre-1 July 2014 fee-arrangement cohort retain the accommodation-bond and income-tested fee arrangements preserved by Schedule 2 of the Aged Care (Consequential and Transitional Provisions) Act 2024 (Cth). For a detailed cost walk-through see our guide to aged-care costs, RAD, DAP and the fee reforms, and for a signing checklist see our aged-care resident agreement checklist.

Support at Home and care at home

Support at Home is the primary Commonwealth in-home aged-care program. It commenced on 1 November 2025 and replaced Home Care Packages and Short-Term Restorative Care. It funds services delivered in the person's own home — personal care, nursing, allied health, home modifications and assistive technology — with client contributions varying by service category and means-testing.

From a legal perspective, Support at Home involves a service agreement with a registered provider, not a residence or accommodation contract. There is no RAD, no DAP and no accommodation price. It is not covered by state retirement-villages legislation. The relevant legal questions are usually about capacity, family authority and coordination with the person's Will and enduring powers of attorney — not about accommodation terms.

Capacity and who can make decisions

All three regimes turn on the same underlying question: does the person have decision-making capacity for the particular decision, and if not, who has legal authority to act? A validly executed enduring power of attorney (financial) generally covers signing retirement-village contracts, aged-care Resident and Accommodation Agreements and Support at Home service agreements. Where no valid appointment exists, VCAT administration and, if necessary, guardianship may be required. See our powers of attorney in Victoria guide for the framework.

What happens when needs change?

Most people do not stay in one setting for the whole of later life. Common transitions include:

• Home → Support at Home. Increasing care needs while remaining at home; a service agreement is entered with a registered provider.
• Home → retirement village. Downsizing from the family home into an independent-living village unit; sale of the family home usually funds the ingoing contribution.
• Retirement village → residential aged care. Care needs exceed what independent living can support; the village exit process runs in parallel with the aged-care entry process. Timing risk is significant — whether the village exit entitlement is paid on vacant possession, on resale, or under some other contractual timetable depends on the occupancy type, contract terms and contract date (contracts from 1 May 2026 may attract a 12-month vacant-possession rule, while earlier contracts follow transitional or contractual timing rules) — while the aged-care accommodation price is due at entry. A statutory advance-payment mechanism may be available to bridge the gap where the resident is moving into aged care or alternative accommodation.
• Support at Home → residential aged care. Care needs exceed what can safely be provided at home.
• Aged care → different aged-care facility. A change of provider mid-stay, requiring a new residential aged care service agreement and Accommodation Agreement (and refund of any RAD paid to the previous facility, subject to permitted deductions).

Each transition is a legal event as well as a personal one. Independent legal advice — coordinated with the family's financial adviser — usually pays for itself in avoided errors.

What happens if the resident dies?

• Retirement village. The right to occupy ends. The exit entitlement is calculated (after deferred management fee, refurbishment or reinstatement costs, resale commission and any capital-gain/loss sharing — each dependent on the contract terms and the applicable statutory rules, and, for contracts from 1 May 2026, subject to new written-arrangement requirements for renovation obligations) and paid to the estate, subject to the applicable exit-timing rules for that occupancy type and contract date. Post- exit charges depend on the contract date and ownership structure: for post-30 January 2006 contracts, personal service charges cannot continue beyond 28 days after the resident leaves, non-strata maintenance charges generally stop within six months (or earlier on reoccupation or a new contract), while strata-title owner maintenance and owners-corporation charges may continue until sale. See our detailed guide to what happens when a village resident dies.
• Residential aged care. The residential aged care service agreement ends. Any RAD balance is refundable to the estate within the statutory timeframe, subject to permitted deductions and, where relevant, the Accommodation Payment Guarantee for eligible refundable accommodation balances in provider insolvency or default circumstances. Final account reconciliation and collection of personal belongings sit with the executor.
• Support at Home. Services cease. There is no accommodation payment to refund; unpaid client contributions or unused funding are reconciled with the provider.

Legal checklist for families

• Identify which regime is actually in play — village, aged care or Support at Home.
• Locate the current, valid enduring power of attorney (financial) and confirm scope.
• Review the resident's Will — a move often triggers estate-plan changes.
• Obtain and review the specific contract(s) before signing, not after.
• Coordinate timing where a village exit is funding an aged-care entry.
• Confirm complaint and dispute pathways for the relevant regime.
• Coordinate legal, financial and accounting advice — none of them substitutes for the others.
• Document family decisions in writing, especially where multiple adult children are involved.

How we help

Our retirement living and aged care team advises across the three regimes — reviewing retirement-village contracts, aged-care residential aged care service agreements and Accommodation Agreements, and Support at Home service agreements; confirming signing authority; coordinating with the resident's Will and enduring powers of attorney; and acting in disputes. We work alongside financial advisers and accountants where the situation calls for it.

Frequently Asked Questions