TWEED's elderly residents are set to benefit from landmark changes to the aged care system.

They will get to keep their home or get to stay in their home as they receive aged care, according to local MP Justine Elliot.

The Gillard Government has announced a 10-year plan to reshape Australia's aged care system beginning on July 1.

"Labor will spend $3.7 billion over five years to deliver Living Longer Living Better which will give older Australians and their families more choice, easier access, and better care," Mrs Elliot said.

"These reforms will enable older Australians to get the help they both need and deserve so they can remain living in their own homes for as long as possible."

The Government will increase the number of Home Care packages by two thirds and provide tailored care packages to people receiving home care.

There will also be new funding for dementia care.

"Costs will be capped so full pensioners pay no more than the basic fee," Mrs Elliot said.

The Minister for Mental Health and Ageing, Mark Butler, said the reforms would introduce fairness into the payment system for aged care for the first time.

"Many pensioners with meagre savings and few assets are paying more than people with hundreds of thousands of dollars in assets and private income," he said.

"As a result, pensioners are subsidising the accommodation and care costs of millionaires.

"These reforms replace an aged care system designed a quarter of a century ago and which is now ill-equipped to meet the needs of retiring baby boomers and their parents who are living longer and healthier lives."

Mr Butler said the changes will have no impact on the million people already in the aged care system.

"They will not pay any more than they would have under the current arrangements," he said.

"This package reflects in large part what older Australians, their families and carers, and aged care providers have said is wrong with the system, along with the valuable input of the Productivity Commission report, Caring for Older Australians."

Implementation of the reforms will be overseen by a new Aged Care Reform Implementation Council.

The new reform package will be implemented in stages to enable providers and consumers to gain early benefits of key changes and have time to adapt and plan for further reform over the 10 years.