The expansion will include 15 new beds in a purpose-built dementia-specific area as well as 31 new beds for the LGBTQI+ community.

The building, joined to the existing facility via a walkway, will include visual cues to communal areas so residents can wander freely around a circuit and out to the gardens, a theatre, gym, men's shed and nostalgic kitchen which will allow residents to help with cooking.

Hepburn House facility manager Dianne Jones said the new building would be great for new and existing and residents.

"We won't have any trouble filling the beds because there is a need for more aged care. Daylesford has an ageing population but people are also bringing their parents out here to be close to them," Ms Jones said.

"There is also definitely a need for a dementia- specific facility as Daylesford doesn't currently have anywhere that offers it. It will make a huge difference to not only their lives but others in the facility too."

Ms Jones said the new LGBTQI+ area was not specifically reserved for that community but was created to make residents feel safe.

Hepburn House became a rainbow tick accredited facility early last year and so the move is another step to becoming a more inclusive service organisation for LGBTQI+ people.

The extension was decided upon after consultation and support from the Ageing With Pride committee, comprised of residents, community members and staff, which was created after the facility was accredited with the rainbow tick to discuss how best to care for elderly people in the LGBTQI+ community.

"It's difficult for people in their 80s coming into care when they have had a history of discrimination when they were young. It was illegal until 1984 so it is very scary for them so we hope this will create a culture of safety," she said.

"We are continuing to promote community engagement and look at other services we can provide like bringing the young and the old together."

Hepburn House's existing building contains 60 beds so the expansion will almost double the amount of residents the facility will care for.