Food costs are a barrier to healthier diet selections, particularly for low socioeconomic households who regularly choose processed foods containing refined grains, added sugars, and added fats. In this study, the objectives were to: (i) identify the nutrient density-to-cost ratio of Australian foods; (ii) model the impact of substituting foods with lower nutrient density-to-cost ratio with those with the highest nutrient density-to-cost ratio for diet quality and affordability in low and medium socioeconomic households; and (iii) evaluate food processing levels. Foods were categorized, coded for processing level, analysed for nutrient density and cost, and ranked by nutrient density-to-cost ratio. The top quartile of nutrient dense, low-cost foods included 54% unprocessed (vegetables and reduced fat dairy), 33% ultra-processed (fortified wholegrain bread and breakfast cereals <20 g sugars/100 g), and 13% processed (fruit juice and canned legumes). Using substitution modelling, diet quality improved by 52% for adults and 71% for children across all households, while diet affordability improved by 25% and 27% for low and medium socioeconomic households, respectively. The results indicate that the quality and affordability of the Australian diet can be improved when nutritious, low-cost foods are selected. Processing levels in the healthier modelled diets suggest that some ultra-processed foods may provide a beneficial source of nutrition when consumed within national food group recommendations.