Aged care fees and charges - accommodation payments 065-05020020

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Frequently asked questions

1

Question: How do I calculate the equivalent daily accommodation payment?

When a completed means assessment results in a care recipient being assessed as not low means, the care recipient will negotiate the cost of their accommodation with their provider. This is the Refundable Accommodation Deposit (RAD). To calculate the equivalent Daily Accommodation Payment (DAP) of a RAD, the formula is:

• Equivalent daily payment = refundable deposit x maximum permissible interest rate (MPIR)/365

The formula remains the same in a leap year. This remains the same while the care recipient remains in the same room in the same provider.

Notes:

• the Maximum Permissible Interest Rate (MPIR) that is used is the MPIR applicable for the care recipient’s date of entry
• Registered providers calculate the DAP, it is not the responsibility of Services Australia Service Officers to calculate a DAP for a care recipient
• Care recipients and aged care nominees can contact the registered provider, My Aged Care or an Aged Care Specialist Officer for further assistance

Previous and current interest rates are available on Department of Health, Disability and Ageing – Schedule of Fees and Charges for Residential and Home Care.

For care recipients who entered care before 1 July 2014, see Pre 1 July 2014 residential aged care accommodation bonds and charges.

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Example: Daily Accommodation Payment (DAP)

For example, a refundable deposit of $400,000 for entry in February 2017 would have an equivalent daily payment of $63.12 per day.

The registered provider would calculate the DAP as:

• Refundable deposit x MPIR / 365 = ($400,000 x 5.76%) / 365 = $63.12 per day.

An example of a combination payment for a $400,000 price may be a combination of a refundable deposit of $200,000 and a daily payment of $31.56 per day, with the registered provider calculating the daily payment as follows:

• Balance of price x MPIR / 365 = (($400,000 - $200,000) x 5.76%) / 365 = $31.56 per day).

Note: registered providers calculate the DAP, it is not the responsibility of Services Australia Service Officers to calculate a DAP for a care recipient. The care recipient can discuss this with their prospective/ current registered provider or be guided to My Aged Care 'How much will I pay?' to calculate an estimate.

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Question: How does the service calculate a Refundable Accommodation Contribution (RAC) from a Daily Accommodation Contribution (DAC) amount?

When a completed means assessment results in a care recipient being assessed as low means, the means assessment also determines the DAC that a care recipient is required to contribute to the cost of their accommodation.

To work out the equivalent RAC payable, follow the equation below:

• RAC = (DAC advised by Services Australia x 365)/Maximum Permissible Interest Rate

Note: the Maximum Permissible Interest Rate (MPIR) that is used is the MPIR applicable for the care recipient’s date of entry.

Note: letters from Services Australia will always show the DAC, determined by the means assessment. This is even if a lump sum has been paid. The provider is required to adjust the amount of DAC charged to the care recipient where a full or partial lump sum has been paid.

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Example: Refundable Accommodation Contribution (RAC)

For example, Services Australia has advised a care recipient that their DAC payable is $28.15.

The care recipient advises their service they wish to pay their accommodation contribution by lump sum and the service calculates this.

The care recipient can be asked to pay the following RAC (using the Maximum Permissible Interest Rate (MPIR) of 4.98% as set at 1 October 2019):

• RAC = ($28.15 x 365)/4.98% = 10274.75/4.98%
• RAC = $206,320.28 (rounded to the nearest cent)

Based on the care recipient’s assessed means, the equivalent RAC the provider could charge is $206,320.28.

Note: registered providers calculate a RAC using the advised Daily Accommodation Contribution details and the formula in the applicable legislation. Services Australia does not calculate a RAC amount and the care recipient can discuss this with their registered provider.

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Question: How do I calculate a reduced Daily Accommodation Contribution (DAC) amount after a partial Refundable Accommodation Contribution (RAC)?

Services Australia is not responsible for calculating a care recipient's RAC amount if they choose to make a lump sum accommodation payment.

If a care recipient chooses to pay a part RAC, the registered provider will calculate the reduced daily payment as follows:

• Reduced DAC = DAC amount payable − [(Balance of RAC paid × MPIR) / 365]

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Example: reduced Daily Accommodation Contribution (DAC) amount

Services Australia advises that care recipient is eligible to pay a DAC of $16 per day. The care recipient chooses to pay a part RAC of $20,000. A reduced DAC amount must be calculated by the registered provider.

An example of the steps the registered provider will follow is:

• If the MPIR is 4.89% (as of 20 March 2020) when the care recipient enters the service, the reduced DAC works out to be $13.32:
• Reduced DAC = $16.00 – [($20,000 × 4.89%) / 365] = $13.32 per day.

The care recipient can require the provider to draw this reduced DAC amount from their paid RAC.

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Question: How long does a care recipient have to decide on their accommodation payment?

When a care recipient enters care, they have 28 days to enter an agreement that states how they will pay their accommodation payment. If they do not choose within 28 days, they are charged a daily payment. An accommodation payment may be paid by:

• daily payments, or
• refundable deposit (lump sum), or
• a combination of refundable deposit and daily payments

If they agree to pay a lump sum, they have 6 months from date of entry to pay it. They are charged a daily payment up until when the lump sum payment is made.

A lump sum payment can be made at any time after entry into care.

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Question: Can a care recipient draw down fees from an accommodation payment

Care recipients who pay a lump sum accommodation payment, can draw down their daily payments from this balance to meet their accommodation costs. This applies to DAP payments and is at the care recipient’s request.

Other fees, such as care fees or costs of additional services may be deducted if there is a written agreement between the provider and the care recipient.

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Question: How often should I update my accommodation balance (RAD/RAC) balance if I draw down on my balance?

It is important to update your balance regularly to ensure your fees are correct. From 1 November 2025, your aged care service will be reporting your accommodation balance each month. If the amount doesn’t match, within $10,000 of the amount we have on your record, you will be sent a letter to verify your balance.

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Question: How do I calculate the RAD/RAC retention amount?

Registered providers are solely responsible for the retention calculation of a care recipient’s RAD/RAC balance, you should talk to your provider about how the retention amounts are calculated and managed.

Services Australia Service Officers must not calculate RAD/RAC retention amounts for care recipients.

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Question: Will the increase to a maximum accommodation price e.g. the room price, apply to all care recipients?

No, all existing care recipients will not be impacted by the implementation of the Aged Care Taskforces recommendation to increase a maximum room price up to $750,000 on 1 January 2025, from the previous limit of $550,000.

The updated maximum room price will be indexed on 1 July each year, in line with CPI. Care recipients who enter care on, or after the date of indexation, may be asked to pay a higher amount if the registered provider also increases the maximum room price in line with the CPI changes.

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Question: Will a provider have to retain 2% for 5 years of all Refundable Accommodation Payments and Contributions?

Yes, Residential aged care providers will be required to retain 2% per annum of Refundable Accommodation Payments (RAD) and Contributions (RAC) for care recipients who enter residential care on or after 1 November 2025, and meet the eligibility requirements. The retention amount is capped at 5 years from the first date the RAD is paid.

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Will a provider have to apply the CPI to all Daily Accommodation Payments (DAPs)?

Yes, the CPI increase will be applied on 20 March and 20 September for those care recipients who would have the 2% retention applied as per the details in Question 11.

Existing care recipients will not have these changes applied to their DAP and the indexation of the DAP does not apply to a care recipient’s Daily Accommodation Contribution (DAC).

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Will financial hardship assistance that is granted for a DAP be indexed?

No, care recipients who are granted hardship for a DAP, will not have the hardship amount increased when indexation of the DAP is applied. The amount of hardship assistance will not change, however a care recipient can reapply and have their financial hardship assistance reassessed based on their current circumstances at that date.

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Borrowing funds pre-1 July 2005 when accommodation bonds were assessable assets

If the care recipient borrowed from family members to pay the accommodation bond, the asset value of the bond reduces by the amount borrowed.

If the care recipient had borrowed money against their former principal home to pay the accommodation bond, it is assessed as follows:

• The 2 year exemption from the assets test for the former principal home still applies. The house is not an assessable asset for 2 years
• The loan is treated as a Home Equity Conversion (HEC) Loan. If it isn't all spent on the Accommodation Bond right away, then the first $40,000 is exempt from the assets test for 90 days
• The asset value of the accommodation bond is not reduced by the loan
• If the former principal home has not been sold after 2 years, the asset value is reduced by the balance of the HEC loan. The care recipient will then have the non-homeowner’s asset etc. applied