Aged care fees and charges - accommodation payments 065-05020020

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Frequently asked questions

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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
• Service 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 service provider, My Aged Care or an Aged Care Specialist Officer for further assistance

Previous and current interest rates are available on Department of Health and Aged Care – 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 service 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 service 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).

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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, 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.

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

If a care recipient chooses to pay a part RAC, 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.

If the MPIR is 4.89% (as at 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 an accommodation payment be recalculated if fees are being drawn down from it?

Service providers and care recipients will need to agree how often they will recalculate accommodation payments as part of their accommodation agreement.

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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