Each accredited residential service needs to set the payment (or range of payments) and publish these amounts on their own website as well as on the My Aged Care website.
The published rate is the maximum that the service can charge. Whether you are then required to pay this price will depend on your means assessment. Some providers may be willing to negotiate a lower amount for clients who do not have the financial means to pay this level. Services cannot negotiate to accept payments higher than the published rate.
Services can self-assess the price they set for accommodation based on commercial factors. But if they want to charge more than $550,000, they need approval from the Aged Care Pricing Commissioner and must justify that the price represents a higher standard of accommodation.
We recommend that you seek specific financial advice to decide which payment option works best for you.
Payment options
You have three options as to how you can pay for your accommodation:
- A lump sum – This is a refundable accommodation amount. There are two types of lump sum, depending on the outcome of your means assessment:
- Refundable accommodation contribution (RAC) – This is when the government helps with the costs.
- Refundable accommodation deposit (RAD) – This is when you pay the full amount yourself.
- Rental-style daily payments – This is a daily accommodation charge. There are two types of rental-style daily payments, depending on the outcome of your means assessment:
- Daily accommodation contribution (DAC) – This is when the government helps with the costs
- Daily accommodation payment (DAP) – This is when you pay the full amount yourself.A combination of lump sum and rental-style payments – This is when you combine the two types of payments to meet your costs. You can split the combination any way you choose. For example, for an agreed room price of $500,000, you could choose to pay $100,000 as a refundable lump sum, and also pay a reduced non-refundable daily payment.
Important points about lump sum payments (RAD/RAC)
- If you have decided to pay by lump sum for part or all of your accommodation, your provider may also agree to let you draw other aged care fees from your RAD or RAC balance, such as your basic daily fee or your means-tested care fee. It is your provider’s decision whether they choose to allow this.
- Paying a lump sum can affect other Aged Care fees as the balance of an accommodation lump sum is counted as an asset in the aged care means assessment. This means it is considered when working out your means-tested care fee and/or accommodation contribution. However, an accommodation lump sum is exempt from the age pension means test.
- If you are a member of a couple, half the combined income and assets of both you and your partner are included in the means assessment. This happens regardless of who earns the income or whose name the asset is held in. This means that if your partner is in aged care or planning to move into aged care, your paid lump sum may affect your partner’s means-tested care fee or accommodation costs.
- Your provider is not obliged to refund lump sums while you remain in care, although they may choose to do so. This means that if you have a loan agreement with your family and they would like it repaid while you are in care, you will need to ask your provider if they will refund this amount to you. However, the balance is refunded when you leave the aged care home. Any amounts that you have drawn down from the lump sum to pay other aged care costs will not be refunded.
Daily accommodation payment (DAP)
If you choose to pay for your accommodation by DAP, the amount is worked out by applying the maximum permissible interest rate (MPIR) to your agreed room price and dividing the amount by 365 days. For example, if you agree to a room price of $500,000, your DAP will be worked out as follows:
DAP = (room price × MPIR) / 365
= ($500,000 × 4.02%) / 365
= $55.06
For the same room price of $500,000, you could choose to pay a part RAD of $200,000 and a DAP based on the remaining $300,000. For this combination payment, your reduced DAP would be worked out as follows:
Reduced DAP = ((agreed room price − RAD paid) × MPIR) / 365
= (($500,000 − $200,000) × 4.02%) / 365
= ($300,000 × 4.02%) / 365
= $33.04
Note: The MPIR used here (4.02%) is current as of 1 January 2021.
The MPIR that applies when working out your DAP is fixed at the date you agree to a room price with your provider. Increases or decreases to the MPIR that occur after this time will not affect the rate that applies to you. If you have paid a part RAD, you can tell your provider to draw your reduced DAP amount from your paid RAD. Over time, this will make your lump sum smaller and your daily payment larger.
Daily accommodation contribution (DAC)
If you are eligible for government assistance with your accommodation costs, Services Australia will write to your provider to advise them of the DAC you are eligible to pay. This amount applies only if you choose to pay for your accommodation entirely by daily payments. If you wish to pay part of your accommodation contribution as a lump sum (RAC), your provider will need to calculate a reduced DAC amount for you.
What is the maximum permissible interest rate (MPIR)?
The MPIR is a government-set interest rate used to calculate a daily accommodation payment based on your agreed room price. It is used to determine equivalence between a daily payment and a refundable lump sum deposit, giving you a choice in how to pay.
The MPIR is not an interest charge to residents who have not paid for their accommodation costs in full. It is set at a level to ensure that if you choose to pay daily payments rather than a lump sum, the daily payments are sufficient to cover the costs of providing accommodation in your aged care home.
You can find current and previous MPIRs on the Department of Health website.