Managing accommodation payments and contributions for residential aged care

Residents who entered care in an aged care home from 1 July 2014 may pay an accommodation payment or contribution. Residents can choose from lump sum or rental-style payment options, or a mix of both.

What are accommodation payments and contributions?

Accommodation payments and contributions are payable by some residents who enter care from 1 July 2014.

All residents negotiate and agree to a room price before moving in to an aged care home. Services Australia conducts a means assessment to see if the resident is eligible for Australian Government assistance with their accommodation costs.

If a resident is not eligible for assistance, or has means not disclosed status, they will pay the agreed room price as an accommodation payment.

If a resident is eligible for Australian Government assistance, they will either pay nothing or contribute towards the cost by paying an accommodation contribution.

The Australian Government will pay your service the difference between the maximum accommodation supplement and the amount of accommodation contribution the resident is eligible to pay. If their means tested amount is $0, the resident will not pay an accommodation contribution. Instead, the Government will pay the full maximum accommodation supplement your service is eligible for.

Charging interim accommodation costs

Where a resident enters care before a means assessment has been completed, or if they have chosen not to disclose their means to Services Australia, you can charge the agreed accommodation payment price as set out in the accommodation agreement. If the resident is later found to be eligible for Government assistance with their accommodation costs, you must refund any overpaid amounts. The change to a resident’s means status and accommodation costs can be backdated to the day they entered care.

For accommodation costs that apply to pre-1 July 2014 residents, see managing accommodation bonds and charges.

Residents choose how they pay

If accommodation costs are payable, residents must choose how they pay within 28 days of entering care. They have 3 options:

  • a refundable deposit (a lump sum)
  • daily payments (rental-style payments)
  • a combination of the two.

These options apply whether a resident pays contributions or payments.

If the resident chooses to pay in full or part by a refundable lump sum, you must give the resident 6 months to pay. In the meantime, the resident will pay for their accommodation as a daily amount.

If they choose to pay a combination, the resident decides the percentage of refundable lump sum and daily amounts that works best for them.

You cannot ask someone to pay a lump sum before they enter your service.

Accommodation payment

If a resident is not eligible for Australian Government assistance, they will pay the agreed room price for their accommodation. They can pay as a lump sum, daily payment, or a combination of the two.

Refundable accommodation amount (RAD)

The lump sum RAD amount is the room price that the resident agreed to.

Daily accommodation payment (DAP)

If a resident chooses to pay for their accommodation with a daily payment, you will need to calculate the DAP based on their agreed room price.

To do this:

  1. note the maximum permissible interest rate (MPIR) that was current on the day the resident agreed to the room price
  2. use this formula:
    DAP = (agreed room price × MPIR) / 365.

Combination option

If a resident chooses to pay a part RAD, you will need to calculate their reduced DAP as follows:

Reduced DAP = (agreed room price − RAD paid) × MPIR / 365

Example of calculating DAP and reduced DAP

If the MPIR is 4.89% (as at 20 March 2020), an agreed room price of $400,000 would have an equivalent daily accommodation payment (DAP) of $53.58: 

DAP = ($400,000 × 4.89%) / 365 = $53.58 per day

An example of a combination payment for a $400,000 room price could be a refundable deposit of $200,000 and a daily payment equivalent to the remaining $200,000, making the daily payment $26.79: 

Reduced DAP = ($400,000 − $200,000) × 4.89% / 365 = $26.79.

Changes to accommodation payment amounts

To calculate daily accommodation payments, you must always use the MPIR that was current on the day the resident agreed to the room price. It will not change while the resident receives care in your home, unless they voluntarily move rooms within your home and negotiate a new room price. If this happens, use the MPIR that was current on the day they agree to a new room price.

Accommodation contribution

If a resident is eligible for some Australian Government assistance, they pay a contribution towards their accommodation costs. They can pay as a daily amount, a lump sum or a combination of the two.

Daily accommodation contribution (DAC)

Services Australia will advise you of the daily accommodation contribution (DAC) that applies to each new resident.

Refundable accommodation contribution (RAC)

If a resident chooses to pay by lump sum, you will need to calculate the RAC that is equivalent to the DAC advised by Services Australia.

To do this:

  1. note the maximum permissible interest rate (MPIR) that was current on the day the resident entered care in your service
  2. use this formula:
    RAC = (DAC advised by Services Australia × 365) / MPIR.

Combination option

If a resident chooses to pay a part RAC, you will need to calculate their reduced daily payment as follows:

Reduced DAC = DAC advised by Services Australia − [(Balance of RAC paid × MPIR) / 365]

Example of calculating a reduced DAC

Services Australia advises that your new resident is eligible to pay a DAC of $16 per day. The resident chooses to pay a part RAC of $20,000. You must calculate a reduced DAC amount for the resident.

If the MPIR is 4.89% (as at 20 March 2020) when the resident enters your service, the reduced DAC works out to be $13.32: 

Reduced DAC = $16.00 – [($20,000 × 4.89%) / 365] = $13.32 per day.

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

Changes to accommodation contribution amounts

The amount of accommodation contribution payable by a resident can change while the resident is in care. This may happen due to:

  • a change in the resident’s personal or financial circumstances
  • indexation of aged care fees and thresholds
  • your service becoming eligible for a higher accommodation supplement.

For residents who pay their accommodation costs by DAC, Services Australia will let you know if the amount changes in a fee advice letter. If the resident is paying by a combination of DAC and RAC, you will need to recalculate contribution amounts when Services Australia issues a new fee advice letter for the resident.

To calculate accommodation contributions, you must always use the MPIR that was current on the day the resident entered your service. It will not change while the resident receives care in your service, even if they move rooms within the service.

Late daily payments and contributions

You may charge interest on daily accommodation payments and contributions that have been outstanding for more than one month.

The accommodation agreement must include the rate of interest you will charge for late payments. You cannot go above the maximum permissible interest rate (MPIR).

Refunding overpayments

You must refund accommodation payments or contributions to a resident if they paid more than they needed to.

For pre-1 July 2014 residents, read about managing refunds for accommodation bonds and charges.

Refunding lump sums

If a resident permanently moves to another service, you must refund any balances of lump sum amounts to them within the legislated refund period:

  • on the day they leave – if they give more than 14 days’ notice
  • within 14 days of them giving notice – if they give up to 14 days’ notice
  • within 14 days of them leaving – if they don’t give notice.

You must also refund the lump sum balance:

  • within 14 days of a resident permanently leaving residential care
  • within 14 days of being shown probate or letters of administration after a resident dies
  • within 14 days of a service ceasing to be certified.

The refund period is specified in Section 4 of the Fees and Payment Principles 2014 (No. 2) and Section 52P-1(4) of the Aged Care Act 1997.

Until you pay the lump sum balance, you will need to pay interest:

  • at the base interest rate (BIR) from the day after the resident’s permanent departure, or the day after the resident died, until the end of the legislated refund period
  • at the MPIR from the day after the resident should have received their refund.

The rate remains fixed at the MPIR until you complete the refund.

Check the current and previous BIR and MPIR interest rates.

When calculating the BIR, use the rate current on the first day of the refund period. That is:

  • if the resident died – the day after you’re shown a copy of probate or letter of administration
  • if the resident moves to another service and
    • gives up to 14 days’ notice – the day after the resident gives notice
    • gives no notice of departure – the day after the resident leaves
  • in any other case – the day after the resident leaves.

When calculating the MPIR, use the rate current on the day after the resident should have received their refund.

Note that the BIR does not apply if the resident moves to another service and gives more than 14 days’ notice of departure. In this case the refund is due on the day of departure and the MPIR applies from the day after departure until you complete the refund.

Full requirements

For full details, see Fees and Payments Principles 2014 (No. 2):

  • rules for charging accommodation payments and contributions — see Part 4
  • rules for refunding accommodation deposit balances and accommodation bond balances — see Part 7
  • base interest rate (BIR) — see how to calculate the BIR in Section 4
  • maximum permissible interest rate (MPIR) — see how to calculate the MPIR in Section 6.

Contact

Residential aged care and home care fees contact

Contact us about fees for residential respite care, home care (basic daily fee, income-tested care fee) and residential aged care (means-tested care fee, income tested fee, additional service fees, time extensions to enter into accommodation agreements, accommodation payments, bonds and charges).

AgedCareFees [at] health.gov.au

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Last updated: 
16 April 2021

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