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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, but not all residents will need to pay this price. Services Australia conducts a means assessment to see if the resident qualifies for ‘low means’ status.

A resident without low means status, or with means not disclosed status, is not eligible for assistance with their accommodation costs. They will pay the agreed room price as an accommodation payment.

A resident with ‘low means’ status is eligible for Australian Government assistance with their accommodation costs. They will either pay nothing for accommodation or contribute towards the cost by paying an accommodation contribution.

For each low means resident, the 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.

A resident’s status as ‘low means’ is set at their date of entry to a service. It will not change while they reside in the same service, regardless of how their means change after entry.
You cannot charge a low means resident the agreed room price, even if their means increase. Rather their accommodation contribution may increase.

Changes to a resident’s financial circumstances can affect their accommodation contribution or means tested care fee. Residents should notify Services Australia of any significant changes to their assets or income.

See the Residential aged care fee scenarios for some simplified examples of how fees and accommodation costs are worked out for people with different financial circumstances.

Charging interim accommodation costs

Where a resident enters care before a means assessment has been completed, you can charge the agreed accommodation payment price as set out in the accommodation agreement. If Services Australia later assigns low means status to the resident, 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.

You must not require a person to pay any amount of their accommodation costs as a lump sum before they enter your service. It is up to them how they choose to pay.

How to collect payments and contributions

If the resident chooses to pay in full or part by a refundable lump sum:

  • you must give them 6 months to pay
  • the resident pays by daily payments until they pay the lump sum
  • you must refund the balance of the lump sum when the resident permanently leaves your care.

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

If the resident requests you to, you must deduct their daily amount from their paid lump sum. Where this reduces the lump sum balance, you can require the resident to maintain the agreed accommodation payment or accommodation contribution. They can do this by:

  • paying increased daily payments
  • topping up the lump sum
  • a combination of both.

If the resident does not make a payment choice within 28 days of entering your service, you can only ask them to pay by daily payments.

You can ask a resident to pay daily payments no more than 1 month in advance. Any daily payments paid more than 1 month in advance must be refunded.

Accommodation payment

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

Refundable accommodation deposit (RAD)

This is the lump sum room price that the resident agreed to. You must refund the balance of the RAD when the resident permanently leaves your care.

Daily accommodation payment (DAP)

You will need to calculate the resident's DAP based on their RAD.

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 = (RAD × 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 full RAD − RAD paid) × MPIR / 365

Example of calculating DAP and reduced DAP

If the MPIR is 4.07% (as at 20 March 2022), an agreed room price of $450,000 would have an equivalent daily accommodation payment (DAP) of $50.18: 

DAP
= ($450,000 × 4.07%) / 365
= $50.18 per day

An example of a combination payment for a $450,000 room price could be a refundable deposit of $250,000 and a daily payment equivalent to the remaining $200,000, making the daily payment $22.30: 

Reduced DAP
= ($450,000 − $250,000) × 4.07% / 365
= $22.30.

The resident can require the provider to draw this reduced DAP amount from their paid RAD.

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

A low means resident may need to pay a contribution towards their accommodation costs. They can pay this as a daily amount, a lump sum or a combination of the two.

Daily accommodation contribution (DAC)

Services Australia will advise you of the maximum daily accommodation contribution (DAC) that applies to each new resident. However, the maximum DAC advised by Services Australia may be higher than the amount you can ask the resident to pay.

The DAC amount payable for a day cannot exceed

  • the amount advised by Services Australia based on the resident’s means tested amount
  • the accommodation supplement applicable to your service for the day (see section 52G-6 of the Aged Care Act 1997)

The accommodation supplement applicable to your service can change over time based on your supported resident ratio. You may need to adjust a resident’s DAC if the ratio of low means or supported residents in your service changes.

It is your responsibility to ensure that the resident is not charged more than they should be.

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 amount payable.

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 amount payable × 365) / MPIR.

You must refund the balance of the RAC when the resident permanently leaves your care.

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 amount payable − [(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 4.07% (as at 20 March 2022) when the resident enters your service, the reduced DAC works out to be $13.77: 

Reduced DAC
= $16.00 – [($20,000 × 4.07%) / 365]
= $13.77 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 different rate of accommodation supplement.

For residents who pay their accommodation costs by DAC, Services Australia will let you know if the maximum 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.

Full requirements

For full details, see the Aged Care Act 1997:

  • rules about accommodation payments and accommodation contributions – see Division 52G
  • rules about daily payments — see Division 52H
  • rules about refundable deposits – see Division 52J

Also see the Fees and Payments Principles 2014 (No. 2):

  • rules for charging accommodation payments and contributions — see Part 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

View contact

Last updated: 
10 May 2022

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