Refunding lump sums in residential aged care

Refundable payments

Accommodation lump sum balances you need to refund include:

• refundable accommodation deposits (RADs)
• refundable accommodation contributions (RACs)
• accommodation bonds.

Refund period

You must refund a resident’s lump sum balance to them within the legislated refund period to avoid paying a higher rate of interest.

If the resident permanently moves to another service, you must refund their lump sum balance:

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

You must also refund a lump sum balance within 14 days after:

• a resident permanently leaves residential care
• sighting probate or letters of administration after a resident dies
• your services ceases to be certified.

Refund periods are defined in:

• Section 4 of the Fees and Payment Principles 2014 (No. 2)
• Section 52P-1(4) of the Aged Care Act 1997.

Deductions

To deduct an amount from a RAD or RAC balance before refunding it, you must have agreed on the deduction in writing with the resident. You cannot deduct any amounts not recorded in the accommodation agreement.

There are different rules about what you can deduct from an accommodation bond paid by a resident who entered care before 1 July 2014. Read more about deducting fees from bonds.

You should deduct approved amounts before calculating interest on the lump sum balance.

Interest rates and timeframes

Until you refund the lump sum balance, you may 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
• maximum permissible interest rate (MPIR) – from the day after the end of the relevant refund period until the refund is paid.

For interest calculations see Section 69 of the Fees and Payments Principles 2014 (No. 2).

Check the current and previous BIR and MPIR interest rates.

Which rate of BIR and MPIR to use

The BIR and the MPIR are updated quarterly.

For the BIR, use the rate current on the first day of the refund period:

• if the resident died – the day after sighting 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.

For the MPIR, use the rate current on the day after the end of the refund period.

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.

Refunds while a resident is in care

You can refund accommodation lump sum amounts if requested by a resident who is still accessing care in your service. This is not a legal requirement. It is a business decision you can make on a case-by-case basis.

You and the resident must mutually agree to any changes to accommodation payment arrangements. You must record changes in the accommodation agreement or resident agreement.

Full requirements

For full details, see Division 52P of the Aged Care Act 1997.

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

• rules for refunding accommodation deposit balances and accommodation bond balances – see Part 7
• how to calculate the BIR – see Section 4
• how to calculate the MPIR – see Section 6.

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