Residential Aged Care Accommodation: Understanding the Costs

When you move into a residential aged care home (nursing home), a price for your chosen room will be negotiated between you and the aged care home. A means assessment will determine if you are required to pay this price.

Key Points

There are a range of options available to you, depending on your financial situation
We recommend you seek financial advice to help you decide the payment option that suits you best
There are three (3) payment options available: RAD, DAP or a combination of the two
The remaining balance of a RAD payment is refunded when you leave residential care
DAP payments are calculated using the MPIR

Your Payment Options

1. A refundable lump sum

RAC (Refundable Accommodation Contribution): the government helps with the cost of your aged care accommodation

RAD (Refundable Accommodation Deposit): you pay the full amount for your aged care accommodation

2. Daily payments (rental style)

DAC (Daily Accommodation Contribution): the government helps with the cost of your aged care accommodation

DAP (Daily Accommodation Payment): you pay the full amount for your aged care accommodation

3. A combination of a refundable lump sum and daily payments

You can choose to pay for your aged care accommodation using a combination of the lump sum and daily payments. For example, the room you choose may have a RAD of $495,000, so you could pay $150,000 as a refundable lump sum and the rest as a reduced non-refundable daily payment.

Is the lump sum refunded?

Yes! If you make a payment for your aged care accommodation with a RAD, the remaining balance will be refunded when you leave the aged care home.

When do I need to decide how to pay?

You have 28 days from the date you move into your new home to decide how you would like to structure your payments. Until you decide, you will need to pay by DAP.

If you choose to pay by RAD (lump sum), you have six (6) months from your date of entry to pay. Again, in the meantime you will need to pay by DAP.

How are Daily Accommodation Payments (DAP) calculated?

Daily Accommodation Payments are calculated by applying the MPIR (maximum permissible interest rate) to your room price and dividing the amount by 365.

If you agree to a room price of $400,000, your DAP will be worked out as follows:

DAP = (room price × MPIR) / 365
= ($400,000 × 4.07%) / 365
DAP = $44.60

(The current MPIR is 4.07% and is correct as at 17/5/22)

DAC (Daily Accommodation Contribution) & RAC (Residential Accommodation Contribution)

These payments only apply if you are eligible to receive government assistance with your aged care accommodation costs. Services Australia will write to your chosen home to advise them of the payments you will need to make.

What is the MPIR (maximum permissible interest rate)?

The MPIR is an interest rate set by the government and is used to calculate daily accommodation payments (DAP) based on the agreed room price.

The MPIR is updated twice a year.

The MPIR that applies to you is set on the date you move into aged care. Increases or decreases to the MPIR that are made after you have entered care will not change the rate you pay.

MPIR from 1 January 2022 – 31 March 2022: 4.04%
MPIR from 1 April 2022 – 30 June 2022: 4.07%

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