Accommodation Payments

What Are Accommodation Payments?

When an older Australian moves into permanent Commonwealth regulated Residential Aged Care — such as a nursing home — they may be asked to pay an Accommodation Payment. This payment covers the cost of your room, including your share of the building and maintenance costs, not your day-to-day care and living expenses.

These payments are separate from the Basic Daily Fee and any Means Tested Care Fee you may pay for your personal and clinical care.

Why Are Accommodation Payments Charged?

Residential aged care facilities must provide safe, comfortable, and modern accommodation for older Australians. The Australian Government subsidises part of the cost of aged care services, but residents with sufficient means are expected to contribute to the cost of their accommodation.

By contributing an Accommodation Payment, residents help ensure aged care providers can build, renovate, and maintain facilities — offering better living environments for everyone.

Who Pays Accommodation Payments?

Whether you pay an Accommodation Payment — and how much — depends on your income and assets. This is determined through the Residential Aged Care Combined Assets and Income Assessment you complete (using the SA457 and SA485 forms) when you move into permanent residential care.

• Low Means Residents: If you have low income and assets below certain thresholds, the Australian Government may pay your accommodation costs in full or in part on your behalf — you may not need to pay an Accommodation Payment.
• Higher Means Residents: If you have sufficient income and assets, you will pay your own accommodation costs as a Refundable Accommodation Deposit (RAD), Daily Accommodation Payment (DAP), or a combination.

The maximum price for each room must be published and approved by the Aged Care Pricing Commissioner if it is above the threshold. Providers cannot charge you more than this published price.

How Are Accommodation Payments Structured?

You can choose to pay for your accommodation in three ways:

• Refundable Accommodation Deposit (RAD): A lump sum payment that is fully refundable when you leave the facility.
• Daily Accommodation Payment (DAP): A rental-style daily fee calculated based on the RAD amount you haven’t paid as a lump sum — using the Maximum Permissible Interest Rate (MPIR).
• A Combination: Many people pay part RAD and part DAP, offering more flexibility for their financial situation.

What Is a Refundable Accommodation Deposit (RAD)?

The Refundable Accommodation Deposit is a lump sum paid upfront to cover your accommodation costs. It is fully refundable when you leave residential care or pass away, minus any amounts you’ve agreed to have deducted for other fees or charges.

Key features:

• The RAD is government guaranteed. Your provider must refund it within 14 days after you leave care or pass away (or 14 days after they receive probate if required).
• It is not means-tested income for Centrelink or DVA pension calculations.
• It is exempt from the Age Pension assets test for the first 28 days after you pay it — after that, it counts as an asset but is exempt from deeming rules.

What Is a Daily Accommodation Payment (DAP)?

If you choose not to pay some or all of the RAD as a lump sum, you will pay a Daily Accommodation Payment instead. The DAP is like paying rent for your room. The DAP amount is calculated using the unpaid RAD balance and the Maximum Permissible Interest Rate (MPIR).

The DAP is not refundable — it is a regular payment to your provider for the cost of your accommodation.

How Is the DAP Calculated?

The formula for calculating the DAP is:

DAP = (Unpaid RAD balance) x (MPIR) / 365

For example, if the RAD for your room is $500,000 and you choose not to pay any lump sum:

• Unpaid RAD = $500,000
• MPIR = 8% (example only — check current MPIR)
• DAP = ($500,000 x 8%) / 365 = $109.59 per day

This means you would pay $109.59 per day for your accommodation.

What Is the Maximum Permissible Interest Rate (MPIR)?

The MPIR is set by the government and used to calculate the DAP. It reflects the cost to the aged care provider of not having the lump sum amount available to invest in maintaining or developing facilities.

The MPIR changes quarterly — it is the maximum rate that can be used to calculate your DAP. Your provider must use the MPIR that applies on the date you enter care — and that rate will remain fixed for your DAP calculation while you stay in that service.

Latest MPIR figures are available on My Aged Care - Understanding Aged Care Accommodation Costs..

Can You Combine RAD and DAP?

Yes! Many residents choose to pay part of their accommodation payment as a RAD and pay the rest as a DAP.

For example:

• RAD for your room: $500,000
• You pay $300,000 as a lump sum RAD
• Unpaid RAD balance: $200,000
• DAP = ($200,000 x MPIR) / 365

This combination approach allows you to keep access to some funds while reducing your daily payment amount.

Who Decides the Accommodation Price?

Each aged care facility sets prices for each room type, within government guidelines. The maximum price must be published on the provider’s website, in their written materials, and on the My Aged Care website. Providers cannot charge more than this maximum published price for that room.

For RADs above $ 750,000 (current threshold), the price must be approved by the Aged Care Pricing Commissioner.

Does the Government Help with Accommodation Payments?

If your income and assets are below certain thresholds, the government may subsidise your accommodation costs fully or partially.

This means you may not need to pay a RAD or DAP at all. Your provider will receive accommodation supplements from the government instead.

How Are Refunds Handled?

When you leave care or pass away, your provider must refund the RAD (minus any agreed deductions) within:

• 14 days after you leave care
• 14 days after receiving probate (if required for deceased estates)

Government rules strictly protect these deposits. If your provider goes out of business, your RAD is guaranteed by the government.

How Does the RAD Affect Your Age Pension?

The RAD is counted as an asset after the first 28 days but is not deemed for income purposes. This means it can impact your Age Pension eligibility, so it’s wise to get independent financial advice before deciding how much to pay as a lump sum.

What If You Can’t Afford a RAD?

If you don’t have enough assets to pay a lump sum, you can pay the full amount as a DAP instead. If you can’t afford either, you may be eligible for government help through the means test.

Practical Examples

Example 1: Paying the full RAD

Robert sells his home and pays a full RAD of $450,000 for his room. He does not pay any DAP because he has paid the entire amount upfront. This lump sum is fully refunded to his estate when he passes away.

Example 2: Paying a full DAP

Margaret wants to keep her home and does not pay any lump sum. Her RAD for her room is $500,000. Using an MPIR of 8%: DAP = ($500,000 x 8%) / 365 = $109.59 per day. She pays this daily amount from her pension or savings.

Example 3: Combination

Norma decides to pay $250,000 as a RAD and the rest as a DAP. Her unpaid RAD balance is $250,000. Using an MPIR of 8%: DAP = ($250,000 x 8%) / 365 = $54.79 per day.

Tips for Choosing Your Accommodation Payment

• Ask your provider for a full breakdown of the RAD, DAP and combination options.
• Check the current MPIR and see how it will affect your DAP.
• Talk to an accredited aged care financial adviser about how your choice could affect your pension or tax.
• Always get the details in writing in your Resident Agreement.
• Keep in mind how your decision fits into your overall financial and estate planning.

Your Rights

You have the right to:

• Know the maximum price for your room upfront
• Choose how you pay: RAD, DAP or a combination
• Receive clear statements and receipts
• Have your RAD fully refunded, guaranteed by the government

Where to Get More Help

Accommodation Payments can be complicated — don’t make decisions alone:

• Visit My Aged Care for official information and fee estimators.
• Speak to a qualified aged care financial adviser for personal advice.
• Check the current MPIR rates with Services Australia or your provider.
• Ask your provider to explain all payment options in plain language.

Remember, the best choice depends on your personal circumstances — there is no one-size-fits-all answer.