When you’re looking at how you will need to pay for residential aged care accommodation, it’s easy to be thrown off by all the technical terms. Accommodation costs and payments are one of the expense subsidised by the Australian Government, so there are a few different categories and ways to make payments. Accommodation costs are separate from day-to-day living costs, care fees and extras.
‘Aged care accommodation’ covers the cost of your room and board. The total price is determined by the quality and features of the aged care accommodation you are applying for. Depending on your financial situation, your accommodation can be free (fully subsidised), partially subsidised, or full-price.
After completing an income assessment test through The Department of Human Services, you will fall into one of the following categories:
- No accommodation cost – your income and assets are below a certain amount, so all your accommodation costs are paid for by the Australian Government.
- Accommodation contribution – you will need to pay for part of your accommodation, and the Australian Government will pay the rest.
- Accommodation payment – your income and assets are above a certain amount and you will need to pay for the full cost of your accommodation.
When you are within a certain income range, you will need to pay for part of your accommodation cost, while the Australian Government covers the rest. You have two main payment options. You can choose either, or opt for a combination of both.
Refundable Accommodation Contribution (RAC)
With some of your costs already covered by the government, a RAC is a payment method that allows you to pay the other half as a lump sum. This amount is like a bond, and is fully refundable when you leave the aged care home.
Daily Accommodation Contribution (DAC)
The DAC works the same way as the RAC except that payments are made over time, just like with a rental property. While the DAC is also government subsidised and requires less money up-front, unlike the RAC, it is not refundable.
When you exceed a certain income range, you’ll be required to cover the entire cost of your accommodation. There are two main accommodation payment options, and you can opt to choose one or a combination of both.
Refundable Accommodation Deposit (RAD)
The RAD is a lump-sum payment for the entire cost of accommodation in aged care. If you choose this option, the entire accommodation balance is due within six-months. The RAD is entirely refundable. While it is more money upfront, the RAD is cheaper overall than the DAP, since RAD is not subject to any interest rates.
Daily Accommodation Payment (DAP)
Choosing the DAP allows you to make payments over time, rather than a lump sum up front. The DAP payment is not refundable and is subject to the maximum permissible interest rate (MPIR). The amount of your DAP is equal to your refundable deposit multiplied by the maximum permissible interest rate as set by the government.
This makes the DAP more expensive than the RAD, but at the same time leaves your finances freer for investments and other endeavours.
Figuring out the Cost of Aged Care Accommodation
It can be hard to wrap your head around the cost of your aged care accommodation. The amount is dependent on your choice of aged care, and the payment method is reliant on your financial situation.
If you’re having trouble figuring things out, there are some great resources on the Australian Government’s My Aged Care website. You can utilise the fee estimator tool to estimate what the cost of your aged care accommodation may be. The income and assets checklist will help you fill in the estimator if you’re unsure about what you earn.