Do I need to pay the aged care accommodation cost in full?

In residential aged care you generally have the choice to pay the accommodation cost as a lump sum payment, a daily payment or a combination of the two.

Where the choice is to pay the accommodation amount as a daily payment an interest rate, referred to as the maximum permissible interest rate (MPIR), is used to convert it from a lump sum payment amount to a daily one.

For the period from 1 October 2022 to 31 December 2022 that interest rate is 6.31% p.a. From 1 January 2023 that interest rate is expected to rise to 7.06% p.a. which means the daily payment will be more expensive.

If you are already in care, any interest rate changes don’t generally affect your daily payment amount as the interest rate is set at the date you entered care.  But if you are looking to move rooms, change facilities that change of interest rate can affect the daily accommodation payment you are required to pay.

It’s important the choice of how to pay the accommodation cost is not based the interest rate alone. You will also need to consider any personal objectives, liquidity, taxation, estate planning and impact on age pension entitlements as well as means-tested care fees.

Interestingly, if you are assessed by the Services Australia as low-means resident when you enter permanent care the rules are quite different, and the higher interest rate doesn’t impact your daily accommodation contribution but it can make the lump sum option relatively cheaper.

Seeking specialist aged care advice can provide you will a detailed and personalised analysis on your options so you can make better and more informed decisions.

How to find some help

To find out how we help families make informed choices at each stage of their care journey and achieve their preferred outcome at a very emotional and stressful time please contact us to find out more.

 

Download our guide to aged care

Our exclusive booklet illustrates examples where specialist financial advice may assist in significantly improving financial outcomes. Complete the form below and your copy will be emailed to you.



    More insights

    Caring through retirement

    Caring through retirement

    As we move through the various phases of retirement, our lifestyle and care needs will change. At some point, we or our loved ones will need varying degrees of assistance, and it is important to understand the emotional, financial, and practical challenges of caring...

    read more
    Fees in aged care – how much and why?

    Fees in aged care – how much and why?

    When entering residential aged care, you are likely to come across a multitude of acronyms. This can be overwhelming, and to help make the change easier, having a clear understanding of what the fees in aged care are and how they apply, can certainly help. What are...

    read more
    Adjustments when your spouse moves to care

    Adjustments when your spouse moves to care

    Life is filled with changes. But with preparation and good advice, you may be able to manage the changes more effectively and minimise the stress. In this article, we highlight five aspects that couples may need to think about and tips to help you to adjust when a...

    read more