Understanding Daily Accommodation Payments

Accommodation Interest Rate is increasing.

When it comes to paying for aged care accommodation, understanding the complexities can be overwhelming. There are multiple payment options that provide flexibility when arranging aged care accommodation, including lump sum payments, daily accommodation payments, or a combination of both. In this article, we will focus on the daily accommodation payment (DAP), a “rent-like payment,” and its relationship with the Maximum Permissible Interest Rate (MPIR).

Understanding the MPIR

The MPIR plays a significant role in determining the “rent” cost associated with residential care, as it is the interest rate used to convert the lump sum payment amount into the daily payment amount.

From 1 October 2023 to 31 December 2023, the rate is increasing to 8.15% p.a. (currently 7.90%) for clients entering permanent aged care or moving rooms, making that rent-like payment, DAP, more expensive.

For those already in care, the rate is fixed and is unaffected by the change unless you decide to move rooms. If you are assessed as a Low-Means resident, the rules are quite different, which means for new residents the higher interest rates won’t affect your daily rent-like payment, called a Daily Accommodation Contribution (DAC), but it can make the equivalent lump sum option relatively cheaper.

Key Considerations

It is crucial for families and individuals planning for aged care to be aware of these changes and factor them into their financial considerations. The impact of MPIR on daily accommodation payments can be substantial, and understanding this relationship is essential for making informed decisions.

While some people may choose to liquidate assets to pay a refundable accommodation deposit (RAD) to avoid or help to reduce the amount payable by DAP, the choice should not be based on interest rates alone. You also need to consider your objectives, liquidity, taxation, estate planning, and the impact on age pension entitlements, as well as means-tested care fees. This is where we can help with a full analysis and advice on your options so you can make better and more informed decisions.

We are here to help

With a specialist division of financial advisers who are accredited in aged care advice, we have a team that can help you and those you care about make sense of their care options. Whether you’re just starting to explore your options or working your way through the aged care system, we are here to help.

If you have any questions or need guidance on your aged care financing journey, please don’t hesitate to learn more about our accredited financial advisers for aged care here. Your confidence and peace of mind is our top priority.

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.