Q&A – Aged Care facilities and means tested amount

Find out what your peers are asking – based on real-life questions submitted to TechConnect.

By Janet Manzanero-Caruana, Senior Technical Services Manager

Can an Aged Care facility charge less than the means tested amount?

Q: My client is entering a newly refurbished aged care facility which advertises a room with RAD at $380,000 (equal to $41.85 daily accommodation payment (DAP) based on the maximum permitted interest rate of 4.02% pa at 1 January 2021. My client’s means tested amount (MTA) at entry is estimated at $55 per day per day and she is classified as a low means resident. Accordingly, her daily accommodation contribution (DAC) is $55 per day. The aged care facility offers to charge the client $41.85 DAC rather than $55 DAC. Is this possible?

A: The facility may charge the client an amount that is lower than the DAC calculated by Centrelink/DVA for the quarter.

A resident is ‘low means’ if their MTA is less than the maximum accommodation supplement ($58.19 per day per day at 1 Jan 2021) at the time of entry to residential aged care. The advertised RAD, DAP or combined RAD/DAP don’t apply to low means residents. Rather, they receive accommodation subsidies from the government which are paid directly to the aged care facility. A low means resident’s contribution to their daily accommodation cost (DAC) is the lowest of:

  • The maximum accommodation supplement applicable to the service or
  • Their MTA for the period. In this client’s case it is $55 pd.

The maximum accommodation supplement for a new or significantly refurbished facility at 20 September 2020 is:

  • $58.19 per day where the facility has more than 40% low means, supported, concessional and assisted residents
  • $43.64 per day where the facility has 40% or fewer low means, supported, concessional and assisted residents.

Under the above rules, where DAC is paid, the government pays the aged care facility an accommodation supplement that is the difference of the maximum accommodation supplement and the DAC.  For example, if the facility is eligible for:

  • $58.19 per day maximum accommodation supplement, the client’s DAC is $55. The government pays the facility an accommodation supplement of $3.19, the difference between $58.19 and $55 DAC.
  • $43.64 per day maximum accommodation supplement, the client pays $43.64 DAC. The government does the facility an accommodation supplement as the DAC fully pays for the accommodation cost.

An aged care facility may agree to receive a DAC ($41.85 per day) lower than the amount calculated by Centrelink ($55 per day), however it bears the cost of the shortfall. Any accommodation supplement paid by the government to the facility continues to be based on the DAC calculated by Centrelink (not the lower DAC the facility agrees to charge).

The aged care facility cannot charge the resident an amount exceeding the DAC calculated by Centrelink. As Centrelink recalculates the DAC every quarter based on the resident’s income and assets, a client’s DAC is likely to reduce over time as their assets and income are depleted.

The agreement to pay a DAC lower than that calculated by Centrelink would benefit a low means resident, however the resident or their representative should have the agreed terms in writing to avoid any misunderstanding. It should be clear that the resident will make accommodation contributions that are the lower of the advertised RAD ($380,000 or its DAP equivalent) or the DAC calculated quarterly by Centrelink.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.