Blog #05 Fact #04 What is a Refundable Accommodation Contribution (RAC)?

Blog #05 FACT #04                                                           What is a RAC?

· Short name term for a ‘Refundable Accommodation Contribution”

· What is it? – An amount of money that someone can pay as a lump sum to an aged care facility to reduce their Daily Accommodation Payment (DAC- described in previous blog)  

· How does someone find out they will have to pay a Refundable Accommodation Contribution (RAC)? – They do not. It is an option available to a care resident who may wish to reduce their daily accommodation payment

· How is a Refundable Accommodation Contribution (RAC) calculated?

· The formula is: RAC = DAC x 365/MPIR

· What does MPIR mean?

· Maximum Permissible Interest Rate

· What is the rate? 4.01% (from 1/10/21-31/12/21)

· Using the example calculated in the previous blog, a resident who entered an aged care facility in January 2021, now wishes to investigate the option of possibly reducing their DAC of $10.83 a day to zero

Therefore, using the above formula:

                RAC = $10.83 x 365/4.01% = $98,577.30

Result- To reduce the Daily Accommodation Payment of $10.83 a day to zero, the resident would need to pay a lump sum of $98,577.30

· Could the resident pay a lesser lump sum? Yes

· If the resident did pay a lesser lump sum, a new calculation would have to be completed to work out how much the Daily Accommodation Payment would be reduced by

· Does a resident have to pay a Refundable Accommodation Payment? No, it is optional

· If a resident paid a lump sum as a Refundable Accommodation Contribution, when is it returned? – Normally when a person leaves the facility or passes away

· When a person passes away – how long till the Refundable Accommodation Contribution is paid to their estate? – Normally after probate and this may take 12 months or longer in some cases

·Does a person receive the whole amount amount back or are there exit fees? – Normally the full amount is paid, however, if the resident had authorised other deductions – this would be subtracted from the lump sum to be returned

· Does a person receive interest on any Refundable Accommodation Contribution paid to an aged care facility? No

· Is it possible to receive capital gains on a Refundable Accommodation Contribution paid to an aged care facility? No

· If the aged care facility went into liquidation- are there any guarantees that a person will receive their Refundable Accommodation Contribution back? Yes – currently (as of January 2021) there is a government guarantee to have funds returned

Is it possible not to have pay a Refundable Accommodation Contribution at all ?