How do refundable lump sum payments work in aged care homes, and what happens if I leave or my provider can't refund my payment?

18 Dec

We understand that planning for aged care can feel daunting, especially when it comes to financial decisions. Knowing how refundable lump sum payments work can bring clarity and peace of mind. Here's a guide to help you understand what happens if you leave an aged care home, and the protections in place to ensure you or your family receive the refund you’re entitled to.

Types of Refundable Lump Sums

If you decide to pay for your aged care accommodation with a lump sum, you can rest assured that this amount must be refunded when you leave. The types of payments that are refundable include:

Refundable Accommodation Deposit (RAD) – When you pay the full cost of your accommodation yourself.

Refundable Accommodation Contribution (RAC) – When the government helps with your accommodation cost based on your means assessment.

Accommodation Bond – For those who entered care before 1 July 2014 and paid a lump sum.

How Much Will Be Refunded?

The balance of your lump sum will be returned to you or your estate. This amount is your original payment minus any agreed deductions, such as daily accommodation payments or other aged care fees. Knowing this can provide comfort that the funds are protected and will come back to you or your loved ones.

Refund Timelines

If You Leave the Aged Care Home Permanently:

Your lump sum will be refunded within 14 days of your departure.

If You Move to Another Aged Care Home:

The refund timing depends on the notice you give:

More than 14 days’ notice: Refund on the day you leave.

Up to 14 days’ notice: Refund within 14 days after giving notice.

No notice: Refund within 14 days after the day you leave.

After a Resident Passes Away

Losing a loved one is difficult, and financial matters should not add to that burden. If a resident passes away, the aged care home must refund the lump sum balance (less any agreed deductions) within 14 days of receiving:

Proof of probate (official confirmation of a Will), or

Letters of administration (for estates without a Will).

In some cases, providers may refund the lump sum without these documents if they are confident of the beneficiary’s identity. This ensures the resident’s wishes are respected promptly.

Interest on Your Lump Sum Refund

During the 14-Day Refund Period: You will receive interest at the Base Interest Rate (BIR).

If Refund is Delayed: If it takes longer than 14 days, interest will be paid at the higher Maximum Permissible Interest Rate (MPIR).

This ensures you are fairly compensated for any delay.

For current rates, visit the Department of Health and Aged Care website.

What If the Aged Care Home Cannot Refund the Lump Sum?

If your aged care provider becomes bankrupt or insolvent, know that the Australian Government guarantees your refund. This includes any interest accrued since you left care. This safeguard, called the Accommodation Payment Guarantee Scheme, ensures your financial security is protected, even in challenging circumstances.

Moving to a New Aged Care Home

Before you move, take the time to agree on new fee arrangements with your new provider. If you entered care before 1 July 2014, you can keep your current fee arrangements or choose to switch to the new arrangements.

What to Do if You Have Concerns

If you’re worried about your refund, you’re not alone. Here are steps you can take:

Speak with the Manager at your aged care home.

If you’re still concerned, reach out to the Aged Care Quality and Safety Commission for support.