aged care placement | the better way
Posted: 14th August 2019
MPIR RAD DAP Interest Rate Reducing October 2019
The interest rate used to convert a Refundable Accommodation Deposit (RAD) lump sum payment to the equivalent Daily Accommodation Payment (DAP) is called the Maximum Permissible Interest Rate (MPIR).
The MPIR rate will reduce by a further 0.56% from the 1st October to 4.98 %.
The dramatic fall is caused by the low interest rate environment and the recent Reserve Bank rate cuts.
This should mean that more residents will opt to pay DAP and retain the value of the exisiting assets (generally a family home).
The implication for the aged care provider will now mean that if a facility is significantly refurbished and at 40% concessional ratio …. Their $57.14/day Daily Accommodation Contribution works out to be an equivalent RAC of $418,797 … meaning that a supported resident will be more valuable to a facility if their RAD price is below $418,797.
Given that the rate was at 5.96% in June of this year, this is a significant change to the rate in a very short space of time.
On an average RAD of $450,000 with a client choosing to pay via DAP only, their aged care fees (and subsequently a facility’s profitability) have dropped by $4,410/yr.
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