The answer is simple.
Become the operator of an aged care facility.
8.15% per annum is the current Maximum Prescribed Interest Rate (MPIR) payable by aged care residents who are paying a Daily Accommodation Payment (DAP).
Who pays the DAP?
When a resident enters residential aged care, the Department of Human Services (Centrelink) will, by reference to their income and assets, determine whether the resident is a concessional resident and entitled to government support or needs to pay for their aged care.
Most residents who own a property will be assessed as having to pay a Refundable Accommodation Deposit (RAD). This is a lump sum payment which the facility owner charges the resident for their bed in the facility. By its nature the lump sum is refundable upon the resident leaving the facility – usually upon their death. The lump sum repayment is guaranteed by the Commonwealth. While the resident is living in the facility the facility operator may invest the funds and retain the return on their investment for its benefit.
Many people who enter aged care do not have the full amount required for the RAD or may require some time to realise the assets required to be disposed of to fund the RAD. In this event they will be charged the DAP.
The facility operator is entitled to retain the DAP in lieu of the interest they could have earned on the RAD.
The MPIR charged on the DAP on entry is the DAP that applies throughout the resident’s stay in the facility. 
How is the DAP calculated?
Whatever is owed on the RAD is multiplied by the MPIR and then divided by 365 to arrive at the DAP.
By way of example: Assume a RAD of $500,000 has not been paid.
The resident will have to pay $500,000 X 8.15% ÷365 = $111.64 per day.
Why is it as much as 8.15% per annum?
The MPIR is calculated in accordance with section 6 of the Fees and Payments Principles 2014 (No.2) (Aged Care Act).
This in essence provides the regulator has determine the General Interest Charge Rate under section 8AAD of the Taxation Administration Act – the monthly average yield of 90 day bank bills – and add 7%. Then 3% is deducted from this to arrive at the MPIR.
This is a very blunt approach to determining the appropriate rate.
Comment
Having regard to the fact that the MPIR has more than doubled since 1 October 2021 – when it was 4.01% – we are concerned that the formula used is overly generous to facility operators and penalises residents who do not have access to the full amount required to fund the RAD.
The approach to determining the MPIR should be reconsidered in the new Aged Care Act due to be introduced next year. However this has not attracted much debate or publicity to date and it may well escape the attention it deserves.
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Frequently asked questions
What is the Maximum Permissible Interest Rate (MPIR) in aged care?
The MPIR is the government-set interest rate used to convert a lump sum accommodation payment (a RAD) into an equivalent daily payment (a DAP), and vice versa. It changes periodically and directly affects how much a daily payment costs. Because it drives the numbers, it is central to deciding how to fund residential aged care.
What is a Daily Accommodation Payment (DAP)?
A DAP is the daily rent-style payment for an aged care room, calculated on the room price and the current MPIR, for residents who do not pay the full lump sum (RAD). You can pay a RAD, a DAP, or a combination of both. The right mix depends on your assets, cash flow and personal circumstances.
Should I pay a lump sum (RAD) or a daily payment (DAP)?
There is no single right answer. Paying the lump sum preserves cash flow but ties up capital; paying daily keeps assets liquid but costs interest at the MPIR. The best choice depends on your income, assets, the family home and your wider financial plan, which is why many families get independent advice first.
How is a resident’s aged care contribution worked out?
Services Australia assesses income and assets to decide whether someone is a concessional resident entitled to support or needs to contribute. The assessment shapes both the accommodation payment and any means-tested care fee. When you are placing a parent, getting this right early avoids costly surprises later.
Can you help me decide how to fund aged care?
Yes. Funding decisions bring together accommodation payments, means testing, the family home and cash flow, and small choices can have large consequences. A Perth aged care consultant can explain the options in plain language and help you choose a funding path that fits your situation.
