How to earn 8.15% on your investment (guaranteed)

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. aged care facility operator investment

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.


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.

Avatar photo

All About Aged Care

An aged care consulting and advisory service in Perth that specialises in aged care placement.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top
Call Now Button