will help you navigate
the aged care placement maze
and make the move to aged care
a more positive experience.
We will always place
your loved one first.
9th Nov 2013
When a person enters a Commonwealth subsidised residential
care facility, there are a number of fees and charges that they may have
Accommodation Bonds - Rules and Regulations
These include a basic daily care fee (also known as the standard resident
contribution), an accommodation bond or accommodation charge, and a potential
income tested fee.
For a list of the current fees, please view current
fees and charges.
The accommodation bond raises most questions by the families of new residents
- probably because the accommodation bond is not a set amount - the bond
can be negotiated with the aged care provider.
Many items will vary the value of the accommodation bond that the aged care
home may request of the new resident.
Examples of these items include: the location of the aged care home, the
financial status of the resident, the availability of vacant rooms, and
the pressing need for the aged care home to repay existing bank loans. The
focus of this page is on the accommodation bond, including what the accommodation
bond is, what the bond is used for, when a bond is payable, the conditions
when the bond is refunded, and the standard terms and conditions that you
may find in an accommodation bond agreement.
What is an Accommodation Bond?
All the rules and regulations concerning an accommodation
bond are defined in the Aged Care Act 1997 (ACA-97), and the accompanying
User Rights Principles 1997 (URP-97).
Schedule 1 of the ACA-97 defines the accommodation bond as "an amount
of money that does not accrue daily and is paid or payable to an approved
provider by the person for the person's entry to a residential care service
or flexible care service through which care is, or is to be, provided by
the approved provider."
In summary the accommodation bond is an interest free, unsecured loan (the
majority of the bond is returned when the resident leaves the facility)
and can range in value from $50,000 to $750,000+ , depending upon a range
of conditions including the financial status of the new resident.
The aged care provider is entitled to the income derived (interest) from
the accommodation bond. The income derived from the accommodation bond must
be used for specific purposes, essentially concerned with maintaining existing
or building new infrastructure (buildings and equipment).
Income derived from the accommodation bond pool is not to be applied to
the provision of care services. ACA-97 s57.2 (1) (n).
When do you need to pay an Accommodation Bond?
Currently (from 20th September 2013) an accommodation bond can be requested
from a resident entering into a low care (hostel) care and those receiving
high level care in a facility with an "extra service" status. ACA-97 s57.2
When is an Accommodation Bond not required to be paid?
An accommodation bond is not payable under some circumstances:
- Where the admission is for respite care. ACA-97 s57.2(1)(b)
- Where a determination has been made that by paying an accommodation
bond, that this would cause the resident to experience financial hardship.
- Where the person is "fully supported" that is that the person receives
an income support payment (pension) and has not been a home owner for
more two or more years (or, if so, the home is occupied by a protected
person such as a spouse) and the value of the persons assets is less
than 2.5 times the basic aged pension at the time in question. ACA-97
- Where the Department of Health and Ageing has imposed sanctions on
the aged care provider prohibiting the charging of an accommodation
bond. ACA-97 s57.2(1)(o).
How much Accommodation Bond can the Aged Home ask for?
This is the question that perplexes most of our family clients. The ACA-97
provides only one limiting criteria on the level of the accommodation bond
to be paid, and that is that a resident must be left with a minimum permissible
asset value. This value will always be 2.5 times the basic aged pension
at the time that the resident enters the residential care service.
The current minimum value that a resident must be left with as at 20th September
2013 is $44,000.
It should be understood that the resident can be left with more than the
minimum of assets and this is where the discussion with the aged care provider
begins to get interesting.
Assessing the Resident's level of Assets
Centrelink or the Department of Veterans' Affairs (DVA) can assist a person
to complete assets testing for entry into permanent residential aged care
on behalf of the Department of Health and Ageing. Centrelink has the responsibility
of all assessments except those for people who receive a means tested pension
Assets assessments may be undertaken before a person enters residential
An assets assessment is not compulsory unless a person wants to find out
if they are eligible for government assistance with their accommodation
costs for permanent residential aged care.
Prospective residents may instead choose to negotiate the payment of an
accommodation bond with an aged care home directly rather than having an
If the resident does not provide the aged care home with sufficient information
about their assets, then there is no limit set upon the accommodation bond
that can be negotiated.
However, usual competitive pressures stops most aged care providers from
requesting exhorbitant aged care accommodation bonds. Usually.
If a resident's previous family home is rented out to pay some or all of
the bond by periodic payments, the value of the family home and the rental
income is exempt from the pension assets and income tests for as long as
the resident is liable to pay a periodic payment.
Many of our family clients, especially those with valuable real estate,
choose not to sell the family home, but to simply negotiate the accommodation
bond based around the rental income. The family benefits from the capital
appreciation of the family home over a period of time.
We would suggest that new residents and their families seek professional
advice on the average accommodation bonds being paid in the local area,
and professional advice related to the financial implications of the payment
of the bond.
What is the Accommodation Bond Retention Amount?
The aged care provider is allowed to retain a fixed amount from the accommodation
bond. As at the 20th September 2013, the accommodation bond retention amount
is $331 per month, or part of a month, for a maximum of 5 years (60 months).
The retention amount is regularly reviewed in relation to changes in the
Example 1 - if a resident stays within the residential care facility for
a period of 2 years (24 months), then $7,944 will be retained from the bond
by the aged care provider. Ie 24 x $331.
Example 2 - if a resident stays within the residential care facility for
a period of 10 years (120 months), then a maximum of 60 months of retention
amount can be deducted ie. $19,860 will be retained from the bond by the
aged care provider. Ie 60 x $331.
If a resident moves to a new aged care home, then the 5-year retention period
does not begin again.
Is the Accommodation Bond Guaranteed?
The ACA-97 specifies that the Commonwealth Government will refund the residents
accommodation bond if the aged care provider becomes bankrupt or insolvent.
Under these exceptional circumstances, a levy may be imposed on an aged
care provider by the Commonwealth Government in relation to refund and administrative
costs associated with the repayment of the accommodation bond balance to
a resident. Source: Aged Care (Bond Security Levy) Act 2006.
What Methods of Payment can be used?
The accommodation bond can be paid in three ways:
The option chosen by the resident will depend upon the individual's and
family situation and preferences.
- Lump sum
- Periodic Payment (ie. interest only)
- Lump sum and periodic payment.
It is important to seek quality professional advice at this stage in order
to maximise the benefit to the resident.
If you agree to pay the bond as a lump sum, you cannot be required by
the aged care provider to pay that lump sum during the first 6 months following
the residents entry into the home. Although you can choose to do so.
What if the residents care needs change from low care to high care?
If care needs change from low-level care to high-level care, and the resident
remains in the same aged care home (typically an ageing in place facility)
and the resident has already paid an accommodation bond, then the bond arrangements
that were in place when entering low care will continue.
If the resident moves to another home to receive high-level care, they can,
with the agreement of the new home, transfer the balance of the accommodation
bond to the new home.
Otherwise, the resident can receive a refund of the accommodation bond and
may be asked to pay an accommodation charge based on their level of assets.
When is the Accommodation Bond refunded?
If a resident dies, the accommodation bond refund must be paid to the estate
within 14 days after the date that the aged care provider is shown a grant
of probate or letters of administration (ACA-97, s57.21(3)(aa))
If a resident moves to another aged care home, the date for the accommodation
bond refund will depend upon when notice is given:
- Equal to or more than 14 days notice: refund is due and payable the
day that the resident leaves the aged care home.
- Less than 14 days notice: refund is payable within 14 days after the
date that the notice was received.
- No Notice: refund is payable with 14 days after leaving the home
What does the Accommodation Bond Agreement cover?
If a resident is required to pay an accommodation bond, the aged care provider
must prepare and enter into an accommodation bond agreement with the resident
within 21 days of the resident entering the aged care home as a permanent
The "accommodation bond agreement" will contain specific terms and conditions
relating to the following:
- The amount of the accommodation bond
- The interest rate applicable to periodic payments
- The entry date (to permanent residential care)
- The method of payment
- The retention amounts and when these will be deducted
- The resident's entitlements to specific services
- Additional fees (ie administrative fees) and conditions when they
- Refund conditions
Accommodation Bonds in Mainstream High Care?
Currently (as from 20th September 2013) there is no accommodation bond applicable
if a person enters a mainstream (general service) high care home.
However, this situation is expected to change if the current
Productivity Commission Submissions recommend that bonds are applicable
in all level of Commonwealth subsidised residential care.
In 2008, Aged care providers refused to take up over a third of the new
bed licences issued by the Commonwealth because they cannot afford the cost
building and staffing new facilities.
This is not surprising since 40% of high care providers now operate at a
loss. The Hogan Report into Aged Care Funding arrangements found that a
fair, efficient and sustainable solution to the problems facing high care
nursing homes was to extend the existing accommodation bond system, and
allow 'high care' nursing homes to charge residents a bond to offset the
cost of their care, as well as fund the construction of additional capacity.
Bonds can currently be levied by aged care providers for places in "low-care"
facilities. This has led to spectacular growth in that segment of the aged
care market. Demand for high care beds will increase over the next 20 years
as the proportion of the population aged over 85 expands.
The Hogan Report found that the uncertainty the inability to levy bonds
creates discourages investment and restricted long-term planning and development
decisions. The high care sector is already heavily dependent on taxpayer
The Commonwealth government will not be able to provide the estimated $27
billion capital required over the next decade alone to expand and modernise
high care facilities.
relating to our
bond negotiation work
We have just gone
through the complicated process of settling my father into a low care room
at a nursing home.
Most people don't realise that the bond payable to a nursing home is totally
After being told that most families borrow money to cover the bond I searched
the internet and found a business that negotiates the bond.
Aged Care Connect negotiates the bond on behalf of the family and in our
case the bond required was almost halved to what was asked for originally,
saving Dad $121,000 .
My understanding is they will also search and find a suitable place for
your family member
I highly recommend the service.
Ron Carroll is understanding and efficient, without being aggressive towards
the facility he is dealing with.
Just thought you may want the details to pass on to anyone who is going
through the process of finding an aged care facility
Ms K. Peltzer (19th Sept 13)