The Maximum Permissible Interest Rate (MPIR) is an Australian Government rate used by aged care homes to calculate daily accommodation fees. From 1 July 2026, it will increase to 8.43%. The government reviews the rate quarterly on 1 January, 1 April, 1 July and 1 October, and it can rise or fall depending on economic conditions. The change applies only to new residents entering care; existing residents with locked-in arrangements are not affected.
Key Takeaways
You can pay for your room with a lump sum or daily payments.
The Refundable Accommodation Deposit (RAD) is a refundable lump sum.
The Daily Accommodation Payment (DAP) is non-refundable and uses the MPIR.
You can combine a partial RAD and a DAP to cover room costs.
The MPIR is updated quarterly and can increase or decrease.
- The MPIR is currently 8.43% (1 July 2026)
An increase in the MPIR can increase the cost of residential aged care for many older Australians. Let’s look at the MPIR and how it is used to calculate aged care costs.
What is the Maximum Permissible Interest Rate (MPIR)?
The MPIR is an interest rate set by the Australian Government that aged care homes use to calculate daily room fees. The government reviews this rate every quarter on 1 January, 1 April, 1 July and 1 October, and depending on the economy, it can go up or down.
As of 1 July 2026, the MPIR is 8.43%. This is the maximum rate a facility can use to set a daily accommodation payment for residents.
- a Refundable Accommodation Deposit (RAD),
- an ongoing Daily Accommodation Payment (DAP), or
- a combination of the two.
The MPIR is a rate used by residential aged care facilities to calculate a DAP that is equivalent to the payment of a RAD for any given room.
You can read the official government guidelines for calculating the MPIR
What is a Refundable Accommodation Payment (RAD)?
A RAD is a lump sum you pay upfront to cover the cost of your room in an aged care home. RADs are set by the facility and can be negotiated before you move in. A recent Mirus Australia Survey found the average RAD is about $600,000 but prices vary greatly depending on location and facility.
When entering residential aged care, the RAD can be paid:
Up-front in full – if you choose to pay the whole RAD up-front, you do not need to pay the DAP.
In part – if you choose to pay a portion of the RAD for your room, you will pay a DAP that is calculated based on the portion of the RAD you have not paid up-front.
Not at all – if you choose not to pay a RAD, you will pay a DAP that is calculated based on the total price you’ve agreed on for your room.
You can choose to ‘draw down’ on the RAD you have paid to cover some of your other aged care costs – including your Daily Accommodation Payments, if applicable.
For anyone entering care after 1 November 2025, the RAD is mostly refundable. Under the new rules, facilities deduct a 2% non-refundable retention amount from your RAD each year for up to five years. The remaining balance must be refunded within 14 days of you permanently leaving the home.
For more information see our Residential Aged Care Hub.
We recommend that you seek independent financial advice to determine which RAD option best meets your needs.
What is a Daily Accommodation Payment (DAP)?
A DAP is a non-refundable fee that covers the unpaid portion of your room price. You pay this amount periodically, usually fortnightly or monthly.
The facility calculates your DAP by applying the MPIR % to the portion of the room price not paid by RAD and dividing that amount by 365 days.
Here are two examples:
DAP with no RAD paid
Roger moves into an aged care home with a room price of $600,000 and chooses not to pay a RAD. Using the current 8.43% MPIR, his DAP is calculated as follows:
His starting Daily Accommodation Payment (DAP) is based on the current MPIR of 8.43%:
DAP = (room price × MPIR) / 365
= ($600,000 × 8.43%) / 365
= $50,580 / 365
= $138.58
Roger pays a DAP of $138.58 per day.
DAP with a partial RAD paid
Dennis has the same $600,000 room price but pays a $200,000 RAD upfront. This leaves a $400,000 unpaid balance. His daily payment is calculated on the remaining balance:
DAP = (unpaid balance × MPIR) / 365
= ($400,000 × 8.43%) / 365
= $33,720/ 365
= $92.38
Dennis pays a DAP of $92.38 per day.
The MPIR applied to your DAP is locked in on the date you agree to your room price. However, your daily amount will be indexed twice a year in March and September, in line with the Consumer Price Index.
How Will an MPIR Increase Affect Your Aged Care Fees?
If you are already living in an aged care residence, an increase in MPIR will not affect you, as your DAP will have been locked into the MPIR that was current when you moved in.
For anyone moving into an aged care home on or after 1 July 2026, the higher MPIR means you will pay a RAD and/or DAP at the new, higher rate.
How Aged Care Decisions can help you
Navigating room costs and payment options can feel complex, especially when rates are changing. Our Aged Care Specialists take the time to explain your options clearly and match you with aged care homes that suit your care needs, location and budget.
We provide a tailored Options Report so you can compare facilities side by side. Our service is 100% free and fully independent. Connect with Aged Care Decisions today and let us do the running around for you.
For more information about aged care fees and charges see the following articles:
https://agedcaredecisions.com.au/faq-aged-care-fees/
https://agedcaredecisions.com.au/how-much-does-a-nursing-home-cost-in-australia/
