Indexation of approved RADs
Residential aged care providers can apply indexation to their approved RAD amount (or equivalent daily amount) annually from each approval anniversary date up to four years. After four years they must apply for a new approval to charge higher RADs
What is indexation?
Applying indexation to an approved RAD (or equivalent daily amount) means adjusting it in line with inflation.
Section 29 of the Fees and Payments Principles 2014 (No 2) sets out how and when you may index an approved RAD.
The legislation requires you to use the All Groups Consumer Price Index (CPI) as the measure of inflation.
Who can apply indexation
Residential aged care providers can apply annual indexation to approved RAD prices above the maximum amount.
You do not need approval from IHACPA to do this.
When you can apply indexation
You can apply indexation annually from the anniversary date of your approval. After four years you must apply to IHACPA for a new approval to charge RADs higher than the maximum amount.
For example, if the date of your approval letter is 21 April 2024, you can apply indexation at any time within the anniversary year from the following dates:
- 21 April 2025
- 21 April 2026
- 21 April 2027
If you decide to index, the indexed amount substitutes your approved price. If you continue to apply indexation in subsequent years you should use the previous year’s substituted price (the indexed amount) to calculate it.
You can only apply indexation for the current year. If you do not apply indexation for one or more years you cannot catch up by applying indexation retrospectively.
After four years, you need to re-apply for a new approval.
When you can charge the indexed amount
Before you can enter into new accommodation agreements for the indexed amount, you must publish the amount.
You can only charge the indexed amount to residents who enter care on or after the day that you applied indexation.
How to apply indexation
- Go to All Groups CPI on the Australian Bureau of Statistics (ABS) website
- Click on ‘Selected Tables – Capital Cities’
- Use the index numbers in the last column of the table (weighted average of 8 capital cities)
- Use this formula: (most recent index number / previous index number) x approved RAD
The most recent index number is the index number for the most recent completed quarter before the latest anniversary date.
The previous index number is the index number for the most recent completed quarter before the previous anniversary date.
Example
IHACPA approves your application for a RAD of $800,000 on 15 February 2023. You index your approved amount on 15 February 2024.
The most recent index number is the index number for the December 2023 quarter which is 136.1.
The previous index number is the index number for the December 2022 quarter which is 130.8.
You use the formula to calculate the indexed amount:
(136.1/130.8) x $800,000 = $832,416 (rounded to the nearest whole dollar)
From 15 February 2024 you can advertise a RAD of $832,416.
You can charge this new maximum amount to any new resident who enters your care on or after 15 February 2024.
When index numbers are available
If your approval date falls early in a new quarter, you may have to wait a while for the ABS to release the index number for the most recent quarter.
The quarters end in:
- March
- June
- September
- December
The ABS releases index numbers for each quarter on the last Wednesday of the following month (depending on public holidays).
Indexation calculator
You can use the indexation calculator to work out the indexed RAD amount for your current approval year.
The calculator uses index data from the Australian Bureau of Statistics (ABS) website. You will need to enter the RAD approval date and your current RAD amount. This is the approved amount shown in your approval letter or the current indexed amount (if you have applied indexation from earlier approval anniversaries).
You can use this calculator to work out the indexed RAD amount for your current approval year.