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Unfunded Beds and the Aged Care Act

By Julie McStay01 Oct 2009

Unfunded places are offered in a variety of models across the residential aged care industry in Australia. The 2006/2007 National Residential Aged Care Survey1 shows that (of the APs who participated) 5 per cent of care recipients in low care and 3 per cent of care recipients in high care were unfunded.

An unfunded place is a place offered to a care recipient of a residential aged care facility on the basis that the care recipient will privately fund the care provided to them and in respect of which the approved provider (AP) seeks no subsidy from the Commonwealth Department of Health and Ageing (Department). The term ‘unfunded place’ is not defined in the Aged Care Act 1997 (Cth) (Act) but in the User Rights Principles. S23.83C provides that a care recipient’s place is an unfunded place if a residential care subsidy otherwise payable under Chapter 3 of the Act is not payable because the AP has exceeded the AP’s allocation of places for residential care subsidy.

Unfunded places are offered in a variety of circumstances, such as:

  • To a person who has low or no care needs and an ACAT assessment (ACAT) and who agrees to be transferred to a funded place when their care needs increase.
  • To a person who has low or no care needs and no ACAT and who agrees to be transferred to a funded place when their care needs increase.
  • To a person who has low or no care needs and no ACAT and who agrees to pay for their care as an unfunded resident for the duration of their stay at the service.
  • To a person entering care direct from hospital.
  • To facilitate accepting a couple into a facility where one spouse requires low or no care and the other has higher care needs. The spouse with low or no care needs is offered the unfunded place.
  • To provide emergency or other short term care (eg while awaiting an ACAT).
  • Where an AP has expanded existing facilities or built new facilities in anticipation of future growth but has not obtained allocated places for the new beds.

Unfunded beds and regulation

S56-1 of the Act sets out the responsibilities of an AP with respect to the provision of residential care to a care recipient. The responsibilities set out in s56 apply to all unfunded residents who have an ACAT. These provisions do not apply to those residents who do not have an ACAT, although they apply as soon the resident obtains one.

Daily care fees

The AP can negotiate a higher daily care fee with an unfunded resident if the resident has a current ACAT and the provisions of s23.83C of the User Rights Principles are met but the AP must otherwise comply with the provisions set out in s56 of the Act. There are no restrictions which apply to care fees if the AP offers an unfunded place to a resident who does not have an ACAT. However the provisions of s56 apply immediately an ACAT is obtained and once the resident moves to a funded place, the maximum daily care fees apply. APs should take care to ensure that their resident agreements used for unfunded residents comply with the prescriptive disclosure requirements of s23.83C.

Accommodation bonds and bond retentions

An AP must comply with all of the provisions of the Act with respect to the regulation of accommodation bonds, accommodation charges and accommodation bond and charge agreements in relation to any resident who has an ACAT that is asked to pay either an accommodation bond or an accommodation charge. The prudential requirements of the Act must also be met in respect of any bond received from an unfunded resident with an ACAT.

An AP may rollover a bond paid by an unfunded resident with an ACAT when their care needs increase and may keep taking retentions for a maximum period of 5 years.

If the resident does not have an ACAT they can be asked to pay a bond and the provisions of the Act with respect to the regulation of the bond will not apply. However, those provisions apply immediately the resident obtains an ACAT. While the Act does not regulate the payment of a bond by an unfunded resident who does not have an ACAT, that bond is still guaranteed by the government if the AP becomes insolvent because the bond paid falls within the definition of an ‘unregulated lump sum’ under the Aged Care (Bond Security) Act 2006 (Cth).


The Aged Care Standards and Accreditation Agency will only provide accreditation for the funded places allocated to an AP. There is no requirement for an AP to obtain accreditation for unfunded places. An unfunded resident could be offered a room in a facility which has not yet been accredited but if the resident becomes a funded resident the facility must be accredited in order for the AP to claim a subsidy.


S57 of the Act requires that a residential care service be certified in order for the AP to charge a bond. An AP can not ask a resident who has an ACAT to pay a bond for an unfunded place in a facility which is not certified.

Conversion of a resident from unfunded to funded and vice versa.

The Act does not specifically contemplate moving residents between funded and unfunded places and it is unclear whether it is lawful to do so. However anecdotal industry evidence indicates that this practice does occur.

Relevantly, s42-7 of the Act provides:

  1. For the purposes of a person’s eligibility for residential care subsidy, residential care provided to a particular care recipient on a particular day is excluded if:
    • the number of care recipients provided with residential care by the AP during that day exceeds the number of places included in the AP’s allocation of places for care residential care subsidy; and
    • the Secretary decides, in accordance with subsection (2), that the residential care provided to that particular care recipient on that day is to be excluded.
  2. In deciding under paragraph 1(b) which residential care is to be excluded, the Secretary must:
  • make the number of exclusions necessary to ensure that the number of places for which residential care subsidy will be payable does not exceed the number of places included in the AP’s allocation of places for residential care subsidy; and
  • exclude the residential care in the reverse order in which the care recipients entered the residential care service for the provision of residential care.’

If s42-7 is strictly applied the Department should only pay subsidies in accordance with the order in which a resident enters the facility. This section will become relevant if an AP who has no vacant allocated places wants to offer a potential new resident who has high care needs a funded place by taking a resident who has an allocated place and lower care needs ‘off line’. An AP who is contemplating adopting processes to facilitate conversion of residents from funded to unfunded and vice versa should take legal advice before doing so as there are risks associated with this practice which should be considered.

Other issues

  • Allocated places – relinquishment and revocation

There is no requirement under the Act for an AP to relinquish allocated places if they elect to use some of those places as unfunded places provided no conditions have been attached to the allocations which would prevent that use. However the Secretary may revoke the allocation of a place if the AP has not provided ‘residential care’ in that place for a continuous period of 12 months. APs should take steps to reduce the risk of revocation of an allocated placed by ensuring an allocated place is not used as an unfunded place by a resident for more than 12 months.

  • Moving residents within the facility

An unfunded resident with an ACAT can be moved within the facility however the restrictions contained in the User Rights Principles in relation to moving a resident within a residential care service will apply.

  • Application of retirement villages legislation

APs should consider the retirement village legislation which applies in the jurisdiction in which they operate to ensure that if they do offer unfunded places they do not accidentally fall within the operation of that legislation.

  • Rent assistance

Prudent APs will not make statements about eligibility for rent assistance as an inducement to prospective residents to take an unfunded place because each resident’s entitlement to rent assistance will be dependent on their personal circumstances and will in any event cease as soon as an ACAT assessment is obtained.


Many different models and fee structures are used throughout the industry for unfunded places. An AP who is considering offering unfunded places should take legal advice in relation to the model and fee structure proposed and the extent to which they must offer unfunded residents the same protections that would be offered to funded residents.