Direct Debit and Beyond: Rethinking Payment Collection for Support at Home

Written by Pete Williams, CTO Tyro Health at Tyro Payments

As aged care providers prepare for the new Support at Home program, many are re-evaluating their approach to collecting care recipient contributions. With changing payment structures on the horizon, is your current collection method still the right fit?

Collecting care recipient contributions efficiently is critical to the financial health and operational performance of aged care providers. Yet too often, it’s a source of significant administrative friction and cash flow delays.

With the Support at Home program reshaping how contributions are structured—introducing variable rates and potentially increasing payment frequency—providers must reassess how payments are collected, managed, and reconciled.

For years, Direct Debit has been the industry standard, offering a seemingly automated way to collect regular fees. However, the hidden costs are becoming apparent: failed payments that require manual follow-up, account changes that disrupt collection schedules, and batches that take hours to reconcile. As contribution models evolve under the new program, these inefficiencies will only multiply.

This article explores the practical challenges of using Direct Debit in aged care and introduces modern alternatives that can transform your payment operations—such as Card on File (secure storage of payment card details) and PayTo (the next generation of digital direct debits). These solutions can reduce administrative overhead, speed up reconciliation, and improve the experience for both care recipients and your finance team.

How Direct Debit works in aged care

At its core, Direct Debit allows providers to ‘pull’ funds directly from a care recipient’s bank account via the Bulk Electronic Clearing System (BECS). This occurs only after receiving explicit authorisation—the Direct Debit Request (DDR)—from the care recipient or their financial delegate. This authorisation is the bedrock of the entire process.

Direct Debit has been widely adopted across the aged care sector due to its:

• Ubiquity: Many Australians are familiar with Direct Debit for recurring payments like utilities, insurance, and memberships

• Automation potential: Providers can process payments for multiple care recipients at once using batch files—reducing the need for manual entry

• Perceived lower cost: While Direct Debit fees are often lower per transaction compared to card payments, this overlooks the total cost of managing the process, including dishonours, reconciliations, and administrative time

However, it’s far from perfect.  

Direct Debit may work well for collecting standard periodic fees—but with variable amounts (e.g. based on service usage under Support at Home) things get complicated fast. These variable payments require more sophisticated communication with recipients, flexible payment systems, and strict adherence to DDR service agreement terms to maintain compliance and avoid disputes.

Setting up Direct Debits: more complex than it looks

Setting up Direct Debit isn’t plug-and-play. Establishing a compliant and effective Direct Debit system involves several critical steps:

Provider requirements:

• Getting authorised: To process Direct Debits, providers need a Direct Debit User ID (often called an APCA ID or BECS ID), which is issued by a bank or a specialist third-party payment provider. This isn’t automatic—it requires due diligence, formal agreements, and in some cases, financial guarantees or collateral 

• BECS compliance:  Internal processes must fully comply with the rules set out by the Bulk Electronic Clearing System (BECS). 

Care recipient authorisation (The DDR): 

• The crucial document: The DDR form is legally vital. It must be clear, compliant with BECS rules, and include essential details like full name, BSB, account number, and a valid authorisation signature 

• The service agreement: The DDR must be accompanied by a service agreement that outlines payment terms—payment frequency, fixed amounts (or precisely how variable amounts are calculated and advised before debiting), the process for cancellation, and provider contact information 

• Secure collection & storage: DDR forms—whether physical or digitally signed—must be collected securely and stored in a way that meets compliance standards. This often requires tight integration with care recipient onboarding workflows to ensure seamless data capture 

• Mandate management: managing DDR mandates is both an operational and technical challenge. Systems must support secure storage, amendment (e.g. account updates), and cancellation throughout the recipient’s lifecycle. 

Software integration

• The authorised BSB, account number, and unique DDR reference must be accurately linked within Aged Care Management Software to the care recipient’s billing profile to enable automated payment file generation. 

The Direct Debit processing cycle

Once set up, the typical processing flow involves: 

• Initiation: The Aged Care Software or finance system generates a payment file, usually in the ABA format, containing all scheduled debit transactions.  

• Submission: The ABA file is uploaded to a bank or payment gateway via their designated channel such as a business banking portal or SFTP connection. Strict cut-off times often apply, and files can only be processed business days.  

• Clearing: The file enters the BECS network. Transactions are sorted and routed to the various recipient banks. Crucially, this is a batch process, not real-time. Funds typically take 1-3 business days to clear after submission. 

• Settlement & reporting: Eventually, the provider receives confirmation reports detailing successful debits. Just as importantly, and often more time-consuming, separate reports list the failed debits (dishonours). Only then can the reconciliation process truly begin. 

Handling Direct Debit issues: Where the real pain lies 

While Direct Debits can run smoothly in the background, it’s the exceptions—dishonours, delays, and manual intervention—where administrative costs quickly escalate. 

Dishonours – the recurring headache: 

Common reasons: 

• Insufficient funds (most common) 
• Closed or invalid accounts 
• Cancelled payments by the recipient
• Invalid or cancelled DDR authorisation   

The process:  
Dishonour reports often arrive the business day after funds were expected to settle.  Sometimes funds appear settled, only to be reversed later when the dishonour notification comes through.  

Identifying the issue, matching it to the right care recipient, and triggering the right follow-up—retrying the payment, updating account details, contacting the care recipient or delegate—becomes a manual or semi-automated scramble.

The impact: 

Delayed receipt is obvious, but the significant administrative overhead chasing these failures is often underestimated. It also leads to potentially awkward conversations with care recipients or their financial delegate. 

Other operational headaches: 

• Delayed acknowledgements: The batch-based process means you often fly blind at first. You don’t get instant confirmation of success or failure, hindering real-time visibility of a care recipient account status. 

• Timing roulette: Submission cut-off times, weekends, public holidays, and inter-bank processing delays can all shift expected settlement dates, making precise cash flow management difficult. 

• DDR management burden: Keeping authorisations current, especially when care recipients change bank accounts, requires proactive communication and processes. An outdated or incorrect DDR guarantees a future failure. 

• Compliance complexity: Ensuring your processes strictly adhere to BECS rules – especially around pre-debit notifications for variable amounts, DDR content requirements, and handling cancellation requests promptly – is essential to avoid penalties or having your Direct Debit facility revoked. 

• Cybersecurity risks: As recent high-profile incidents targeting Superannuation disbursements and related payments have shown, systems holding sensitive Direct Debit details (BSB, Account Number) for a potentially vulnerable audience are attractive targets. Secure storage and processing are non-negotiable. 

Read on as we explore smarter, more future-ready alternatives to Direct Debit—like Card on File and PayTo—the key advantages of these solutions and how embracing them will make you better equipped to deliver high-quality care without the operational headaches.

To help providers navigate this transition, Tyro Health will seamlessly integrate with the Support at Home framework, enabling aged care providers to process Support at Home claims and manage participant contribution payments with ease. If you’re an aged care service provider or software developer interested in learning more about our integrated solution, please register your interest here.

Disclaimers 

Tyro Health provides this article for general information and educational purposes and does not take into account the financial situation or need of any reader. The information provided must not be relied upon as  legal, tax or financial advice.