Moving into residential aged care can be a big change, and one of the first things families often worry about is the cost of accommodation.
Seeing a large lump sum attached to a room can feel overwhelming. This is where a Refundable Accommodation Deposit (RAD) comes in.
A RAD is a lump sum paid towards your accommodation. Depending on your circumstances, you may instead choose to pay a Daily Accommodation Payment (DAP) or use a combination of a RAD and DAP. You can find more information about aged care accommodation costs and payment options through My Aged Care
What is a RAD?
A Refundable Accommodation Deposit is an upfront payment towards the agreed price of your room in residential aged care.
You don’t necessarily have to pay the entire amount as a lump sum. You can choose to pay the accommodation cost as a RAD, a daily payment, or a combination of both.
For example, if your agreed room price is $500,000, you could pay the full $500,000 as a RAD, pay a daily accommodation payment instead, or pay part of the $500,000 as a RAD and pay a reduced daily amount on the balance. The Australian Government provides further information about accommodation payments and contributions.
1. A RAD is generally refundable
One of the biggest misconceptions about a RAD is that the money simply disappears once you enter care.
A RAD is refundable when you permanently leave the aged care home. The balance is generally returned to you or your estate, although permitted deductions and applicable RAD retention amounts may reduce the amount refunded. You can read more about aged care accommodation refunds on the official My Aged Care website.
There have also been changes to RAD retention rules since 1 November 2025. For eligible residents under the new arrangements, providers can deduct retention at a rate of 2% per year, calculated daily, for up to five years. The Australian Government’s RAD and RAC retention guidance explains who these rules apply to.
2. You don’t have to pay the whole amount upfront
If paying the full RAD would put too much pressure on your finances, you may be able to use a combination of a RAD and DAP.
For example, rather than paying a $500,000 RAD, you could pay $200,000 as a RAD and make daily accommodation payments based on the remaining $300,000.
This can allow you to retain some money outside the aged care facility while reducing your ongoing daily accommodation costs.
3. A DAP is a non-refundable daily payment
If you choose not to pay a RAD, you may instead pay a Daily Accommodation Payment (DAP).
The DAP is calculated using the agreed room price and the applicable Maximum Permissible Interest Rate (MPIR).
For example, using an 8.43% MPIR, a $500,000 room price would result in a DAP of approximately $115.48 per day before any applicable changes.
Unlike a RAD, daily accommodation payments are not refunded when you leave care.
The Australian Government provides information about how accommodation payments are calculated, including RADs, DAPs and combination payment options.
4. Your RAD is only one part of the financial picture
Choosing between a RAD, DAP or combination payment isn’t simply about deciding whether you can afford the lump sum.
Your decision can also involve your Age Pension, other aged care fees, income from investments, cashflow, assets and estate planning.
A refundable lump sum is treated as an asset for aged care means assessment purposes, so the decision can have wider financial consequences.My Aged Care provides information about aged care home costs and means assessments.
This is why it is important to look at the complete financial picture rather than focusing on the RAD amount alone.
Is a RAD right for you?
There isn’t one answer that works for everyone.
For some people, paying a RAD may reduce their ongoing accommodation costs and make sense financially. For others, keeping more capital available and paying a DAP may be more suitable.
You can also combine the two options to create a balance between keeping access to your capital and reducing your daily payments.
The right choice will depend on your individual circumstances, financial position and longer-term goals.
Get advice before making a decision
Aged care funding can involve several moving parts, and the decision you make can affect your cashflow, assets, Age Pension and estate.
Before committing to a RAD or DAP, it is worth considering the options carefully and getting professional advice based on your circumstances.
This article is intended for general information only and does not constitute financial product or taxation advice. It has been prepared without considering your personal objectives, financial situation or needs. Before making any financial decision, you should seek professional advice appropriate to your individual circumstances.