Aged Care “Deposits” Explained

Aged Care “Deposits” Explained: RADs, DAPs and What Families Need to Know

When a loved one moves into residential aged care, one of the biggest (and most confusing) costs is the accommodation payment — often referred to as an “aged care deposit”.

In practice, there are a few different ways to pay, and the best option depends on cash flow, assets, and your broader plans.

Step 1: Start with the room price

Before entry, you’ll agree on a room price with the aged care home. Providers must publish their prices and you can negotiate (but you generally can’t be charged more than the published price for that room). If a provider wants to charge above a government-set threshold, they may need approval from the Independent Health and Aged Care Pricing Authority.

Step 2: Your means assessment affects what you pay

Services Australia assesses income and assets to determine whether you’ll pay the full accommodation cost yourself or receive some government support. Those with support may pay an accommodation contribution instead of the full price.

The three common payment methods

Most residents will be offered one (or a mix) of the following options:

1) Refundable Accommodation Deposit (RAD) A RAD is a lump sum paid upfront (think of it like a large bond). It is refundable when the resident leaves care, less any agreed deductions (for example, unpaid fees). The RAD is also treated as an asset in the means assessment.

2) Daily Accommodation Payment (DAP) A DAP is a non-refundable daily amount, like paying “rent” instead of a lump sum. It’s calculated using the government-set Maximum Permissible Interest Rate (MPIR), applied to the unpaid portion of the room price. In simple terms: DAP = (Unpaid RAD × MPIR) ÷ 365

3) A combination of RAD + DAP Many families choose to pay part of the RAD upfront (to reduce the daily cost) and pay a smaller DAP on the balance. This can help manage cash flow while keeping some funds available. An additional option is to use the part payment of the RAD to fund the payment of the DAP. This helps with cashflow but does have the effect of increasing the amount of the DAP as the RAD diminishes over time.

A note on recent reforms

Rules can differ depending on when someone enters care. Recent reforms introduced RAD retention for eligible residents (a small non-refundable amount deducted over time, capped) and changes affecting how accommodation costs are managed under newer arrangements. If you’re arranging entry now, it’s worth checking which “entry date” rules apply before signing.

How we can help

Aged care decisions are often made quickly, under stress. Before you commit to a RAD, DAP, or a mix of both, it’s wise to consider how the choice affects:

ongoing cash flow and affordability
sale/retention of the family home
Centrelink outcomes and estate planning

General information only: This article is not personal financial advice. We recommend seeking advice tailored to your circumstances before making decisions.

Before you choose a RAD, DAP or a combination, get advice tailored to your circumstances. Call us to book an aged care funding review, so you can feel confident about the decision and avoid surprises.

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