One of the biggest decisions families face when moving into residential aged care is how to pay for accommodation. Most aged care providers offer two main payment options: RAD (Refundable Accommodation Deposit) and DAP (Daily Accommodation Payment). You can choose one—or a mix of bot
What is a RAD (Refundable Accommodation Deposit)?
A RAD is a lump sum payment made to the aged care provider for your accommodation.
- Think of it like a rental bond — but much larger.
- It’s fully refundable when you leave care or pass away, minus any agreed deductions (such as outstanding fees or a portion of extra services, if applicable).
- The government guarantees RAD refunds if the provider cannot pay.
Example:
If the aged care home charges $500,000 for the room and you pay this amount as a RAD, that entire amount is refunded later.
What is a DAP (Daily Accommodation Payment)?
A DAP is like interest paid on the RAD amount if you choose not to—or cannot—pay the lump sum upfront.
- You don’t need to pay a deposit.
- Instead, the provider charges a daily fee, based on the unpaid portion of the RAD.
- The interest rate is set by the government (called the MPIR).
Current MPIR (as of July 2025): 8.15%
Example:
- RAD = $500,000
- You pay no RAD upfront
- DAP = $500,000 × 8.15% ÷ 365 ≈ $111.64/day
So, instead of a lump sum, you pay approximately $3,349 per month in DAP.
Can I Pay Part RAD and Part DAP?
Yes. Most people choose a combination payment.
Example:
- Room price = $500,000
- You pay $300,000 as RAD
- Unpaid amount = $200,000
- DAP charged only on the $200,000:
- $200,000 × 8.15% ÷ 365 ≈ $44.66/day
This offers flexibility—especially if you have some savings or property equity, but don’t want to commit the full RAD amount.
According to the Australian Government’s Aged Care Financial Report 2023–24, 40.1% of new aged care residents paid a full RAD, 40.0% paid a full DAP, and 19.9% chose a combination of both payment methods.
Pros and Cons of RAD vs DAP
| Option | Pros | Cons |
|---|---|---|
| RAD | – Fully refundable – No daily payments – Less financial pressure long term | – Large upfront cost – May require selling assets |
| DAP | – No upfront payment needed – Keeps assets liquid | – Ongoing cost adds up – Not refundable |
| Combination | – Flexible option – Reduces DAP outlay – Retains partial capital | – Requires financial planning |
How to Choose Between RAD and DAP
Choosing the right option depends on your:
- Cashflow: Do you have funds or access to liquid assets?
- Estate planning goals: Do you want to leave money to family?
- Asset structure: Selling a home or investment might change your financial picture.
- Financial advice: Always consult an aged care financial adviser before committing.
Common Misconceptions
❌ “I have to sell the house to pay the RAD.”
✅ Not always. You can pay a DAP instead, or use a mix. The home may also be exempt from aged care calculations in some cases.
❌ “DAP is cheaper than RAD.”
✅ Not in the long run. DAPs don’t accumulate value and are not refundable. Over time, they may cost more than paying a RAD.
❌ “I must decide straight away.”
✅ No. You have 28 days after entering care to decide how to pay. Until then, you’ll be charged a DAP.
Frequently Asked Questions (FAQs)
Q2: Is RAD refundable?
Yes. The RAD is fully refundable when you leave care or pass away, minus any agreed deductions (e.g. unpaid fees).
Q3: Do I have to sell my house to pay a RAD?
Not necessarily. You may choose to pay a DAP instead, use savings, or arrange financing. The family home may also be exempt for a period.
Q4: What happens if I don’t choose between RAD and DAP?
You’ll automatically be charged the DAP until you make a decision. You have 28 days to choose your preferred method.
Q5: Can the DAP rate change?
Yes. The DAP is based on the government-set MPIR (currently 8.15%). This rate is reviewed quarterly.
Q6: s the RAD guaranteed?
Yes. The Australian Government guarantees RAD refunds, even if the provider becomes insolvent.
💭 Final Thoughts
Understanding RAD and DAP is crucial when entering aged care. Whether you choose a lump sum, a daily payment, or a combination of both, it’s important to weigh the financial impact and get professional guidance.
👉 Compare accommodation prices, aged care homes, and payment options today at Aged Care Made Easy — your trusted partner in simplifying aged care decisions.
Here are some more related articles:
What Does Residential Aged Care Really Cost in Australia?
7 Signs Your Loved One May Need Aged Care Support
How to Reduce My Aged Care Fees
Aged Care Entry Checklist: 10 Essential Steps Before Moving In
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