The Refundable Accommodation Deposit (RAD) explained
The Refundable Accommodation Deposit (RAD) forms part of the nursing home costs (there are four different costs involved – the RAD, the basic daily fee, the means tested care fee and the extra or additional service fee).
- The Refundable Accommodation Deposit (RAD) is an upfront deposit that covers ‘rent’ of your room for as long as you need it. The deposit amount is always set before you commence your permanent residency, and once set, it won’t change unless you leave.
- The amount of the Refundable Accommodation Deposit is set by the residential care facility with a general maximum of $550,000, although it can be more, if Government approval is obtained.
- The good news is that the RAD will be fully refunded when you leave the age care facility. The return of this amount is guaranteed by the Government.
The residential care facility must advertise the amount of the Refundable Accommodation Deposit on the My Aged Care Government website.
Read more about all of the Nursing Home Costs.
How can you pay the Refundable Accommodation Deposit be paid
The RAD needs to be agreed before entering permanent care. There are options on how to figure out how to pay it, depending on your individual financial circumstances. It’s very important to understand you options for paying for the RAD upfront. Once it’s agreed, you won’t be able to change.
Option 1 – pay it as a lump sum
This involves paying the full amount of the RAD in cash – upfront when you first enter the nursing home.
However, most facilities understand that you may not be able to raise that money on the day that someone moves into care, so read on for other options. However, it is important to note that the amount must always be agreed before you enter, regardless of how you decide to pay for it. If you are not able to pay the RAD in cash before you move in, then you will be charged interest on the amount that is outstanding until it is paid.
Option 2 – pay it as a daily charge (also known as a DAP)
An alternative to an upfront payment is a daily interest charge. The Government sets an interest rate that is used to work out the charge on the unpaid amount of the RAD, and this is calculated on a daily basis.
The maximum interest rate that can be applied in calculating this figure is set by the government.
The rate is reviewed by the Government each quarter, but once you have locked in a rate, and signed your Aged Care contract– it is set for the period that you remain in care.
Option 3 – pay as a combination part lump sum and part daily charge
Where you choose not to, or cannot afford to, pay the full amount of the Refundable Accommodation Deposit you may choose to pay part of it as a lump sum in cash, and cover the balance of the amount outstanding by paying the daily interest charge as set out in option 2 above.
Option 4 – Using the RAD to cover your daily fee
If you do not have enough ongoing income to cover your daily charge, you can use the Refundable Accommodation Deposit to help cover any short fall.
The amount that is payable for the daily charge is taken from the Refundable Accommodation Deposit each month, which effectively then reduces the amount held in the Refundable Accommodation Deposit.
The daily charge will then increase for the next month, as there will be a higher amount of the RAD that is now unpaid.
This also means that the total amount of the RAD is reduced so that when you leave the aged care in Melbourne facility only the remaining balance of the RAD is repaid.
Finding the money to pay the RAD
While the above covers the mechanics of the Refundable Accommodation Deposit and how you can pay it, the next logical question is where to get the money to cover it!
If you don’t have savings to cover the amount, many people will either look to find the cheapest nursing home, or they look to sell the family home, or both.
You have options
The best and most cost-effective way to pay for the RAD will depend on your own unique circumstances. We have written another article entitled ‘Do I need to sell the family home’ which answers the important question of whether to sell your home.
This is a complex financial problem to figure out and there are many rules and regulations that need to be considered. Working with a financial planner who specialises in this area means you can see the different approaches that you could take and the long-term impact on your finances – all personally modelled based on your unique circumstances.
What’s more they can work with you to help you achieve your personal financial goals such as keeping the family home or ensuring you are able to leave something for the children.
A financial aged care specialist will give you the peace of mind of:
- Understanding all of your options – based on the rules and regulations
- Take away the complexity of trying to work out what will apply to you and what doesn’t
- Provide you with detailed financial modelling so you can see both the short term and long term impact of the different strategies
- Give you the pro’s and cons of each option so you really know which will be the best option for you and your family in the long run.
Why not get in touch now to talk through your situation with an Aged Care Specialist Financial Adviser.
Free consultation just by putting in a call.
0419 319 386
Authorised Representatives of Synchron AFSL 243313