What is the Refundable Accommodation Deposit and how is it paid?

The Refundable Accommodation Deposit (RAD) forms part of the nursing home (aged care) costs. There are four different parts 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 an average of about $500,000 up to even $1 million+ in inner city areas.
  • 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?

The payment of the RAD needs to organised 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 your 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. 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 goes through the important question of whether to sell the family 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:

  1. Understanding all of your options – based on the rules and regulations
  2. Take away the complexity of trying to work out what will apply to you and what doesn’t
  3. Provide you with detailed financial modelling. This ensures so you can see both the short term and long term impact of the different strategies
  4. 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.

Get in touch now to talk through your situation with an Aged Care Specialist Financial Adviser.

Call our office on 1300 001 225 or email  claudia@agedcsv.com.au

Comments 8

  1. Hi. Info is about paying rad but what are the conventions for getting it back into the persons estate one the client dies. Thanks for any insight u may be able to give me.

    1. When a resident dies the RAD is then required to be refunded to the estate 14 days from the receipt of the Grant of Representation.The Grant of Representation can take 4-6 weeks if the estate is straight forward. Thank you for your message.

        1. Hi Malia. The 14 days is from when the provider receives the probate. This is directly from the government website: If a resident passes away, the aged care home must refund their lump sum balance less any allowable amounts that have been deducted over the care period. This must be done within 14 days of the provider receiving either:

          proof of probate of the resident’s Will (the official proving of a Will) or
          letters of administration (authority to administer the estate of someone who has died without making a Will).

  2. If a family member is prepared to pay the RAD will it be refunded directly to the payee or does the RAD always have to be refunded to the deceased estate?

    1. Hi Elizabeth, generally speaking, aged care homes do not want to be involved in family matters, so the RAD is refunded to the care recipient (if they move homes) or estate. It is imperative if you are paying a RAD for a parent to obtain finanncial advice to ensure all options are understood. If you do still wish to pay the deposit, we would strongly recommend having this financial agreement written up legally as it is a significant amount of money.

  3. Hi ,
    Is the BIR ( Base Interest Rate) applicable from the day after the resident dies?
    Or only applied from the date that Grant of Representation is sighted by the Aged Care Facility?

    Thanks.

    1. Hi Christina, thanks for your comment. The Base Interest Rate (BIR) in the context of aged care applies from the day after the resident’s permanent departure. Until the lump sum balance is refunded, the Aged Care Facility must pay interest at the BIR, which is applicable from the day after the resident’s departure.

      The BIR is used when the resident stops receiving care, setting the interest rate for outstanding amounts owed by the facility. As of 1 October 2023, the Maximum Permissible Interest Rate (MPIR) is 8.15%, affecting daily accommodation payments for residents.

      I have attached a few other links for further reference:

      https://www.health.gov.au/our-work/residential-aged-care/managing-residential-aged-care-services/refunding-lump-sums-in-residential-aged-care

      https://agedcare.royalcommission.gov.au/system/files/2020-09/RHC.9000.0011.0001.pdf

      Thanks

Leave a Reply

Your email address will not be published. Required fields are marked *