Refunding the Refundable Accomodation Deposit (RAD): How It Works

When it comes to aged care in Australia, there are a lot of rules and regulations governing the administration and one of the questions we are often asked around refunding the refundable accomodation deposit and to whom. This is especially relevant when family members are offering to pay the RAD on a residents behalf. The RAD can be anywhere from 500K – $1 million+. This financial transaction is a significant part of the aged care system.

What is the RAD

The Refundable Accommodation Deposit (RAD) is a lump-sum payment made by a resident to the aged care facility. This lump sum is a substantial financial commitment, often involving a significant portion of the resident’s assets. Given its size, it’s essential to understand how and when this deposit is refunded.

Base Interest Rate (BIR) for Refunding The RAD

The Base Interest Rate (BIR) plays a fundamental role in the process of refunding the RAD. It is calculated from the day after the resident’s permanent departure from the aged care facility. (Whether they have passed away or transferred to a new facility.) Until the lump sum balance is refunded, the facility is obligated to pay interest at the BIR rate. This interest helps to compensate the resident or their estate for the funds held by the facility. The BIR serves as a crucial component in determining the interest rate for the outstanding amount owed by the facility. It ensures that the resident’s financial interests are protected during their stay at the facility and that they receive a fair return on their RAD investment.

Understanding the Refunding Process for the RAD

To understand how the refunding process works, it’s essential to follow a few key steps:

Determining the BIR: The BIR is calculated from the day after the resident’s permanent departure from the facility. This rate will serve as the foundation for interest payments.

Calculating the Interest: The facility calculates the interest owed to the resident based on the BIR. This interest is calculated daily until the RAD balance is refunded.

Refunding the RAD: Once the resident’s permanent departure is confirmed, the facility initiates the process of refunding the RAD, ensuring the resident or their estate is refunded.

“I paid my parents RAD, will the amount be refunded to me?”

Generally, aged care facilities do not want to get involved in family finance issues, so the refund is provided to the resident or their estate if they have passed away. When considering paying the RAD for a parent, we strongly suggest receiving financial advice and if you still wish to pay the RAD, then we recommend getting legal advice to ensure your money is protected when the time comes for a refund.

For more detailed and up-to-date information on this topic, you can refer to the following resources:

Australian Government – Refunding Lump Sums in Residential Aged Care

Royal Commission into Aged Care Quality and Safety – Refundable Accommodation Deposit – Fact Sheet

Understanding the RAD refunding process is important for residents and their families to navigate the tricky financial aspects of aged care and ensure their financial investments are handled correctly. We are here to help and can be contacted here to help you through the aged care journey. 

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