Until recently, anyone entering aged care would need to pay a bond for their accommodation, just as tenants do when renting a home.
Today a Refundable Accommodation Deposit (RAD) is payable instead, at a price set by the facility.
What is a Refundable Accommodation Deposit (RAD)?
As the name suggests, a Refundable Accommodation Deposit is a fully refundable amount of money you pay when entering a residential aged care room.
The amount is set by the facility (but you may be able to negotiate a lower price) and you get the full amount of the RAD you’ve paid back when you leave the facility.
How much is a RAD?
In Australia the average RAD payable for a residential aged care facility room is $470k, but this amount varies greatly, depending on location, and the features and services available at different facilities.
RADs can be as high as $1m in in-demand areas such as inner-city Sydney and Melbourne.
Each aged care homes sets their own RAD and they must publish the rates clear and up front.
Aged Care Decisions’ FREE service can assist you to find and compare residential aged care rooms (and RADs) by taking your personal preferences, location, care needs and budget, and matching them with available vacancies.
After just a 20-minute conversation our team can email an Options Report to you, listing the residential aged care facility rooms that best suit your specific needs.
You can connect with us here to get started.
How do I know if I will have to pay a RAD when entering aged care?
If you have assets over $61,500, you will need to pay an accommodation fee or accommodation payment of some sort.
If your assets are valued at over $206,039.20, you can choose to make a Refundable Accommodation Deposit, pay a Daily Accommodation Fee, or pay for your room with a combination of both these options.
What is a Daily Accommodation Payment (DAP)?
If you don’t want to put down a large sum of money as a RAD, you can fund your residential aged care accommodation with Daily Accommodation Payments.
The Daily Accommodation Payment covers the cost of your room that you have not paid up-front as a RAD. The DAP is paid periodically (usually fortnightly or monthly) and is not refundable.
The DAP amount is calculated by applying a Maximum Permissible Interest Rate % to the portion of the room price not paid by RAD and dividing that amount by 365 days to wind up with a daily payment amount.
The MPIR is set by the government and generally follows the direction of the Reserve Bank of Australia’s interest rate movements.
Read more: All about the Maximum Permissible Interest Rate (MPIR) (agedcaredecisions.com.au)
What if I have no assets and cannot pay a RAD or DAP?
Don’t worry if you have no assets at all because there is a safety net in place to look after you.
The Australian Government fully funds residential aged care placement for people who cannot afford it.
Read more: What happens if you can’t afford aged care? (agedcaredecisions.com.au)
Why should I pay the RAD?
While there are a couple of ways you can pay your accommodation costs, there are advantages to paying the RAD.
- When you pay the RAD, you are paying for your accommodation as a lump sum payment. If you don’t do that, you will need to pay a Daily Accommodation Payment, which is tied to fluctuating interest rates set by the government.
- The RAD is refundable. Daily Accommodation Payments are not refundable. By paying the deposit up front, you will save money in the long term.
- Your RAD payment is Government Guaranteed. If the facility you choose is government accredited and something goes wrong, you won’t lose your money.
- Your RAD payment is considered exempt when working out your aged pension entitlements.
Will I have to sell the family home to pay the RAD?
Your home is considered part of your overall assets unless an immediate family member or carer was living with you at the time you moved into residential aged care, and they still live there. If your home is empty, or will be when you move out, your total assets will probably be more than $206,039.20 and you will be required to make a full accommodation payment.
Selling your home is a big decision. We strongly recommend speaking to a financial advisor to ensure you understand the implication of selling up – which can include the sale affecting your assets and income test, your eligibility for the aged pension and your means-tested care fees.
Read more: Do I need to sell my home to pay for aged care? (agedcaredecisions.com.au)
The transition to aged care can be an emotional time for you and your family. Communication and planning is essential before you make any big decisions about your RAD or your family home.
Can any family member live in the family home, so I do not have to pay a RAD?
Unfortunately, not usually. If your spouse, partner or dependent child plans to remain living in the home, it may not be counted as an asset when calculating the fees and charges you may pay for residential aged care.
If they are a family member who has been living with you in the family home and caring for you for two years or more and has also been receiving an income support supplement for your care, then a RAD may not be required. This can start to get a little complicated to it is best to call Services Australia (formerly Centrelink) to discuss your individual situation.
What happens to the RAD once it is paid?
The RAD is paid to the accommodation facility and is held by the administrators until it is returned to you when you move out. RAD funds can only be used for specific purposes such as making improvements to the facility and the quality of life it offers, for investments or for refunds.
How long do I have to make my decision about paying the RAD?
You have 30 days from the day you enter aged care accommodation to decide how you want to make your payment. If you choose to pay a lump sum (the RAD) you then have 6 months to pay the money to your provider. Until the RAD is paid in full, you will pay a set daily fee with interest.
What happens to the RAD if I leave my aged care facility?
There are some set rules about the refund of the RAD.
If you decide to return home, the RAD must be refunded within 14 days.
If your care needs change and you need to move to different accommodation, the RAD will be refunded within 14 days, and you will then pay the amount to the new facility.
In the event you pass away, the RAD is refunded to your estate within 14 days of receipt of a certified copy of Grant of Probate.
What does all this mean for you?
If your assets are over $206,039.20 you will have to make a full accommodation payment.
You can choose to pay a RAD in full up front or you can choose to pay a Daily Accommodation Payment, which fluctuates with interest rates and includes in interest component.
You can also choose to pay part of the RAD and pay the difference as a Daily Accommodation Payment.
Because your family home is likely to be considered as part of your assets, you will need to make some decisions about whether to keep it or sell it.
We recommend talking with your family and your financial advisor to work out the best options for you.
Get FREE assistance to find and compare vacancies
Aged Care Decisions assists tens of thousands of Australian families to find and compare residential aged care vacancies. Our obligation-free service is quick, easy, completely free of charge, and can have you comparing current room vacancies in your area within about 20 minutes.
Here’s how our service works:
Click here to make an enquiry or call us on 1300 775 870 and our friendly team can get you started.
