Understanding Refundable Accommodation Deposit (RAD)

What is Refundable Accommodation Deposit in Aged Care?

A Refundable Accommodation Deposit (RAD) is a lump sum payment made by residents moving into an aged care facility in Australia. This deposit is set by the facility and covers the cost of accommodation. The RAD is fully refundable when the resident leaves or passes away, minus any agreed-upon deductions.

Key Features of RAD:

• It is an alternative to ongoing daily accommodation fees.
• The amount is determined by the aged care provider but may be negotiable.
• It is government-guaranteed, meaning your money is protected if the facility is accredited.
• The payment is exempt from asset testing when calculating aged pension entitlements.

How Much Does a RAD Cost?

The cost of a RAD varies significantly depending on location, facility quality, and available services. On average, the RAD in Australia is around $470,000, but in high-demand areas like Sydney and Melbourne, it can exceed $1 million.

How to Find Out the RAD for a Facility

Aged care facilities are legally required to publish their RAD rates upfront, allowing families to compare costs before making a decision. However, you may be able to negotiate the amount in some cases.

Do You Have to Pay a RAD?

Your requirement to pay a RAD depends on your financial situation. If your total assets exceed $61,500, you will need to contribute toward accommodation costs. If your assets exceed $206,039.20, you will have the option to:

1. Pay the full RAD upfront
2. Make daily payments instead (DAP – Daily Accommodation Payment)
3. Use a combination of both

Learn more about: Daily Accommodation Payment

What If You Can’t Afford a RAD or DAP?

If you have limited assets and income, you may qualify for government-funded aged care accommodation. The Australian Government provides financial assistance to those who cannot afford aged care fees.

Should You Pay the RAD Upfront?

There are several advantages to paying the RAD instead of opting for DAP:

• Cost Savings: Since DAP includes an interest component, paying the RAD upfront can be more cost-effective.
• Guaranteed Refund: The RAD is refundable, unlike DAP payments.
• Financial Planning Benefits: The RAD is exempt from asset testing when determining pension entitlements, potentially preserving your aged pension benefits.

Before making a decision, it’s wise to consult a financial planner to explore the best approach based on your financial situation.

Do You Have to Sell Your Family Home to Pay the RAD?

Your family home is considered part of your assets unless a spouse, dependent child, or long-term carer remains living there. If your home is unoccupied when you enter aged care, it is included in your asset assessment, which may require you to sell it or find alternative financing for the RAD.

Selling your home is a major financial decision that can affect your aged pension, means-tested care fees, and overall financial position. It’s essential to get professional financial advice before deciding.

Learn more about: Do I Have to Sell The Family Home To Pay For Aged Care?

Can a Family Member Stay in the Home to Avoid Paying a RAD?

In most cases, simply having a family member live in your home won’t exempt it from being counted as an asset. However, exceptions apply if a spouse, dependent child, or a long-term carer (who has been receiving a support payment while caring for you for at least two years) resides in the home.

Since these rules can be complex, it’s best to discuss your personal situation with Services Australia or a financial advisor who specialises in aged care.