This article begins a series that debunks Aged Care myths and commonly encountered ‘traps’. Clients new to this field often struggle with, or misunderstand, rules around RADs. (RADs by the way, are Refundable Accommodation Deposits – we describe them below!) Two common Aged Care myths regarding RADs are:
- Misunderstanding available options
- Thinking they are non-negotiable.
Firstly, let’s eliminate another ‘monkey from the woodpile’: how RADs and DAPs interact. (DAPs are Daily Accommodation Payments.)
What do RADs and DAPs mean, and do providers always apply both?
An incoming resident of an Aged Care facility pays the RAD as a deposit. The deposit entitles the new resident to an exclusive room and those facilities of the establishment available to them. Interestingly, the resident can pay the RAD as a lump sum when entering the facility or through another financial agreement. If the resident only pays part of the RAD, they must pay a DAP to cover the remaining agreed fee. In some cases, the resident may gain entry without paying a RAD, covering the full amount through the DAP. The operator of the Aged Care facility decides whether to offer a partial RAD.
A RAD is an interest-free loan to an Aged Care provider: a DAP is considered interest on any unpaid RAD.
Full payment of the agreed RAD will preclude the payment of any DAP.
The RAD amount paid is fully refundable to the resident (or their estate) at the termination of their occupancy2. Effectively, the DAP is more akin to rent, calculated as interest, and no part of it is refundable.
Options available for payment of RAD
Residents researching suitable facilities to access Aged Care sometimes confuse the offering published in marketing materials, as fixed. This may not always apply, as we present examples only to highlight potential flexibility. While legislation sets the maximum amounts payable as RADs, it does not prescribe how operators can require them. Facility operators offer options based on their strategic financial constraints.
Accordingly, a brochure may show that a RAD of $550,000 can be paid as –
- Initial payment of 50%; and followed by payment of a
- DAP amount monthly,
doesn’t mean that this is the only configuration. If the operator is open to it, you may be able to enter with a 25% RAD payment, and a higher DAP.
Consequently, a financial structure that suits your circumstances should at least be proposed to the facility operator and negotiated.
Can the RAD amount be negotiated?
Certainly: whilst there is a cap on the RAD payable to an aged care facility, there is potential to negotiate an amount less than what they publish. The degree to which negotiation will reduce the RAD will depend on a number of factors. None the least of these factors is the occupancy rate of the facility at the time. As with most markets, supply and demand play a part in determining price. Significantly, a report by the Department of Health and Aged Care for the 2019/20 year reveals that the average RAD for that year was around $70,000 below the advertised price.
In our experience, the difference may not be so great. The important point here though is that it is worthwhile asking!
Wanting your Aged Care myths debunked?
Our experts at Continuum Financial Planners are here to help you debunk some of the urban aged care myths. Our accredited specialist adviser is available for consultation as to RADs DAPs and other costs you may incur. You can book yourself in for a meeting with ouir specialist: book your appointment –
- phone our office on 07-34213456, or
- at your conveniernce, use the linked Book A Meeting facility.
- The resident may be able to pay the DAP from the RAD payment. This arrangement can protect their cashflow, but they may need to negotiate it with the facility operator.
- If the resident agrees to have the DAP charged against the RAD, the RAD will be depleted and not fully refundable.
(This article was originally posted by us in March 2024. We occasionally refresh/ update it, most recently in July 2025.)
