Don’t be afraid of a RAD

When moving into residential aged care, you might find the thought of paying a large lump sum to be confronting, but don’t be afraid of a RAD. The full name of this payment – a Refundable Accommodation Deposit – provides a clue why you should not be afraid.

When you move into residential care, you are effectively moving into a new home. And just like any move to a new home, there is a cost to secure your accommodation – you either need to find a lump sum to buy the accommodation or create cashflow to pay rent.

With a move into care, one of the first expenses you will face is the cost of your room. This is likely to be quoted as a lump sum but you have the choice to either pay the lump sum (called a Refundable Accommodation Deposit – RAD) or turn it into a daily fee (called a Daily Accommodation Payment – DAP). You can also choose to pay a part lump sum and part daily fee.

While many people hesitate at the idea of a lump sum, paying a RAD can often be a financially sound choice, if you have the means to do so.

“One of the biggest concerns families have when moving into aged care is the fear of making the wrong financial decision. But understanding how a RAD works—and how it fits into the bigger picture—can provide enormous peace of mind during what is often an emotional transition.”
— Jenny Brown, CEO, JBS Financial

Four things to know about RADs

Firstly, the RAD is mostly refundable when you leave care or pass away. The provider can only deduct and keep a small retention amount (up to 2% each month for the first five years) and any outstanding fees. The majority of your money remains as part of your estate.

Example:

Carol pays a $750,000 RAD. If she passes away two years later, the care provider will have deducted $29,432 in retention amounts, leaving $720,568 to be refunded to her estate.

The refund of the RAD is guaranteed by the Federal Government. So, the second thing to know is that even if the aged care provider experiences financial difficulty, your deposit is protected.

Thirdly, if you choose not to pay a RAD, you’ll pay the Daily Accommodation Payment (DAP) instead. This is effectively interest (currently at 7.96% per annum) on the unpaid amount. And none of this interest paid is refundable.

Example:

If Carol opts to pay just the DAP, she would pay $163.56 per day ($59,700 per year) as “rent”.  This stops when she passes away, but none of the DAP paid is refundable.

And fourthly, the RAD paid is exempt when calculating age pension entitlements. This can potentially increase your entitlements and help offset lost investment income.

Next Steps: Understanding the Bigger Picture

Deciding how to pay for aged care is rarely straightforward. There are often many moving parts to consider—from cash flow and investments to Age Pension entitlements, taxation, family conversations and long-term care needs.

That’s why it’s important not to look at a RAD in isolation.

At JBS Financial, we help families step back and understand the bigger picture so they can make informed decisions with greater clarity and confidence. Often, what initially feels confronting becomes far more manageable once the options are properly explored.

The reality is that aged care decisions are not just financial—they’re deeply personal. And having experienced guidance can make a significant difference during what is often an emotional time for families.

If you or someone you care about is beginning to explore aged care options, we invite you to book a conversation with our team. We’re here to help you navigate the transition calmly, thoughtfully and with confidence.