Refundable Accommodation Deposit (RAD) explained
The Refundable Accommodation Deposit (RAD) is the single largest cheque most Australian families ever write — often $400,000 to $750,000 — and the rules around it are widely misunderstood. This guide explains what a RAD is, how it differs from a DAP, what's actually refundable, and the 2025 reforms that change how accommodation is paid for.
What a RAD is
A Refundable Accommodation Deposit is a lump-sum payment to a residential aged care provider for the resident's room. It works like an interest-free loan to the provider — they earn the use of the money, and when the resident leaves or passes away, the balance is refunded to the resident or their estate. The maximum RAD without ministerial approval is $750,000 as of mid-2025, with anything higher requiring approval from the Aged Care Pricing Authority.
RAD vs DAP vs a combination
Every resident chooses one of three ways to pay the agreed Room Price (the cost the provider has set for the room): a lump-sum RAD, a Daily Accommodation Payment (DAP) calculated by applying the Government-set Maximum Permissible Interest Rate (MPIR — 8.34% from 1 July 2025) to the room price, or a combination of both. You have 28 days after entry to decide and can change your mind once. A combination is the most common choice in practice.
Worked example
Room Price: $550,000. Option A (RAD): pay $550,000 up front, refunded when you leave. Option B (DAP): pay $550,000 × 8.34% ÷ 365 = $125.66 per day, or about $3,820 per month. Option C (combination): pay a $300,000 RAD plus a DAP of $250,000 × 8.34% ÷ 365 = $57.12 per day. The right choice depends on whether the money would otherwise earn more than 8.34% after tax and fees, and on age-pension and means-test consequences.
What's actually refundable
The full RAD balance is refundable — provider insolvency is covered by a Government guarantee. The provider can deduct: any unpaid daily fees, any agreed retention amount (capped by law — for new agreements from 1 November 2025, retention is up to 2% per year of the RAD balance for up to 5 years). The refund must be paid within 14 days of leaving (longer if death and the estate is unresolved).
Means test and the home
The family home is exempt from the means test if a 'protected person' lives there — a spouse, a dependent child, or a carer/close relative who has lived there for the required period. Otherwise the home counts toward your asset assessment up to a capped value (around $211,000 in 2025) for the means-tested fee. The full house value can still be sold to fund a RAD; only the means-tested cap applies.
2025 aged care reforms — what's changing
From 1 November 2025, the new Aged Care Act introduces several RAD-related changes: retention amounts of up to 2% per year (for up to 5 years) on new agreements, indexation of the RAD maximum to CPI, and a 'Higher Everyday Living' fee category to replace some extra service arrangements. RAD agreements signed before 1 November 2025 keep their original (non-retention) terms — talk to a financial adviser if your move falls near the cut-off.
Where to get the money
Most families fund the RAD by selling the family home. Other options: drawing down superannuation (if over preservation age), a reverse mortgage (less common), or using investment assets. Don't liquidate retirement accounts without modelling the tax and pension impact — a fee-only financial adviser accredited in aged care can run the comparison.
Frequently asked questions
Authoritative sources
The figures and rules in this guide are drawn from the following official and independent sources. Open any link to verify the latest published numbers.
- Accommodation pricing — RAD and DAP
Department of Health, Disability and Ageing
- Maximum Permissible Interest Rate (MPIR)
Department of Health, Disability and Ageing
- Accommodation Payment Guarantee Scheme
Department of Health, Disability and Ageing
- New Aged Care Act 2024
Department of Health, Disability and Ageing
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About this guide
Written and reviewed by the Nursing Home Match editorial team. We update guides at least annually and verify every figure against the official sources listed above. This guide is general information, not personal, medical, financial or legal advice. Always confirm details on Medicare.gov Care Compare (United States) or My Aged Care (Australia), or speak to a qualified adviser before making decisions.