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Making sense of RAD and DAP

on Thursday, May 12, 2022

What is a RAD and DAP?

Below, you'll find a summary of the accommodation pricing for residential aged care in Australia. We recommend that you seek independent financial advice to decide on the payment option that works best for you and your family.

When you begin researching residential aged care, you will come across two acronyms relating to the price of residential aged care, that are essential to understand.

The Refundable Accommodation Deposit (RAD) is a standard room price set by the respective aged care home and is paid by a refundable lump sum.

The Daily Accommodation Payment (DAP) is the RAD equivalent paid periodically. The DAP amount is calculated by applying the maximum permissible interest rate (MPIR) to the room price and dividing the amount by 365.

RAD/DAP Payment Example 1

If you agree to a room price of $500,000, your DAP will be worked out as follows:

DAP = (room price × MPIR) / 365

        = ($500,000 × 4.07%) / 365

        = $55.75

RAD/DAP Payment Example 2

For the same room price of $500,000, you could choose to pay a part RAD of $200,000 and a DAP based on the remaining $300,000. For this combination payment, your reduced DAP would be worked out as follows:

Reduced DAP = ((agreed room price - RAD paid) x MPIR) / 365

        = ($500,000 - $200,000) × 4.07%) / 365

        = ($300,000) × 4.07%) / 365

        = $33.45

Please note that the MPIR used in example 1 and 2 (4.07%) is current as of 1 April 2022.

When does the RAD need to be paid?

From the day of entering their care, the new resident has 28 days to work out whether they want to pay the facility a lump sum, daily payment, or some combination of the two. If you choose to pay by RAD (lump sum), your aged care provider must give you six (6) months from your move in date to pay the full lump sum.

The RAD and DAP is determined on the quality, location and features of the accommodation and can vary from bed to bed.

If a facility wants to charge more than $550,000 for their RAD, they need to seek approval from the Aged Care Pricing Commissioner.

Providers must advertise their accommodation prices in both RAD and DAP figures prior to charging their clients.

Under the Living Longer, Living Better reforms, the resident must be left with a minimum asset value of 2.25 times the basic age pension at the time of entry.

That sum is subject to quarterly change, but currently it means a resident must be left with at least $51,500 if they choose to pay for their accommodation in full.

Aged Care Means Tested Care Fee

Alongside the RAD and DAP, a means test measuring a combination of assets and income will determine how much the government will contribute to a person’s accommodation and how much each person/family will also have to contribute.

The means-tested care fee will be different for each resident, and not everyone has to pay it.

As of 13 May 2022, the means-tested care fee will be between $0 and $259.26 per day, depending on the outcome of your assessment. This fee can change over time and does not remain fixed when you move into an aged care home.

Click here to view the current Schedule of Fees and Charges for Residential Aged Care

Everyone, regardless of whether they are liable to pay for accommodation, must pay the daily care fee, which is 85 per cent of the single pension. You will pay this fee directly to your aged care home on a fortnightly or monthly basis.

According to current rates, the maximum basic daily fee for aged care is $54.69 per day or $19,961.85 per year.

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