Refundable Accommodation Deposit (RAD) Guide 2026

Every person entering residential aged care in Australia faces a major financial decision: how to pay for their accommodation. The Refundable Accommodation Deposit (RAD) is the most significant cost involved, often running into hundreds of thousands of dollars.

This guide explains what a RAD is, how it works, how much you can expect to pay by state, and how to decide between paying a lump sum RAD, a Daily Accommodation Payment (DAP), or a combination. We also cover pension impacts, selling the family home, hardship provisions, and refund rules.

If you are trying to understand the full picture of residential aged care costs, read our companion guide on how much a nursing home costs in Australia.

What is a Refundable Accommodation Deposit (RAD)?

A Refundable Accommodation Deposit is a lump sum payment made to a residential aged care facility to cover your accommodation costs. It works like an interest-free loan to the provider. The provider uses the funds (for example, to maintain and improve the facility), and the full amount is refunded when you leave the facility or pass away.

Key facts about the RAD:

It is fully refundable. The balance is returned to you or your estate when you leave care.
The provider sets the price. Each aged care home sets its own RAD for each room, and they must publish it on the My Aged Care website.
You have payment options. You can pay as a lump sum RAD, a non-refundable Daily Accommodation Payment (DAP), or a combination of both.
You get 28 days to decide. After entering a facility, you have 28 days to choose your payment method. During this period, you will not be charged a DAP.
The government guarantees your RAD. Under the Aged Care Accommodation Payment Guarantee Scheme, the Australian Government will repay your RAD if the provider cannot.

A RAD only applies if you are assessed as a non-low-means resident. Residents assessed as low-means (based on an income and assets assessment by Services Australia) pay a lower, government-set accommodation contribution instead.

How the RAD works in practice

Here is how the RAD process typically unfolds:

Step 1: Get assessed. You need an assessment through My Aged Care to determine your care needs and financial status. Services Australia conducts a separate means assessment to determine whether you pay a RAD or a lower accommodation contribution.

Step 2: Choose a facility and room. Each room has a published RAD price. You can compare prices on the My Aged Care website. Prices vary significantly between facilities and room types.

Step 3: Agree on the price. The published RAD is the maximum the provider can charge. You can negotiate a lower amount. Get any agreed price in writing in your Resident Agreement.

Step 4: Choose your payment method. Within 28 days of entering care, decide whether to pay a full RAD, full DAP, or combination. If you do not choose, you will default to paying the full DAP.

Step 5: Make the payment. If paying a RAD, the lump sum is transferred to the provider. The provider holds the funds and must refund them when you leave.

Step 6: Receive your refund. When you leave the facility (or upon death), the provider must refund the RAD balance within 14 days.

RAD amounts by state and territory

RAD prices vary dramatically across Australia. Location, facility quality, and room type are the main factors. Below are approximate median RAD amounts for 2026.

State/Territory	Median RAD (approx.)	Typical range
New South Wales	$450,000	$300,000 to $600,000+
Victoria	$420,000	$280,000 to $550,000+
Queensland	$380,000	$250,000 to $500,000
South Australia	$350,000	$200,000 to $450,000
Western Australia	$370,000	$250,000 to $500,000
Tasmania	$320,000	$200,000 to $400,000
ACT	$430,000	$300,000 to $550,000
Northern Territory	$300,000	$200,000 to $400,000

National median: approximately $400,000.

Premium rooms in inner-city Sydney, Melbourne, and Perth can exceed $1,000,000. Regional and rural facilities are generally more affordable, with some rooms available for under $200,000.

You can search and compare RAD prices for every facility in Australia on the My Aged Care website.

The Daily Accommodation Payment (DAP) alternative

If you do not want to (or cannot) pay a lump sum RAD, you can pay your accommodation costs as a non-refundable daily fee called a Daily Accommodation Payment (DAP).

How the DAP is calculated

The DAP is calculated using the RAD price and the Maximum Permissible Interest Rate (MPIR), which is set by the government and updated quarterly.

Formula:

(RAD amount — any lump sum paid) x MPIR / 365 = DAP per day

Example: A room has a RAD of $400,000. The MPIR is 8.34% (as at 1 January 2026). You pay no lump sum.

$400,000 x 0.0834 / 365 = $91.40 per day ($33,361 per year)

The current MPIR is published on the Department of Health and Aged Care website.

DAP key points

The DAP is not refundable. Once paid, you do not get it back.
The DAP is deducted from your aged care fees, so it is a running cost alongside the basic daily fee and any means-tested care fee.
If the MPIR changes, your DAP changes with it at the next quarterly update.
You can stop paying the DAP at any time by converting to a full or partial RAD.

Combination payments: part RAD, part DAP

Most families choose a combination. You pay part of the accommodation cost as a lump sum (partial RAD) and the remainder as a daily fee (reduced DAP).

Example: The room RAD is $400,000. You pay $200,000 as a lump sum. Your DAP is calculated on the remaining $200,000.

$200,000 x 0.0834 / 365 = $45.70 per day

This approach gives you flexibility. You preserve some capital while reducing your ongoing daily costs. You can adjust the split at any time by paying additional lump sum amounts.

Combination payment benefits

Preserve liquidity. Keep some funds accessible for other needs.
Reduce daily costs. A partial RAD lowers your DAP.
Maintain flexibility. Top up or draw down the RAD portion over time.
Balance pension impacts. Optimise the split to manage both the assets test and income test (see pension section below).
Adjust over time. You can increase or decrease the RAD portion at any point, giving you ongoing control over your finances.

A financial adviser can model different combination splits to find the arrangement that minimises your total cost of care over time.

RAD vs DAP: comparison table

Factor	Full RAD (lump sum)	Full DAP (daily fee)	Combination
Upfront cost	High (full room price)	None	Moderate (your choice)
Ongoing cost	None for accommodation	Daily fee (can be $50 to $150+/day)	Reduced daily fee
Refundable?	Yes, fully refunded	No	RAD portion refunded
Age Pension assets test	RAD is exempt	Retained assets are assessed	Partial exemption
Age Pension income test	Deemed income on RAD	Deemed income on retained assets	Split deeming
Means-tested care fee	May reduce assessable assets	Assets remain assessable	Partial effect
Flexibility	Capital locked up	Full liquidity	Balanced
Risk	Government-guaranteed refund	MPIR rate changes affect cost	Mixed

The best choice depends on your total assets, income, pension status, and how long you expect to be in care. There is no single right answer for everyone.

How a RAD affects your Age Pension

This is one of the most misunderstood aspects of aged care finance.

Assets test

A RAD paid to an aged care provider is an exempt asset under the Age Pension assets test. This means paying a RAD can actually help you keep more of your pension compared to holding the same amount in the bank.

For example, if you have $500,000 in savings and pay a $400,000 RAD, only $100,000 counts toward the assets test (instead of the full $500,000). This could increase your pension entitlement.

Income test

While the RAD is exempt from the assets test, Centrelink still applies deeming to the RAD amount under the income test. Centrelink assumes your RAD earns income at the deeming rate, regardless of whether it actually earns anything (the provider does not pay you interest).

The current deeming rates (as at January 2026) are:

0.25% on the first $60,400 (single) or $100,200 (couple combined)
2.25% on amounts above those thresholds

This deemed income is added to your other income and may reduce your pension through the income test. However, the impact is usually smaller than the benefit gained from the assets test exemption.

Net pension effect

For most people, paying a RAD increases their total pension compared to keeping the money in the bank. But the exact outcome depends on your full financial picture. This is why professional financial advice is strongly recommended before making a decision.

Selling the family home to pay a RAD

Many families worry about whether they need to sell the family home. The short answer: you do not have to sell your home.

When the home is protected

Your home is not included in the aged care means assessment if it is occupied by a “protected person.” Protected persons include:

Your spouse or partner
A dependent child
A close relative who has lived there for at least five years and receives an income support payment

If a protected person lives in the home, its value is completely excluded from the assets test, the means-tested care fee calculation, and the accommodation cost assessment.

When the home is included

If no protected person occupies the home, it is included in your assets assessment, but only up to a capped value (currently $201,231.20 as at March 2026). The actual market value above this cap is not counted.

Even if your home is included in the assessment, you still have alternatives to selling:

Rent it out. Rental income can help pay a DAP.
Pay a DAP instead. Choose daily payments rather than a lump sum.
Use a combination. Pay a partial RAD from other savings and a reduced DAP.
Consider a reverse mortgage or home equity access scheme. The government’s Home Equity Access Scheme allows older Australians to borrow against their home equity.

For a detailed guide on alternatives to selling, read our article on how to avoid selling your home for aged care.

Financial hardship assistance

If you genuinely cannot afford your accommodation costs, the Australian Government provides financial hardship provisions.

Who qualifies for hardship assistance

You may be eligible if:

Your assets and income are insufficient to cover your accommodation costs
You have experienced a significant change in financial circumstances (such as a natural disaster, business failure, or unexpected costs)
You have not deliberately reduced your assets to qualify for assistance

How to apply

Contact Services Australia (Centrelink) on 1800 227 475
Request a Financial Hardship Assessment
Provide documentation of your financial circumstances
Services Australia will review and determine if you qualify for a reduced accommodation cost or government assistance

If approved, the government may pay part or all of your accommodation cost directly to the provider. The provider cannot refuse to accommodate you on financial grounds once you have been approved for hardship assistance.

More information is available on the My Aged Care financial hardship page.

RAD refund rules

Understanding the refund rules protects your investment.

Timing of refunds

Departure while living: The provider must refund the RAD balance within 14 days of you leaving the facility.
After death: The provider must refund the RAD balance within 14 days of receiving a copy of the Grant of Probate or Letters of Administration. Interest accrues from day 15 if the provider is late.

What can be deducted from the RAD

The provider can only deduct amounts you have agreed to in your Resident Agreement. Common agreed deductions include:

Ongoing DAP charges (if you are paying a combination)
Means-tested care fees
Additional or extra service fees you have agreed to
Basic daily fee (if agreed)

The provider cannot deduct amounts you have not agreed to and cannot withhold the RAD for any other reason.

Government guarantee

The Australian Government guarantees all RAD refunds through the Aged Care Accommodation Payment Guarantee Scheme. If a provider goes into liquidation or cannot repay the RAD, the government will pay the refund. This means your RAD is one of the most secure “investments” available, as it carries a government guarantee comparable to a bank deposit guarantee.

Earning interest on your RAD

You do not earn interest on a RAD. The provider uses the funds interest-free. This is the trade-off for having the full amount refunded. If earning a return on your capital is important, paying a DAP and keeping your funds invested may be a better strategy (though this depends on investment returns versus the MPIR rate).

Practical tips for making the RAD decision

Get a means assessment first. Before comparing facilities, know your assessed status so you understand what you will actually pay.
Compare multiple facilities. RAD prices vary significantly, even between similar rooms in the same suburb.
Negotiate the RAD. The published price is the maximum. Providers will often accept a lower amount, particularly if rooms are available.
Model both scenarios. Have a financial adviser calculate the total cost over 3, 5, and 7 years for both RAD and DAP options. Include pension impacts.
Consider your expected length of stay. If you expect a longer stay, a RAD may save money over time compared to cumulative DAP payments. The average stay in residential aged care is approximately 2.5 to 3 years.
Do not rush the decision. You have 28 days after entering care to choose your payment method. Use this time.
Seek independent financial advice. An aged care financial adviser accredited by the Aged Care Financial Information Service can model the best strategy for your circumstances.
Review your Resident Agreement carefully. Ensure you understand what deductions the provider can make from your RAD.
Factor in other aged care fees. The RAD or DAP is only one part of the cost. You will also pay the basic daily fee and potentially a means-tested care fee. Make sure your budget accounts for all fees, not just accommodation.
Keep records of all payments. Maintain copies of your Resident Agreement, RAD receipts, and any correspondence about fee changes. These are essential if a dispute arises or when claiming the refund.
Understand the 28-day grace period. During your first 28 days, you are not charged accommodation costs. Use this window to finalise financial arrangements without pressure.

March 2026: Ministerial Investigation Into Premium Service Fees

On 16 March 2026, the Aged Care Minister announced an investigation into claims that some aged care providers are charging premium fees for basic services that should be covered under standard care arrangements. The Minister specifically named Opal Healthcare as one provider under scrutiny, calling the practice “disgusting sidestepping” of aged care regulations.

While this investigation primarily focuses on service fees rather than accommodation costs (RAD/DAP), it highlights the importance of carefully reviewing all fee schedules before paying a RAD or committing to a DAP. Ensure that your Resident Agreement clearly distinguishes between accommodation costs, standard care fees, and any optional extras. Do not accept vague fee structures that could allow providers to add unexpected charges after you have paid your RAD.

If you believe you are being charged inappropriately for services that should be included in standard care, lodge a complaint with the Aged Care Quality and Safety Commission on 1800 951 822. The Minister emphasized that Australians expect and deserve dignity in aged care, not exploitative pricing practices.

Source: ABC News, 16 March 2026

Frequently asked questions

Is a Refundable Accommodation Deposit fully refundable?

Yes. The aged care provider must legally refund the full RAD balance within 14 days of your departure (or 14 days after the Grant of Probate for deceased estates). The Australian Government guarantees RAD repayments through the Aged Care Accommodation Payment Guarantee Scheme, so your money is protected even if the provider goes into administration.

How much is a typical RAD in Australia?

RAD amounts vary widely depending on location and facility. In 2026, the national median RAD is approximately $400,000. Sydney and Melbourne typically range from $350,000 to $550,000, while regional areas may range from $200,000 to $350,000. Some premium rooms in metropolitan areas exceed $1,000,000.

Do I have to sell my home to pay a RAD?

No. You are never required to sell your home. You can choose a Daily Accommodation Payment (DAP) instead, pay a combination of part-RAD and part-DAP, rent your home to generate income, or apply for financial hardship assistance. Read our full guide on avoiding the sale of your home for aged care.

What is the difference between a RAD and a DAP?

A RAD is a refundable lump sum payment (like an interest-free loan to the provider), while a DAP is a non-refundable daily fee calculated using the Maximum Permissible Interest Rate (MPIR). You can also pay a combination of both. The RAD is returned when you leave care; DAP payments are not.

How does paying a RAD affect my Age Pension?

A RAD is exempt from the Age Pension assets test, which means paying a RAD can help preserve your pension entitlement. However, Centrelink still applies deeming rules to the RAD under the income test, assuming it earns income at the standard deeming rate. For most people, the net effect of paying a RAD is positive for pension entitlements, but individual results vary.

Can I change from DAP to RAD after I move in?

Yes. You can switch from paying a DAP to paying a full or partial RAD lump sum at any time during your stay. Your DAP will be recalculated based on the reduced outstanding balance. You can also top up a partial RAD payment whenever you choose.

What happens to the RAD when someone passes away?

The RAD becomes part of the person’s estate. The aged care home must refund the RAD balance to the estate within 14 days of receiving the Grant of Probate or Letters of Administration. The provider may continue to charge the DAP from the RAD balance until the refund date.

Can the aged care home increase the RAD after I move in?

No. Once you have agreed to a RAD amount and signed the Resident Agreement, the provider cannot increase it. Your agreed RAD stays the same for the entire duration of your stay, regardless of changes in market rates or the published RAD for the room.

Getting help with aged care decisions

Choosing how to pay for aged care accommodation is one of the biggest financial decisions Australian families face. The right approach depends on your assets, income, pension status, family circumstances, and how long you expect to need care.

MD Home Care is a connection platform that helps Australian families find aged care providers and support services. While MD Home Care does not provide residential accommodation directly, we help hundreds of families each month navigate the aged care system, compare options, and connect with providers who offer transparent, compassionate support.

If you need help understanding your options or connecting with aged care providers and financial advisers, call us on 1800 953 253 or visit our aged care services page to learn more about the support available to you.