RAD vs DAP

When you (or a loved one) enter permanent residential aged care in Australia, you will be asked to contribute towards your accommodation costs. These costs are separate from care services (like personal care, nursing, meals, etc.) and relate only to your room and living environment. 

There are three ways to pay for accommodation:

  1. Refundable Accommodation Deposit (RAD)

  2. Daily Accommodation Payment (DAP)

  3. Combination of RAD + DAP

You can choose the option that best fits your financial situation — generally within 28 days of entering care.

1. Refundable Accommodation Deposit (RAD)

A RAD is a one‑off lump sum payment you pay to the aged care facility for your room.

Think of it like a refundable deposit — it is your money, paid upfront, and refundable to you or your estate when you leave permanent care (minus any agreed deductions). 

  • You own the deposit — it is refundable when you leave or pass away.
  • You can pay all of it, part of it, or none of it (with combination options). 
  • Since 1 Nov 2025, providers can retain 2% per year of the RAD amount, up to 10% total over 5 years — this portion is not refunded. 
  • RAD counts as an asset for means testing, which can affect other aged care fees. 

Advantages of RAD

  • Refundable: What you pay (minus retention) is returned to you or your estate.

  • Potential pension advantage: Paying RAD can sometimes reduce means‑tested daily costs.

  • No ongoing daily accommodation cost: Once paid, there’s no DAP on the RAD portion.

Considerations

  • Requires large lump sum cash funds — often from savings or property sale.

  • The retention rule (2% per year) means you may not receive 100% back if you stay long term.

2. Daily Accommodation Payment (DAP)

A DAP is like a daily rental fee you pay instead of a lump sum.

It’s calculated using a government‑set interest rate called the Maximum Permissible Interest Rate (MPIR):
DAP = RAD × MPIR ÷ 365.

So if a room’s RAD price is, say, $450,000 and the MPIR is 7.65%, the DAP would be around $94.32 per day (based on current figures).

  • You don’t need to pay a lump sum up front. 
  • You pay accommodation costs as a daily rate until you choose another option.
  • DAP is not refundable — it’s a true ongoing cost. 

Advantages of DAP

  • No requirement for large upfront funds — helps preserve cash flow.

  • Creates flexibility for people without substantial savings.

Considerations

  • Total cost over time may be higher than paying a RAD.

  • Because the daily cost is not refundable, the money can’t be returned to you or your estate.

3. Combination — Part RAD + Part DAP

Many people use a hybrid approach, paying some as a RAD and the balance as a DAP.

Example:
If the agreed room price is $500,000:

  • You pay $200,000 as RAD

  • The remaining $300,000 is charged as DAP (daily accommodation cost)
    The DAP will then be lower because it’s only calculated on the unpaid amount.

This option can help you balance upfront affordability and ongoing costs.

RAD vs DAP 

Feature

RAD

DAP

Combination
Payment Type Lump sum upfront Ongoing daily payment Both lump sum + daily payments
Refundable Yes (minus retention) No Partially (RAD portion)
Impact on Cash Flow Big upfront expense Lower upfront cost Moderate
Total Cost Over Time Often lower Can be higher long‑term Flexible
Impact on Means Test Counts as asset May affect other fees RAD portion counts


Things To Consider: 

You Have Time to Decide

  • You don’t need to choose immediately — you have 28 days after entering care to decide your preferred payment method.

Providers Must Be Transparent

  • Aged care homes must clearly show RAD and DAP amounts in their Accommodation Agreement.

Government Guarantee

  • Even if a provider goes out of business, your RAD is guaranteed by the Australian Government under the Accommodation Payment Guarantee Scheme.

DAP Indexation

  • DAPs are subject to indexation (adjusted to inflation regularly), meaning your daily cost can rise over time if you choose this method.

 Which Should You Choose?

  • RAD is ideal if you have the funds and want refundability, potential pension planning benefits, and no ongoing daily accommodation fee.

  • DAP suits those who want to preserve cash and avoid a large upfront payment.

  • Combination offers flexibility and often a good financial middle ground.

Each choice has pros and cons, so it’s valuable to seek financial advice tailored to your situation — especially if you’re balancing aged care payments with Centrelink or pension planning.