RAD vs DAP: the two ways to pay for aged care accommodation

The two options

A RAD (Refundable Accommodation Deposit) is a lump sum paid to the home. It's refunded when your loved one leaves — it's essentially an interest-free loan to the provider.

A DAP (Daily Accommodation Payment) is a non-refundable daily charge instead of the lump sum. It's calculated by applying a government-set interest rate (the maximum permissible interest rate, or MPIR) to the RAD amount you choose not to pay.

You can also combine them — part RAD, part DAP — in whatever proportion suits your family's cash flow.

A worked example

Say the advertised RAD is $550,000. Paying it in full means no DAP at all. Paying nothing means a DAP of $550,000 multiplied by the current MPIR, divided by 365 — charged daily for as long as your loved one lives there. Paying half ($275,000) means a DAP on the unpaid half only.

The MPIR changes quarterly, so always check the current rate on the My Aged Care website before comparing options.

Which one suits your family?

• Keeping the family home? A DAP preserves the asset but costs more over time
• Selling the home to fund a RAD? The refund on exit can return to the estate
• Pensioners and part-pensioners: the means assessment affects what you're asked to pay — some residents aren't asked for either
• Time matters: the longer the expected stay, the more the DAP adds up to

Don't decide alone

The RAD vs DAP choice interacts with the age pension, means-tested fees and the family home's treatment as an asset. The wrong call can cost tens of thousands of dollars.

We explain the figures for your family's exact situation in plain English, and for the full financial picture we'll point you to an accredited aged care financial adviser. Our aged care costs page covers every other fee involved.