RADS & DAP Aged Care | Benefits & Differences in Fees

RADS & DAP Aged Care | Benefits & Differences in Fees

Understanding RAD & DAP in Aged Care

When researching and exploring different options for residential aged care, you will most likely come across two main abbreviations when looking into how residential aged care is funded. RAD & DAP.

When considering your options in aged care, it is important to understand both RAD & DAP and what are the differences and benefits of each method to determine what best suits you when deciding on aged care accommodation.

Refundable Accommodation Deposit

RAD stands for Refundable Accommodation Deposit and is a type of payment required by residential aged care facilities in Australia. Commonly referred to as an aged care bond, RAD is paid when an individual enters an aged care facility and requires permanent residential care, they may be asked to pay a RAD.

The RAD is a lump sum payment made to the aged care facility by the resident or their representative. It is essentially an aged care deposit that guarantees the resident’s accommodation in the facility. The RAD is negotiated between the facility and the new resident and currently, the average RAD in Australia is $470,000 but prices vary depending on factors such as the facility’s location, quality of accommodation, and amenities provided.

Is RAD Refundable?

The RAD is refundable, meaning that when the resident leaves the aged care facility, either by passing away or by choosing to move out, they or their estate are entitled to receive the RAD back. However, the refund is subject to deducting any outstanding care fees or charges that may be owed to the aged care facility.

What are the benefits of RAD?

There are many benefits to paying a RAD upfront to an aged care facility, including but not limited to increasing your Age Pension entitlement. The RAD is an exempt asset for the Age Pension so you could potentially increase your entitlements or start to receive entitlements if you weren’t previously receiving anything.

Daily Accommodation Payment

If you are unable to or don’t want to pay a Refundable Accommodation Deposit (RAD) there is an alternative payment option called a Daily Accommodation payment (DAP). Instead of paying a lump sum RAD, individuals can choose to pay a basic daily fee for home care in the form of a DAP. This option allows individuals to avoid paying a large upfront amount but may result in higher overall residential aged care costs in the long run as the resident pays interest on the outstanding RAD.

While the RAD is fully refundable, the interest paid on the DAP will be lost forever and is usually relatively high. Some people are unable or unwilling to sell their property, or they may be entering palliative care and will not be in an aged care facility for long and thus wish to retain their assets.

How to Calculate DAP

As an example, the DAP equivalent of a RAD of $470,000 based on the maximum interest rate of 7.46% – the rate effective April 1, 2023.

DAP = $470,000 x 7.46%/365
DAP = $96.06 per day

So, as an alternative to making an upfront (RAD) payment of $470,000 you may opt to make a daily (DAP) payment of $96.06.

Is it better to pay RAD or DAP?

When deciding between RAD and DAP in aged care, the best course of action for your situation will depend on your unique set of circumstances, and no two will be alike. Variables to consider include:

  • The size of the RAD (lump sum)
  • Can you afford to pay the RAD yourself?
  • Do you need to borrow from bank or family/friends?
  • Do you have other assets that could be sold to fund the RAD?
  • Are you intending to sell your home to fund the RAD?

Unsure If RAD or DAP is best? Speak to PACFA

As everyone has different objectives, financial situations and priorities, it is advised to speak to a financial adviser who specialises in aged care services. Speak to an aged care finance adviser at Perth Aged Care Financial Advisers today on 9324 7450. Our financial advisors are experts in aged care and will consider your unique circumstance when advising on which option is best. Get in touch today.