A RAD (refundable accommodation deposit) is a lump sum you pay upfront — fully refunded when you leave. A DAP (daily accommodation payment) is a daily fee instead of that lump sum.
You can also pay a combination of both. Which option is right depends entirely on your financial situation — and specialist aged care financial advice is strongly recommended before you decide.
What is a refundable accommodation deposit (RAD)?
A refundable accommodation deposit is a lump sum paid to the residential aged care facility when a resident moves in. The key feature is in the name — it is fully refundable. When the resident leaves the facility (or passes away), the full RAD amount is returned to them or their estate, minus any agreed deductions.
The facility holds the RAD and earns interest on it at the government-set Maximum Permissible Interest Rate (MPIR). That interest is how the facility generates income from the accommodation arrangement — not by keeping the deposit.
Example
At the current MPIR of 7.96% (from 1 April 2026), a RAD of $400,000 generates approximately $31,840 per year in interest income for the facility. When the resident leaves, the full $400,000 is returned.
The MPIR is set by the government and reviewed quarterly. The rate from 1 April 2026 is 7.96%. Confirm the current rate with Services Australia (1800 227 475) or your financial adviser before making any decisions.
What is a daily accommodation payment (DAP)?
A daily accommodation payment is a rental-style daily fee that covers your accommodation instead of a lump sum. The DAP is calculated by converting the RAD amount into a daily equivalent using the MPIR.
Unlike a RAD, DAP payments are not refunded — they are ongoing daily costs. However, they preserve your capital, which may be important if retaining assets for estate planning purposes is a priority.
Change from 1 November 2025
For residents entering care on or after 1 November 2025, DAPs are now subject to twice-yearly indexation (on 20 March and 20 September each year). This means the daily amount you pay can increase over time in line with indexation. DAPs for residents who entered before 1 November 2025 are not affected.
Can you pay a combination?
Yes — you can pay part of your accommodation cost as a RAD and the remainder as a DAP. This is called a combination payment. It lets you preserve some capital while also reducing the daily fee.
For example, if a facility charges a RAD of $400,000, you could pay $200,000 as a RAD and pay a reduced daily fee based on the remaining $200,000. The partial RAD is fully refundable on exit.
How does the RAD vs DAP decision affect your finances?
The RAD vs DAP decision is one of the most consequential financial choices in aged care. It can affect:
The right choice depends entirely on your family's financial situation. Get advice from a financial adviser who specialises in aged care before making any accommodation payment decision.
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