RAD or DAP: paying for an aged care room

What you are paying for

The accommodation payment buys the room. It is separate from the basic daily fee and separate from care contributions, and mixing them up is the most common source of confusion when a family first sees a quote.

Each home publishes a price for its rooms. That published price is the starting point for both the lump sum and the daily calculation.

How a RAD works

A refundable accommodation deposit is a lump sum paid to the provider. It does not earn interest for the resident. When the resident leaves, the balance is refunded, less any amounts the provider is permitted to deduct.

Since 1 November 2025 those permitted deductions include retention, which is covered below.

How a DAP works

A daily accommodation payment converts the unpaid room price into a daily amount, using a government set rate called the maximum permissible interest rate, or MPIR.

The formula is published and simple:

The MPIR changes every quarter, so we do not publish a rate here. The Department publishes the current one on its base interest rate and maximum permissible interest rate page, linked in the sources below.

You can combine the two

Part lump sum and part daily payment is expressly allowed, and it is what many families end up doing.

There is also a less understood option: the daily payment can be drawn down from the lump sum balance rather than paid from income. For someone who is asset rich and income poor, that can be the practical answer. It does reduce the refundable balance over time.

A provider cannot require you to use a particular payment method.

The two deadlines

What changed in November 2025

This is the part that most published information still misses, and it changes the arithmetic.

From 1 November 2025, providers may deduct a retention amount from RAD balances. It is 2 per cent a year, calculated daily, deducted no more than monthly, and it stops five years from the date the deposit was first paid.

Over the full five years that is up to 10 per cent of the deposit. So a refundable deposit is no longer fully refundable. Retention reduces the refundable balance, it does not increase the outstanding daily payment.

Daily accommodation payments are also now indexed to CPI, on 20 March and 20 September each year.

Room prices above the threshold

A provider can charge up to a published maximum without approval. Above that, it needs approval from the Independent Health and Aged Care Pricing Authority.

The threshold rose from $550,000 to $750,000 on 1 January 2025 and has been indexed to CPI each 1 July since. As at 1 July 2026 it is $789,686.

A room priced above that has been through an approval process. It is not a red flag on its own, but it is worth asking what the higher price buys.

What actually changes the decision

We are not going to tell you which to choose, because the right answer depends on things only you and an adviser can see.

The factors that genuinely move the maths: whether the family home would need to be sold, how the home and the deposit are each treated under the aged care means test and the Age Pension assets test, current interest rates, how long the stay is likely to be, estate planning intentions, and whether the person qualifies as low means.

Those factors often point in different directions for the same family.

Services Australia provides a free Financial Information Service, and a financial adviser with genuine aged care experience can model an individual situation. This is a decision worth paying for advice on.

Frequently asked