Is the RAD fully refundable?

Room prices in aged care are usually quoted as a lump sum, and large amounts can cause financial worry. But this is also one of the most misunderstood areas of residential aged care. Demystifying the rules may reduce some of the worry.

The lump sum charged for a room in residential care is called a Refundable Accommodation Deposit – RAD for short. While this can be a large amount of money to hand over, it is important to realise that a RAD is not “lost” money. The amount you pay as a RAD is mostly refundable when you leave care or pass away.

If you pay a RAD, you will give up access to this money while you live in care, but it remains part of your wealth and is part of the inheritance that you can leave to those you care about.

Importantly, the RAD is also exempt from the income and assets tests for Age/DVA pension purposes, so paying a RAD may help improve pension entitlements. However, under the aged care rules, the RAD balance counts as an asset which is used to calculate your aged care costs.

How much is refundable?

The RAD paid is refundable when you leave care. Before the 1st of November 2025, the aged care home did not retain any of the balance and the RAD was 100% refundable unless fees were agreed to be deducted. Residents who were already in care before the November 2025 are still protected by this even if they later pay a RAD. 

Residents under the current rules (since November 2025), however have the RAD balance reduced by 2% of the RAD paid each year for the first five years after the initial payment towards the RAD is made. This is called the RAD retention amount.

The RAD balance can also be reduced if you have asked (or allowed) the provider to deduct some of your ongoing fees instead of paying these amounts from your bank account or pension.

Under the current rules for residential aged care, as long as you pay your other fees in full each month, only the RAD retention amount will be deducted from the RAD, and the remainder of your money paid is refunded.

Example:

Danny moves into residential aged care with a room price of $700,000. He chooses to pay this as a lump sum. All of Danny’s other ongoing care fees are paid from his bank account. When Danny passes away one year after entering care, $686,000 is refunded to his estate after retention of $14,000 (2%) is deducted. The actual amount refunded would be slightly higher due to aged care homes typically invoicing monthly and calculating a monthly pro‑rata RAD retention amount each month, with RAD retention amounts already deducted reducing the RAD amount for the calculation each month.

When is the RAD refunded?

Your aged care provider needs to refund your RAD (less agreed amounts deducted) when you leave care or pass away.

When a resident passes away, their executor may need to obtain probate (or letters of administration) and provide a copy to the provider. The provider is then required to pay the refund within 14 days. While the provider has the right to see these documents, not all providers require them before they refund the RAD, meaning it may be payable sooner in some cases. Checking with the provider will give clarity around their requirements.

Want to know more about RADs or aged care? Download our free guide or call one of our specialist advisers on 1300 366 932 with any questions you may have.