Is the RAD fully refundable?

Understanding the refund rules for RADs may remove some of the stress and worry with a move into residential care.

Room prices in aged care are usually quoted as a lump sum. Often this is a big number, which 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 refundable when you leave care or pass away.

If you pay a RAD, you will need to 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 Centrelink/DVA pension outcomes. However, under the Aged Care rules the RAD 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. The amount refunded is only reduced if you have asked (or allowed) the provider to deduct some of your ongoing care fees from your RAD, instead of paying these amounts from your bank account or other income sources. 

The rules were different before 1 July 2014, so you may have had experience with a family member who did not get all their money back in previous years. The rules are also different for retirement villages where a deferred management fee or refurbishment fee may be deducted from the entry contribution paid.

Under the current rules for residential aged care, as long as you pay your other fees in full each month, there will be nothing to deduct from the RAD and all of the 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 along the way from his bank account. When Danny passes away, the full $700,000 is refunded to his estate.

When is the RAD refunded?

The aged care provider needs to refund the RAD (less agreed amounts deducted) when the resident leaves care or passes away.

When the resident passes away, their executor may need to obtain probate (or letters of administration) and a copy provided to the provider. The provider is then required to pay the refund with 14 days. Whilst 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 provider 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.

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