What are RADs and DAPs when someone moves to a residential aged care facility?

When transitioning to residential care, an individual may be required to pay an accommodation cost known as a Refundable Accommodation Deposit (RAD), depending on their assessable assets and income. The RAD price is set by the aged care facility and can vary according to the room type and the area in which the facility is located.  Accommodation costs vary significantly between facilities and it is no longer uncommon for room prices to exceed $1m where the home is offering 5-star hotel style accommodation in picturesque seaside or rural locations.

Aged care facilities set their own accommodation prices up to $550,000.  However, RADs above this threshold must be approved by the Aged Care Pricing Commissioner so must be of a standard to justify the premium price.

If the resident elects to pay their accommodation cost by way of a lump sum RAD, it will be fully refundable when they leave the facility and the repayment is secured by a Commonwealth Government guarantee.

However, the aged care system has inbuilt flexibility for accommodation payments.  Each resident has the option of paying their accommodation cost with a lump sum Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP) or a combination of the two. The DAP is calculated using an interest rate set by the Commonwealth Government – 4.02% pa from 1 January 2021.

To provide the resident with even greater flexibility, especially where cashflow is a concern, they can elect to pay a part RAD and have the remaining DAP deducted from this lump sum. The aged care facility is legally obliged to accept these DAP from RAD arrangements if requested by a resident.

The RAD is not the only fee payable when someone moves to residential care. They will also be required to pay a Basic Daily Care Fee which is set at 85% of the single rate of the basic age pension (currently $52.25 per day) and possibly a Means Tested Care Fee and an Additional Services Fee.

Moving a family member to residential care can involve numerous financial decisions, often complex, resulting in very different outcomes.  These decisions need to be made quickly and this is often during a very stressful and emotional time.

A simple phone call to your Alteris Adviser can take a huge weight of your shoulders if the time comes to move a family member to residential care.  Alteris have a dedicated team of specialist Lifestyle and Care advisers who helped more than 1,000 families navigate this journey during the past twelve months.

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