November 2025 Aged Care Changes
Two new rules that fundamentally change the RAD vs DAP decision.
What changed?
On 1 November 2025, the new Aged Care Act came into effect — the biggest overhaul of aged care funding since the current system was introduced in 2014. Two changes directly affect how you pay for accommodation:
Change 1: RAD retention (2% per year)
Previously, the full RAD was refunded when someone left care. Now, providers retain 2% of the RAD per year, calculated daily on the outstanding balance.
- Rate: 2% per annum, calculated daily
- Cap: Maximum 5 years of retention (10% of the original RAD)
- Effect: A $500,000 RAD with a 3-year stay loses $30,000 to retention. After 5 years, retention stops — you lose a maximum of $50,000.
This means paying a RAD is no longer "free." There's now a real, unavoidable cost — though the bulk of the RAD is still returned.
Change 2: DAP indexation (CPI-linked)
Previously, your DAP was fixed for the duration of your stay (based on the MPIR at entry). Now, DAP is indexed to CPI twice yearly — on 20 March and 20 September.
- Frequency: Twice yearly (March 20 and September 20)
- Rate: CPI (Consumer Price Index) — currently estimated at ~3.5% per year
- First indexation: 20 March 2026
- Effect: A DAP of $104.79/day in year 1 could be ~$115/day by year 3 and ~$124/day by year 5
This makes DAP progressively more expensive over longer stays, which didn't happen before.
How do these changes affect the RAD vs DAP decision?
The two changes pull in opposite directions:
- RAD retention makes RAD more expensive — it's no longer a free way to pay. The 2% annual cost is real money.
- DAP indexation makes DAP more expensive — especially for longer stays, as costs compound with inflation.
- For shorter stays (1–3 years): The changes are relatively modest. The decision still depends heavily on your investment returns vs the MPIR.
- For longer stays (5+ years): RAD becomes more attractive because retention is capped at 5 years, while DAP indexation continues indefinitely.
The net effect is that both options now have clear, unavoidable costs. The "free ride" from paying a full RAD is over, but DAP has become riskier for long stays.
Who is grandfathered?
If someone entered residential aged care before 1 November 2025, the old rules continue to apply:
- No RAD retention — the full RAD is still refundable
- No DAP indexation — DAP remains fixed at the entry rate
- These protections continue for the duration of the person's stay, even if they move to a different room within the same facility
If someone entered care before 1 November 2025 and transfers to a different facility after that date, the new rules apply to the new arrangement.
See how these changes affect your numbers
Our calculator models both the retention fee and DAP indexation, so you can see the true cost of each option under the new rules.
Use the RAD vs DAP calculator →This information is current as of March 2026 and does not constitute financial or legal advice. The new Aged Care Act contains many additional changes beyond accommodation fees. We recommend speaking with a specialist aged care financial advisor for personalised guidance.