The 2% RAD Retention Fee
The biggest change to RAD since the system began. Here's what it means.
What is RAD retention?
From 1 November 2025, aged care providers keep 2% of your RAD per year as a retention fee. When the person leaves care, the refund is the original RAD minus the total retention deducted.
Before this change, the full RAD was returned — making it essentially a free way to pay for accommodation. That's no longer the case.
How is it calculated?
Retention is calculated daily on the outstanding RAD balance. For simplicity, the annual amount is approximately:
For a $500,000 RAD: $500,000 × 0.02 = $10,000 per year
The daily calculation means retention is pro-rated — if someone stays for 18 months, the retention is approximately $15,000, not rounded to a full year.
The 5-year cap
Retention is capped at 5 years, meaning the maximum retention is 10% of the original RAD. After 5 years, no further retention is deducted.
| Length of stay | Retention on $500,000 RAD | Refund |
|---|---|---|
| 1 year | $10,000 | $490,000 |
| 2 years | $20,000 | $480,000 |
| 3 years | $30,000 | $470,000 |
| 5 years | $50,000 (cap reached) | $450,000 |
| 7 years | $50,000 (capped) | $450,000 |
| 10 years | $50,000 (capped) | $450,000 |
How does retention affect the RAD vs DAP decision?
Retention adds a clear cost to paying RAD. But it's still typically cheaper than paying full DAP — especially for stays of 3+ years.
For a $500,000 room with a 3-year stay:
- RAD retention cost: ~$30,000
- Full DAP cost (3 years, with indexation): ~$121,000
- Difference: RAD is ~$91,000 cheaper in direct costs — but you also lose the investment returns on $500,000 for 3 years
The real question is whether your money earns more invested than the combined cost of retention + forgone returns. Our calculator works this out for you.
Does retention apply to combination payments?
Yes. If you pay a combination (part RAD, part DAP), retention is calculated only on the RAD portion. The DAP portion is not subject to retention — it's a separate daily charge.
This information is current as of March 2026 and does not constitute financial advice. We recommend speaking with a specialist aged care financial advisor.