What is a RAD?

The short version

A RAD (Refundable Accommodation Deposit) is a lump sum payment for your accommodation in residential aged care. Think of it like a bond on a rental property — you pay a large amount upfront, and most of it is returned when you leave.

The key difference from a rental bond: since November 2025, the aged care provider keeps 2% of your RAD each year as a retention fee. This is new, and it changes the maths significantly.

How it works

When someone enters residential aged care, the facility quotes a room price — this is the RAD. Room prices in Australia typically range from $200,000 to $1,000,000+, with the national average around $470,000.

If you choose to pay the full RAD:

• You pay the lump sum to the aged care provider
• You don't pay any Daily Accommodation Payment (DAP)
• The provider uses your money (they can invest it, use it for operations)
• When the person leaves care (or passes away), the RAD is refunded — minus the retention amount

The 2% retention fee (new from November 2025)

Before November 2025, the full RAD was refunded. That's no longer the case.

Under the new rules, providers retain 2% of the RAD per year, calculated daily on the outstanding balance. This is capped at 5 years (10% total).

This retention fee is a significant change. It means paying a RAD is no longer "free" — there's a real cost, even though most of the money comes back.

Read the full guide to RAD retention →

The government guarantee

Your RAD is protected by the Australian Government's Accommodation Payment Guarantee Scheme. If the aged care provider becomes insolvent, the government guarantees the refund of your RAD. This means you won't lose your money if the provider goes bankrupt.

This guarantee applies to the full RAD amount (minus any retention already deducted).

The 28-day decision window

From the day someone enters residential aged care, the family has 28 days to decide how to pay for accommodation — full RAD, full DAP, or a combination.

Until you decide, DAP is charged automatically. You then have up to 6 months from the date of entry to actually pay the RAD if that's what you choose.

Any DAP paid during this period is deducted from the RAD owing, so you're not paying twice.

When does a RAD make sense?

• You have the funds available — from savings, superannuation, or the sale of a property
• Your investment returns are low — if the money is sitting in a savings account earning 3-4%, it may be better off paying the RAD than paying DAP at 7.65%
• You want to preserve pension eligibility — RAD is exempt from the Age Pension assets test
• You expect a shorter stay — the retention fee has less time to accumulate

Use the RAD vs DAP calculator →

RAD vs DAP — which is better?

There's no universal answer. It depends on your room price, expected length of stay, what the money could earn if invested, and your pension situation. Our free calculator compares all three options side by side.

Learn about DAP (Daily Accommodation Payment) →

Learn about combination payments →