If you or a family member is moving into residential aged care, you may come across unfamiliar terms such as RAD and DAP.
Understanding these payment options can help you plan how to fund aged care accommodation.
What is a RAD?
A Refundable Accommodation Deposit (RAD) is a lump-sum payment towards the agreed price of your aged care accommodation.
However, you do not have to pay the full accommodation price as a RAD. You can choose to pay some or all of the cost through ongoing daily payments instead.
What is a DAP?
A Daily Accommodation Payment (DAP) is an ongoing payment based on the unpaid portion of your accommodation price.
The government-set Maximum Permissible Interest Rate (MPIR) helps determine the DAP. As at 1 July 2026, the MPIR is 8.43% per annum. At this rate, daily payments can represent a significant ongoing expense.
You can also choose a combination strategy. This allows you to pay part of the accommodation price as a RAD and the remainder through daily payments.
Who decides how you pay?
Some families assume that the aged care provider decides how residents must pay for their accommodation. However, residents generally have a choice.
Providers can set the room price. You can then choose whether to pay by lump sum, daily payment or a combination of both.
Many residents initially enter care and pay a daily amount. They may then decide to pay some or all of the RAD at a later stage.
Which option is better?
There isn’t one option that suits every family.
Your decision may depend on your assets, investments and available cash flow. Your Age Pension position and estate planning objectives may also influence your decision.
For this reason, aged care planning involves more than simply asking whether you have enough money to pay the RAD.
The right approach will depend on your individual financial circumstances and priorities.
Not sure whether a RAD, DAP or combination is right for you?
At Forman Financial Services, we help families understand the financial implications of their aged care choices. We can help you consider your options and develop a strategy suited to your circumstances.
Contact us here to discuss your aged care financial planning options.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.