Does paying a lump sum change the fees and the pension?

When a family pays a lump sum for the room, it's natural to wonder what happens next. Will the aged care fees go down because the money's gone? Will the pension go up? The answer is different for each, because the two tests treat a lump sum differently.

This guide is about the refundable accommodation deposit (RAD): the lump sum paid for a room that's refunded later, less any deductions.

The short answer

	Cash in the bank	The same money paid as a RAD
Aged care fees: counted as an asset?	Yes	Yes
Aged care fees: deemed to earn income?	Yes	No
Age Pension: counted as an asset?	Yes	No
Age Pension: deemed to earn income?	Yes	No

So for aged care fees, paying a RAD changes how the money counts, not whether it counts. For the pension, it can take the money out of the tests altogether.

For aged care fees

For aged care fees, a paid RAD still counts as an asset. That's true even if a family member paid it.

What changes is the income side. Money in the bank, shares and similar financial assets are deemed to earn income at set rates, currently 1.75% on the first part and 3.75% above that. A RAD isn't treated as a financial investment, so no income is deemed on it.

That means paying a RAD can lower the income side of the means assessment a little. The assets side stays about the same. The result is often a small change in the hotelling or non-clinical care contributions, rather than a big one.

Low means is set at entry

Whether your parent is on low means is decided when they move in, and it stays that way while they're in the same home. Paying a RAD later, or the balance falling, doesn't change that status, though the amount of a low-means contribution can still change with your parent's means.

For the Age Pension

For the pension, a paid RAD isn't counted in the assets test, and no income is deemed on it.

So turning cash into a RAD can increase the pension for some people. The money stops counting as an asset, and stops adding deemed income. Whether it makes a difference depends on whether your parent's pension is limited by the assets test, the income test, or neither.

What about daily payments?

Paying a daily accommodation payment doesn't change the pension directly. But any cash kept aside to pay those daily amounts is still counted as an asset and deemed.

A worked picture, in words

Imagine your parent has savings in the bank and uses part of them to pay a RAD.

• Before: all the savings count as assets for both tests, and all are deemed.
• After, for aged care fees: the RAD part still counts as an asset, but it's no longer deemed. Only the savings left in the bank are deemed.
• After, for the pension: the RAD part drops out of the assets test and the deeming altogether. Only the savings left are counted.

The size of the change depends on the amounts and on the rest of your parent's income and assets.

Things that change the balance

The RAD balance can go down over time:

• Retention is taken regularly for up to five years, at least every three months and no more than monthly. This applies to people who moved in from 1 November 2025. See our guide to retention.
• Fees or daily payments may be drawn from it, if your parent asks.

A smaller balance is a smaller asset for aged care fees. If fees or daily payments are drawn from the RAD, the daily payment rises to match.

Super and other investments

If your parent has reached Age Pension age, super that hasn't started paying an income stream is treated as a financial asset. It's counted and deemed, just like money in the bank. Account-based pensions that started from 2015 are deemed too. Older account-based pensions can be treated differently, so check with Services Australia if that applies.

Telling the right people

When a RAD is paid, or a large amount moves between accounts, tell Services Australia. For aged care fees, changes need reporting within 28 days. The pension area of Services Australia, or DVA, needs to know too.

See an estimate

The Aged Care Costs calculator gives an estimate of the fees, with the home counted as it is today, and compares the ways of paying for the room over a stay you choose.

Because a lump sum affects fees, the pension and what's left for the estate in different ways, it's worth talking through how much to pay with a licensed financial adviser who specialises in aged care.

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