RAD, DAP or a combination: how paying for the room works

The room is usually the largest cost when a parent moves into an aged care home. This guide covers people who enter care on or after 1 November 2025 and whose means assessment shows they aren't on low means. (People on low means pay an accommodation contribution set by Services Australia instead, and the government helps with the rest.)

Figures are as at 20 September 2026, and the interest rate is the one for 1 October to 31 December 2026. They change regularly, and the interest rate is updated every quarter.

Step 1: agree a room price

Every aged care home publishes a price for each room on My Aged Care. Before moving in, your parent and the home agree a room price in writing, in the accommodation agreement. The price can be negotiated down but can't be higher than the published price. A home needs approval from the Independent Health and Aged Care Pricing Authority to charge more than a government-set maximum, which is $789,686 as at 20 September 2026.

The agreed price can then be paid in one of three ways.

Option 1: a refundable accommodation deposit (RAD)

A RAD is a lump sum for the full room price. It's held by the home and refunded when your parent leaves, minus some deductions.

Retention. For people entering care from 1 November 2025, the home keeps 2% of the RAD balance a year, calculated daily, for up to 5 years from the day the RAD is first paid. Retained amounts aren't refunded. The home deducts them at least once every 3 months but not more than once a month. The home can't ask your parent to top the RAD back up after a deduction.

The daily retention is the RAD balance × 2% ÷ 365. The official example is a $500,000 RAD, which works out to about $27.40 a day. Each deduction lowers the balance, so later deductions are slightly smaller. Over 5 years, the total kept is a little under 10% of the starting balance.

Refunds. When your parent leaves the home, the refund is usually due within 14 days. If they're moving to another aged care home and gave more than 14 days' notice, it's due on the day they leave. If your parent dies, the home has 14 days from being shown probate or letters of administration. Where there's no probate, other evidence the home accepts can be used instead. The government's Accommodation Payment Guarantee Scheme protects the refund if the provider becomes insolvent.

Means test. A RAD counts as an asset in the aged care means test, even if family paid it. It's exempt from the Age Pension assets test.

Option 2: a daily accommodation payment (DAP)

A DAP is like rent: your parent pays a daily amount and nothing is refunded. It's calculated as:

DAP = agreed room price × MPIR ÷ 365

The MPIR is the government's maximum permissible interest rate. It's 8.51% for 1 October to 31 December 2026. The rate that applies is the one in force when the room price was agreed. Later changes to the MPIR don't affect it while your parent stays in that room.

At the interest rate for 1 October to 31 December 2026, a $500,000 room would have a DAP of $500,000 × 8.51% ÷ 365, or about $116.58 a day. That's an illustration only, not a quote.

For people entering from 1 November 2025, DAPs are indexed twice a year, on 20 March and 20 September, using a published index number. A RAD isn't indexed.

Option 3: a combination

Your parent can pay part of the price as a lump sum and the rest as a daily payment. The daily part is worked out on the unpaid amount:

Combination DAP = (agreed price − lump sum paid) × MPIR ÷ 365

For example, if your parent paid $200,000 towards a $500,000 room, at the interest rate for 1 October to 31 December 2026 the daily part would be $300,000 × 8.51% ÷ 365, or about $69.95 a day. The lump sum part is subject to the same 2% retention.

Your parent can also ask for the DAP, or other aged care fees, to be deducted from the lump sum. The balance then goes down over time, and so does the amount refunded later.

Timing

People entering care from 1 November 2025 don't have to choose a payment method within a set time. Daily payments apply until the full amount is paid as a lump sum. A lump sum can be paid, or topped up, at any time after the means assessment is finalised (or "means not disclosed" status is set).

There's a floor, though. A home can't accept a lump sum that would leave your parent with less than $66,500 in assets. This amount is fixed when they move in. Any part of the price not paid as a lump sum is paid by the day instead.

People who entered before 1 November 2025 had different rules, including a 28-day window to choose. They generally aren't charged retention, unless they're out of care for more than 28 days, or opt in to the new rules and change homes. Opting in on its own isn't enough.

Things families often weigh up

There's no single right answer. Families commonly consider:

• whether selling the home or keeping it affects the Age Pension and the means test (see our guide to the family home);
• the difference between money that's refunded (a RAD, less retention) and money that isn't (a DAP);
• how fees will be paid each month from income;
• what happens to the estate.

The official My Aged Care fee estimator and the Aged Care Costs calculator can show how the options compare for your family's numbers.

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