Aged care accommodation funding · Updated 11 May 2026
RAD vs DAP Explained: How to Pay for Aged Care Accommodation in Australia (2026)
The choice between Refundable Accommodation Deposit (RAD) and Daily Accommodation Payment (DAP) is the biggest single financial decision in aged care entry. They fund the same room — the difference is whether you pay a lump sum (RAD), a daily rent equivalent (DAP), or split it (half-half). Worked examples below using the current MPIR of 8.38%.
★Key takeaways
- ✓RAD = lump sum; DAP = daily rent equivalent. Both fund the same accommodation; you choose how to pay.
- ✓Formula: DAP/day = (RAD × MPIR) / 365. MPIR Jan 2026: 8.38%. $500k RAD ≈ $114.79/day DAP.
- ✓Half RAD + half DAP is the most common arrangement — balanced cash deployment.
- ✓RAD is fully refundable on departure. DAP is not. Government-guarantees the RAD up to $187,000.
- ✓You do NOT have to sell the home — the home is means-test exempt if a protected person lives there.
| Provider ⇅ | Full RAD ⇅ | Full DAP ⇅ | Half-Half ⇅ |
|---|---|---|---|
| Lump sum required | Yes (typically $250k-$2M) | No | Partial (e.g. $275k) |
| Daily payment | $0 | ~$80-$200/day | Reduced (proportional) |
| Refundable on departure? | Yes — full refund | No | Yes — partial refund |
| Best when | Long stay + low alternative return | Short stay or high alternative return | Most situations — balanced |
| Govt guarantee? | Yes — up to $187,000 | N/A | Yes — on the RAD portion |
MPIR = Maximum Permissible Interest Rate set quarterly by the Federal Government. Current rate as at 1 January 2026: 8.38%.
Worked example: $550,000 RAD facility
A typical Sydney facility publishes a $550,000 RAD. The resident has three lawful options:
- Pay the full $550,000 RAD. $0/day accommodation cost. $550,000 refundable on departure.
- Pay the equivalent DAP. $550,000 × 8.38% ÷ 365 = $126.27/day = $46,089/year. Non-refundable. Lump sum stays invested in your portfolio.
- Pay half-half. $275,000 lump sum + $63.13/day DAP ($23,043/year). Most common option.
If the resident stays 3 years and chooses Full DAP, they pay $138,267 in accommodation fees — money they'll never see again. If they pay Full RAD, they (or their estate) get the entire $550,000 back. Mathematically, if the resident could reliably earn >8.38% net after tax on the $550,000, DAP would be cheaper. Most retirees in 2026 cannot — Australian deposit rates sit at 4-5% with risk-free returns net of tax around 3.5%. RAD wins.
When DAP makes sense
Three scenarios where DAP is the better choice:
- Very short expected stay. Acute respite or palliative situations where the stay is <6 months — DAP avoids tying up a lump sum that has to be liquidated again quickly.
- The home is being sold but settlement is delayed. DAP during the interim (typically 3-6 months) gives flexibility — pay DAP, then convert to RAD when funds arrive.
- Your investment alternative reliably beats MPIR. Active investors with a 10%+ net return record may prefer to deploy capital and pay DAP. Statistically rare.
When half-half makes sense
Half-half is the practical compromise — partial cash deployment + some lump sum protection. Most families use it because: (a) it doesn't force the home sale, (b) it preserves some liquidity for unexpected costs, (c) it reduces daily cash flow by 50%, (d) the half RAD is still refundable on departure. Half is also a starting position — many families pay 50% RAD initially and top up to 100% RAD within 12 months as estate planning settles.
How the home interacts with RAD/DAP
The family home is means-test exempt if a "protected person" remains there: spouse, dependent child, or a carer who has lived in the home 5+ years. If exempt, the home value does NOT count toward the asset test (which determines means-tested care fee). However, the home value also can't be used to fund the RAD without selling it.
If no protected person remains, the home is means-test counted UP TO $206,663 (the asset cap for aged care). Anything above that cap is excluded from the asset test. So even a $3M home only counts as $206,663 for means-test purposes.
Bridging-finance options (reverse mortgages, family loans) allow paying full or partial RAD without selling the home — useful for families wanting to retain the property for inheritance or future sale at better timing.
FAQ
What is a RAD?
Refundable Accommodation Deposit. A lump-sum payment to cover your accommodation in a residential aged-care facility. Fully refundable when you leave (death or transfer). Government-guaranteed up to $187,000. Published RAD prices in Australia 2026 range from ~$250,000 (entry-level shared rooms in regional facilities) to $2M+ (premium harbour-view suites in capital-city flagship facilities).
What is a DAP?
Daily Accommodation Payment. The daily-rent equivalent of the RAD. NOT refundable — paid continuously while you reside. Formula: DAP/day = (RAD × MPIR) / 365. With MPIR currently 8.38%, a $500,000 RAD equals $114.79/day DAP, or $41,898/year. The MPIR is set by the Federal Government quarterly.
Can I pay half RAD and half DAP?
Yes — this is the most common arrangement. You pay a partial RAD lump sum + the equivalent DAP on the remainder. For example: $550,000 published RAD → pay $275,000 lump sum + $63.13/day DAP on the other $275,000. Provides liquidity flexibility while reducing daily costs.
Which is cheaper, RAD or DAP?
Depends on (1) length of stay + (2) what return you can earn on the lump sum vs MPIR. Mathematically: if you can earn >MPIR (8.38% net after tax) on the cash, DAP is cheaper. Most retirees can't reliably beat 8.38% after tax, so RAD is the default. Average stay in residential aged care is 2.8 years — over a longer stay, RAD has more advantage.
Do I have to sell my home for the RAD?
No. Five lawful options: (1) Full RAD via home sale, (2) Half RAD + DAP — partial lump sum, (3) Full DAP — daily only, no lump sum, (4) Bridging finance / reverse mortgage, (5) Family contribution. If a "protected person" (spouse, dependent child, carer who lived in the home 5+ years) still lives there, the home is means-test exempt — keep it.
What happens to the RAD when I die?
Fully refundable to your estate within 14 days of departure (death or transfer). Government-guaranteed up to $187,000 per resident (Australian Government guarantees the RAD if the provider becomes insolvent). The estate receives the published refundable amount LESS any deductions for unpaid fees or daily-rate retention (typically nil; some facilities deduct up to $500/year for first 5 years).
What is the MPIR?
Maximum Permissible Interest Rate, set by the Federal Government quarterly (each 1 January, 1 April, 1 July, 1 October). MPIR reflects market interest rate environment. As at 1 January 2026: 8.38%. This rate converts RAD to equivalent DAP. The MPIR has ranged 4-9% over the past decade.
Are there any tax implications?
Aged-care residents: RAD is NOT taxable. DAP is NOT tax-deductible. Means-tested care fee is NOT tax-deductible. Some private health insurance and Veterans' Affairs entitlements interact with the means test — get advice from an Aged Care Specialist Adviser (the government subsidises an $800 one-off consultation).
Next step
Use our means-test calculator to estimate your exact RAD/DAP/means-tested cost. Then browse facilities with published RAD prices — no callback gates.