Aged Care Costs: Understanding RADs and What’s Ahead
Written by Luisa Capezio, Aged Care Adviser at Phillips Wealth Partners
As we anticipate the implementation of new aged care fees on 1 July 2025, it is worth noting that Refundable Accommodation Deposits (RADs) are already on the rise.
The average RAD in Canberra is now 10% higher at around $620,000.
What is a RAD?
A RAD is not just a catchy acronym; it is a lump sum payment made by residents entering aged care facilities in Australia to cover accommodation costs. I often describe it as paying for the ‘bricks and mortar’ as well as the amenities of a residential care service. The pricing and mindset are somewhat similar to purchasing a home, except entry is restricted based on eligibility.
To qualify for entry into an aged care home, a person must:
- Be 65 years of age or older, or
- Be 55 years of age or older if Aboriginal or Torres Strait Islander, and
- Have been assessed and approved by the Aged Care Assessment Team (ACAT).
On 1 January 2025, the maximum RAD (or its equivalent daily accommodation payment) that can be charged without approval from the Independent Health and Aged Care Provider Association (IHACPA) increased to $750,000. From 1 July 2025, this amount will be indexed annually to the Consumer Price Index (CPI).
The RAD is often a financial pain point for families transitioning a loved one into residential aged care due to its high cost. While pricing is typically based on local property values in the immediate area, this is not always the case, and there appears to be limited oversight in how these figures are set.
This payment is fully refundable when the resident leaves the facility or passes away, minus any agreed-upon deductions. RADs are backed by the Federal Government, provided the care provider is approved under the Aged Care Act. Additionally, the RAD is exempt from Centrelink and Department of Veterans’ Affairs (DVA) income and asset tests, potentially increasing age or service pension entitlements. Paying a RAD can also reduce daily care fees, improving cash flow.
Paying for the Room
Aged care facilities set and advertise their accommodation prices as a lump sum, which can be found on their websites and My Aged Care. Residents have the option to pay the RAD in full or convert part (or all) of it into a Daily Accommodation Payment (DAP), which functions like rent.
Paying a lump sum is similar to purchasing accommodation rights, while opting for a DAP is akin to "renting" the room.
RADs in Canberra
Last year, I examined the average RAD for a single room with a private ensuite in Canberra. Just three months later, the average RAD has increased by approximately 10%, now sitting at around $623,125 (or rounded to $620,000). My analysis was based on advertised prices from the My Aged Care website, which facilities update regularly.
For those entering aged care, the first step is determining whether the person entering will be classified as:
- A market-price resident, meaning they must cover the full cost of accommodation, or
- A low-means resident, who may receive government support.
Identifying this status early is crucial, as it directly impacts the cost of the room/RAD.
Looking Ahead
Aged care fees are set to become even more complex, and the upcoming reforms suggest an overall increase in costs. Staying informed is key to making sound financial decisions about your care.
Want to learn more? Join us for an educational event on **7 May 2025 **New aged care costs & Estate planning as capacity changes. We are covering:
- An update on aged care reforms and policy changes.
- The funding models for home, residential, and other aged care options.
- Practical strategies for aged care financial planning, including worst-case scenarios.
