1. RAD and DAP in Plain English
If you are asking what is RAD and DAP in aged care, start with the room price. Before moving in, you and the aged care home agree the price of the room. RAD and DAP are simply two ways to pay that same accommodation price: a Refundable Accommodation Deposit (RAD) is a lump sum, while a Daily Accommodation Payment (DAP) is a recurring daily payment on the amount you have not paid upfront. You do not have to choose only one; any split is allowed.
| Payment | How it works | Refund position |
|---|---|---|
| RAD | You pay part or all of the agreed room price as a lump sum. | The remaining balance is refunded when you leave, less applicable retention and agreed deductions. |
| DAP | You pay a daily amount calculated on the unpaid part of the room price. | Not refunded. It works like rent for the unpaid accommodation amount. |
| Combination | You pay some RAD and a smaller DAP on the balance. | Only the RAD balance follows the refund rules; DAP already paid is not returned. |
If a means assessment shows you are eligible for government help with accommodation, the names change to RAC and DAC: refundable accommodation contribution and daily accommodation contribution. The distinction matters because a RAD is counted as your asset in the aged care means assessment even if a family member pays it, so the choice can affect other fees.
2. MPIR and the Daily Payment Formula
The Maximum Permissible Interest Rate (MPIR) is the Australian Government rate used to convert an unpaid room price into a DAP. It is not a bank interest rate and it is not interest you earn on a RAD. The MPIR current for a new calculation is the rate in force on the day you agreed the room price. For 1 October to 31 December 2026, that rate is 8.51% per annum.
DAP amounts are indexed on 20 March and 20 September each year. That indexation is separate from the quarterly MPIR setting: the MPIR converts the unpaid price, while indexation can change the daily payment over time. Our MPIR explained guide covers the rate itself in more depth.
3. Worked Example: A $500,000 Room
Assume a room price of $500,000 and the MPIR of 8.51% that applies from 1 October to 31 December 2026. The three basic choices look like this before any later DAP indexation:
| Choice | Calculation | Result |
|---|---|---|
| All RAD | Pay $500,000 as a lump sum; unpaid amount is $0. | $0 DAP per day |
| All DAP | ($500,000 x 8.51%) / 365 | $116.58 per day |
| Combination | Pay a $200,000 RAD; ($300,000 x 8.51%) / 365 | $69.95 DAP per day |
The combination example also shows why “refundable” needs a second look under the 1 November 2025 arrangements. Providers must deduct RAD or RAC retention at 2% per annum, calculated daily on the balance, for no more than the first five years after the deposit was first paid. On an opening $200,000 balance, the initial daily retention calculation is ($200,000 x 2%) / 365 = $10.96 per day. It is deducted periodically from the RAD rather than billed as a separate daily cash fee, and the amount falls as the balance falls. Retention does not apply to every older arrangement, so check which fee arrangements apply to the resident.
4. Is It Better to Pay RAD or DAP?
There is no universal answer to is it better to pay RAD or DAP. A RAD often suits a person who has accessible capital, wants to reduce daily cash outgoings and understands that the refund will be the balance after lawful deductions. It can be less suitable if selling assets quickly would create losses, leave a partner short of living money or remove a buffer needed for other costs.
DAP often suits a person who needs care urgently, wants time before selling a home or investment, or prefers to keep funds liquid. Its weakness is easy to underestimate: the payments are not refunded and they continue for the whole stay. A combination is often the practical middle path because it lowers the daily payment without committing every available dollar.
Get independent advice before committing a large lump sum. Services Australia's Financial Information Service is free and can explain the pension and aged care fee implications, although it does not replace advice about investments or estate planning. Once you have a shortlist of splits, run them through the RAD vs DAP calculator and compare the result with your other daily fees in the aged care finance hub.
5. Refund Rules, Retention and the Government Guarantee
When a resident permanently leaves, the refund is the lump-sum balance minus applicable RAD or RAC retention and any deductions the resident agreed to, such as DAP or other fees being taken from the deposit. The balance must be refunded within 14 days after the day the person leaves.
Different timing applies when the person gives notice that they are moving to another home. With more than 14 days' notice, the balance is due on the day of leaving. With up to 14 days' notice, it is due within 14 days after notice is given. With no notice, it is due within 14 days after leaving. After a resident dies, the refund is due within 14 days after the provider receives probate or letters of administration, although a provider may pay sooner if it is confident the correct beneficiary has been identified.
No interest is earned while the person is receiving care. During the refund period, interest is paid at the Base Interest Rate; if the provider is late beyond the required period, interest is paid at the MPIR. A provider cannot require a resident to top up a RAD just because retention has reduced the balance. If a provider becomes bankrupt or insolvent and cannot refund the balance, the Australian Government's Accommodation Payment Guarantee Scheme covers the refund and applicable interest for residents of government-subsidised services.
6. Official Sources
Figures and rules were checked against My Aged Care's accommodation costs guide and accommodation refunds guide, and the Department of Health, Disability and Ageing's BIR and MPIR table and RAD and RAC retention rules.