UNDERSTANDING RAD VS DAP: AGED CARE ACCOMMODATION PAYMENTS EXPLAINED

Choosing how to pay for aged care accommodation affects your money right now and for years ahead. Perth families face two main choices: RAD or DAP. A big change happened on 1 November 2025 that makes this decision even more important.

Here's what changed. RAD used to be 100% refundable when you left care. Now, facilities can keep up to 10% of your RAD over five years. That's a huge shift. A $500,000 RAD could mean losing $50,000 that won't come back.

This guide breaks down RAD vs DAP in plain English. You'll learn what each option costs, how the new retention rules work, and which choice might suit your family's situation. Let's start with the basics.

WHAT ARE RAD AND DAP PAYMENTS

RAD: The Lump Sum Option

RAD stands for Refundable Accommodation Deposit. Think of it like a big security deposit for your aged care room. You pay it upfront when you move in. The facility holds your money. When you leave care (or pass away), they give most of it back to you or your estate.

Here's the catch from 2025 onwards. Facilities now keep 2% of your RAD each year. This is called "retention." They calculate it daily (a small amount each day). Over five years, they can keep up to 10% maximum. After five years, they stop taking retention even if you stay longer.

RAD amounts vary widely across Perth. You might see $50,000 for basic rooms. Premium rooms can cost $1 million or more. The exact amount depends on the facility, room type, and location. Quality Perth facilities like Regents Garden provide clear pricing for their aged care costs and accommodation options upfront.

Let's look at a real example. Say you pay $500,000 as RAD. Here's what happens over five years:

• Year 1: They keep $10,000 (2% of $500,000). Balance: $490,000
• Year 2: They keep $9,800 (2% of $490,000). Balance: $480,200
• Year 3: They keep $9,604 (2% of $480,200). Balance: $470,596
• Year 4: They keep $9,412 (2% of $470,596). Balance: $461,184
• Year 5: They keep $9,224 (2% of $461,184). Balance: $451,960

After five years, you'd get back roughly $452,000. The facility keeps about $48,000. That's just under the 10% maximum cap.

DAP: The Daily Payment Option

DAP stands for Daily Accommodation Payment. This works like rent. Instead of paying a lump sum upfront, you pay a daily charge. No big deposit needed. You keep your savings in your bank account.

The government sets an interest rate called the MPIR. Think of it as the "conversion rate" between RAD and DAP. Right now (January 2026), it's 7.65%. This rate converts any RAD amount into its daily equivalent.

Here's the formula: Take the RAD amount, multiply by 7.65%, then divide by 365 days. For a $500,000 RAD, that works out to $104.79 per day. That's about $38,248 per year.

The key difference? With DAP, there's no retention. You're not losing 10% of a lump sum over time. But you're paying ongoing daily charges that add up. Those charges continue for as long as you're in care.

DAP suits families who need to keep their cash liquid. Maybe you're waiting for a house sale. Perhaps you need that money for other family expenses. Or you simply prefer not to tie up $500,000 in an aged care deposit.

Combination Payments: The Middle Ground

You don't have to choose 100% RAD or 100% DAP. Most families mix both. This gives you flexibility. You might pay $300,000 as RAD and the remaining $200,000 as DAP.

Here's how the maths works. Take our $500,000 example. If you pay $300,000 as RAD, the unpaid $200,000 becomes DAP. That $200,000 × 7.65% ÷ 365 days = $41.92 daily. Much less than the full $104.79 DAP.

Retention only applies to the RAD portion you actually pay. In this case, 2% retention applies to $300,000, not the full $500,000. Maximum retention over five years: $30,000 instead of $50,000.

You can adjust your RAD payment later too. Start with $100,000 as RAD. Then top it up to $200,000 when your house sells. Your daily DAP drops accordingly. This flexibility helps families manage changing circumstances.

THE 2026 RETENTION CHANGE EXPLAINED

How Retention Actually Works

Retention is calculated daily, not once a year. Here's what that means. On a $500,000 RAD, the daily retention is about $27.40. That's $500,000 × 2% ÷ 365 days. Small daily deductions add up to roughly $10,000 per year.

The retention keeps going for five years from when you first pay the RAD. After five years, it stops. Even if you stay in care for ten years, they only take retention for the first five. The maximum they can ever keep: 10% of the original RAD amount.

Think of it like a slow leak rather than a sudden deduction. You don't see $10,000 disappear all at once. Instead, about $27 per day quietly reduces your balance. Over months and years, this adds up significantly.

Who Does This Apply To

The 2% retention only applies if you entered aged care on or after 1 November 2025. Already in care before 31 October 2025? You're protected. Your RAD stays 100% refundable under the old rules (minus any fees you owe).

This protection also covers people approved for Home Care Packages back on 12 September 2024. Even if you don't actually move into residential care until 2026 or later, you keep the old rules. The government wanted to protect people already in the aged care system.

Moving between facilities? You keep your protected status if you transfer within 28 days. Take longer than 28 days? You might get moved onto the new retention system. Timing matters when changing facilities.

Why This Changes Everything

Before November 2025, RAD was marketed as "fully refundable." That's no longer true. You now lose up to 10% over time. For a $500,000 RAD, that's $50,000 that never comes back to your family.

This changes how you should think about RAD vs DAP. The old decision was mainly about cash flow: Do I have the lump sum available? The new decision includes permanent capital loss: Am I okay losing 10% in exchange for no daily charges?

Estate planning gets affected too. Your children inherit less when $50,000 disappears through retention. Some families now prefer DAP despite higher ongoing costs. They'd rather pay $38,000 yearly but keep their $500,000 principal intact.

COMPARING THE COSTS: REAL EXAMPLES

Example 1: Full RAD Payment

Let's say you pay $500,000 as full RAD. Here's what this costs you:

• Upfront: $500,000 tied up (can't use this money for anything else)
• Daily charges: Zero accommodation costs
• Yearly retention: Roughly $10,000 for first five years
• Total retention: About $48,000 over five years
• Final refund: Approximately $452,000

Who does this suit? Families with accessible savings who want no ongoing daily accommodation charges. You lose $48,000 to retention, but you avoid paying $38,000+ yearly in DAP. If you stay longer than five years, you actually save money versus DAP.

Example 2: Full DAP Payment

Now let's look at paying 100% DAP instead. No lump sum at all:

• Upfront: Zero (you keep your $500,000)
• Daily charges: $104.79 per day
• Yearly cost: $38,248
• Five-year total: $191,240
• Your savings: Still have full $500,000

Who does this suit? Families who need liquidity. Maybe you're earning good returns investing that $500,000. Perhaps you have other family members who need financial support. Or you expect a shorter stay in care (one to three years) and don't want to tie up capital.

Example 3: 50/50 Combination

Many Perth families split the difference. Pay $250,000 as RAD, keep $250,000 liquid:

• Upfront RAD: $250,000
• Daily DAP: $52.40 ($250,000 × 7.65% ÷ 365)
• Yearly DAP cost: $19,126
• Retention on RAD: Maximum $25,000 over five years
• Five-year DAP total: $95,630
• Total five-year cost: $120,630 (retention + DAP)

This middle ground gives you meaningful daily cost reduction (half the full DAP rate) while keeping $250,000 available. Retention caps at $25,000 instead of $50,000. Many families find this balance works well.

The Break-Even Point

When does RAD become cheaper than DAP? Let's do the maths. Full RAD costs you $48,000 in retention over five years. Full DAP costs you $191,240 over five years. RAD clearly wins if you stay five years or longer.

But what about shorter stays? If you're only in care for two years, DAP costs $76,496 total. RAD retention over two years is about $19,400. But you've also tied up $500,000 for two years. Could you have earned returns investing that money?

This is where professional financial advice helps. An aged care financial specialist models your specific circumstances. They factor in your investment returns, Centrelink impacts, tax situation, and estate goals. The "cheaper" option depends on your complete financial picture.

MAKING YOUR DECISION: WHAT TO CONSIDER

When RAD Makes Sense

Consider paying RAD if you:

• Have accessible lump sum savings (not locked in superannuation)
• Want to minimise ongoing daily costs
• Expect to stay in care for five years or longer
• Prefer predictable costs (retention caps at 10%)
• Don't need that money for other purposes
• Have strong monthly income to cover other aged care fees

Even with 10% retention, RAD eliminates daily accommodation charges. That's $38,000+ per year you're not paying. Over a longer stay, the savings outweigh the retention cost. Plus, you know exactly what retention will cost (maximum 10%). DAP can increase if interest rates rise.

When DAP Makes Sense

Consider paying DAP if you:

• Need to keep your savings liquid and accessible
• Expect a shorter stay in care (one to three years)
• Can afford the ongoing daily costs from pension or income
• Want to preserve capital for estate planning
• Are earning good returns investing your savings
• Don't want to lose 10% to retention

DAP protects your capital completely. No retention deductions ever. Your full $500,000 stays invested or available for family needs. Some families would rather pay $38,000 yearly and keep their principal than lose $50,000 permanently to retention.

When Combination Works Best

Most Perth families choose combination payments. Here's why this often makes sense:

• Reduces daily costs without tying up all your savings
• Limits retention exposure (2% only applies to RAD portion)
• Provides flexibility to adjust later
• Balances cash flow needs with capital preservation
• Lets you start conservative and increase RAD if house sells

A 50/50 split often works well. You get 50% reduction in daily costs. You keep 50% of your capital liquid. Retention caps at half what full RAD would cost. This middle ground gives you benefits of both approaches.

The 28-Day Decision Period

You have 28 days after entering care to decide. During this time, you pay DAP unless you've already paid RAD. Any DAP you pay in these 28 days is not refundable if you later choose RAD.

This means deciding quickly benefits you if you're leaning toward RAD. Every day of DAP during the decision period is money that won't come back. But don't rush such an important decision. Use the time to:

• Speak with an aged care financial specialist
• Review your complete financial situation
• Understand transparent pricing and payment options
• Model different scenarios for your circumstances
• Consider estate planning implications

Quality facilities support families through this decision. They provide detailed breakdowns, connect you with independent financial advisers, and answer all your questions about RAD vs DAP aged care choices.

UNDERSTANDING THE MPIR (INTEREST RATE)

What Is MPIR

MPIR stands for Maximum Permissible Interest Rate. This is the rate the government sets to convert between RAD and DAP. Think of it as the official "exchange rate" for accommodation payments.

The government reviews MPIR every three months. It's based on government bond yields. When bond yields go up, MPIR goes up. When they go down, MPIR goes down. Right now (January 2026), MPIR sits at 7.65%.

This rate directly affects your DAP. Higher MPIR means higher daily charges. A $500,000 RAD converts to $104.79 daily at 7.65%. If MPIR dropped to 5%, that same RAD would only cost $68.49 daily. That's a big difference.

How MPIR Changes Affect You

If you pay full RAD, MPIR changes don't affect you. You're paying zero daily charges regardless of what interest rates do. But if you're paying any DAP, MPIR movements matter.

Say you're on full DAP at current 7.65% MPIR. Your daily charge is $104.79. MPIR increases to 8.5% next quarter. Your daily charge jumps to $116.44. That's an extra $11.65 per day, or $4,252 more per year. No warning, no choice. Your costs just increased.

This volatility makes full DAP riskier for long-term affordability. Combination payments give you some protection. If you're paying 50% RAD and 50% DAP, an MPIR increase only affects half your accommodation payment.

WHAT ABOUT OTHER AGED CARE FEES

RAD and DAP Are Just Accommodation

Understanding RAD vs DAP is important. But remember, these only cover your accommodation (your room). You'll have other aged care fees on top of whichever accommodation payment you choose.

From November 2025, aged care fees changed significantly. The main fees you'll pay are:

• Basic Daily Fee: $65.55 per day (everyone pays this)
• NCCC: Non-Clinical Care Contribution (if your assets exceed $532,000)
• HSC: Hotelling Supplement Contribution (if your assets exceed $252,000)
• Accommodation: Your RAD, DAP, or combination payment
• HELF: Higher Everyday Living Fee (optional premium services)

The Basic Daily Fee covers fundamental living costs. NCCC and HSC are means-tested (based on your income and assets). These are separate from accommodation payments. You'll pay them regardless of whether you choose RAD or DAP.

Total Monthly Costs Example

Let's look at total costs for someone with $750,000 in assets paying 50/50 combination on $500,000 accommodation:

• Basic Daily Fee: $65.55 per day
• NCCC: About $75 per day (estimated for $750K assets)
• HSC: $22.15 per day (maximum rate)
• DAP: $52.40 per day (50% of $500K accommodation)
• Total daily cost: About $215 per day
• Monthly cost: Roughly $6,450
• Annual cost: Approximately $78,475

Plus you've paid $250,000 as RAD upfront (subject to retention). This shows why understanding your complete fee structure matters. RAD vs DAP is just one piece of the puzzle.

GETTING PROFESSIONAL ADVICE

Why You Need Expert Help

RAD vs DAP decisions involve large amounts of money. A $500,000 decision deserves professional guidance. Aged care financial specialists understand things like:

• How retention affects your estate planning
• Centrelink impacts of different payment choices
• Tax implications for your situation
• Optimal timing for house sales
• Investment return comparisons
• Family home exemption rules

These specialists model your complete circumstances. They show you total costs under different scenarios. You can see exactly how RAD, DAP, or combinations affect your finances over time. This modelling often reveals the "best" choice isn't obvious.

Where to Find Specialists

Look for financial advisers who specialise in aged care. General financial planners often lack deep aged care expertise. You want someone who knows the 2026 fee changes, understands retention rules, and models aged care scenarios daily.

Quality aged care facilities can refer you to independent specialists. Regents Garden provides connections to aged care financial advisers who help Perth families navigate these complex decisions. These advisers work independently, not for the facility, so their advice is unbiased.

The Australian Government's My Aged Care website also lists approved aged care financial information services. These services provide free basic guidance, though complex situations benefit from paid professional advice.

CONCLUSION

Understanding RAD vs DAP helps you make smarter decisions about aged care accommodation payments. The 2026 retention rules changed everything. RAD is no longer "100% refundable." You now lose up to 10% over five years. This affects whether RAD or DAP makes better financial sense.

RAD suits families with accessible savings who want no daily accommodation charges. Yes, you lose 10% to retention. But you avoid $38,000+ in yearly DAP payments. DAP suits families who need liquidity or expect shorter care stays. You pay more ongoing costs, but your capital stays intact.

Most Perth families choose combination payments. This balances daily cost reduction with capital preservation. You get benefits of both approaches while limiting retention exposure. The 50/50 split often works well, though your optimal ratio depends on your circumstances.

Professional financial advice is essential. Specialists model your complete situation including retention costs, Centrelink impacts, tax implications, and estate planning. They help you see which option truly costs less when all factors are considered.

Quality Perth facilities provide transparent information about accommodation pricing and support families through these decisions. Facilities offering restaurant-quality meals and comprehensive wellness programs demonstrate commitment to quality care alongside fair pricing practices.

For families seeking aged care that prioritises transparency and quality, contact the care team at (08) 6117 8178 to arrange personalised facility tours. Regents Garden operates aged care residences across five Perth locations: Bateman, Lake Joondalup, Booragoon, Aubin Grove, and Scarborough, with retirement villages at Lake Joondalup and Aubin Grove.