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Demystifying Investment Structures: A Simple Guide for Investors

Hello again all, Shane Brennan here. In the fifth article in my series, I’m exploring the world of investment structures. Imagine standing at the threshold of a vast financial landscape, each investment avenue beckoning with promise. Investment structures can .....

Wealth, Aged Care - 4 min read

A couple of years ago, the “accommodation bond” was terminated, and now we have the Refundable Accommodation Deposit (RAD) in its place. It still acts as a standard bond, and the price is set by the aged care facility you choose. It’s essentially a lump sum payment for a portion of your aged care.

At the same time, the “accommodation charge” became the Daily Accommodation Payment (DAP). It’s the equivalent of the RAD, but it’s paid periodically instead of just once. The DAP is calculated by first multiplying the facility’s RAD by the current government interest rate and then dividing by the number of days in the year.

Aged care providers are required to advertise both their RAD and their DAP figures so clients can make informed decisions about aged care costs. As the client, however, you may wonder which choice is the best for you. That’s a very good question, and it’s an important one to consider. In this post, we’ll focus on the details of the Refundable Accommodation Deposit (RAD) so you can decide if it’s the right option for you.


Living Longer, Living Better Regulations

Under the Living Longer, Living Better guidelines, you must be left with a minimum of 2.25 times the basic age pension after you’ve paid the RAD. The amount can be adjusted quarterly, so check with the current basic age pension rates for current figures.



If you’ve already paid a RAD to one facility and decide to relocate to a different facility, your RAD can’t be rolled over to the new aged care provider. It’s also important to note that the new provider is not allowed to charge an accommodation price that is higher than their advertised fees.


Deductions from RAD

If you pay a RAD, your aged care provider may deduct DAPs at your request. Other care fees, such as fees for additional services, may also be deducted from your RAD, but you have to make these arrangements with your provider. Get these arrangements set out in writing so everyone is clear about expectations, prices, and so forth.


Funding the Refundable Accommodation Deposit

Depending on the aged care facility you choose, the RAD could be hundreds of thousands of dollars. If you want to pay a lump sum upfront, you’ll need to figure out how to pay for it. Some people have enough left in their savings or from their investments to cover the RAD. Other people seek different options.

Some people look to their family home as a way to pay the RAD. They won’t be living in it after they move into the aged care facility, so selling it may be a good option. You could sell the home outright and use the proceeds to cover your RAD, or you could rent out the home and pay part of the deposit right away while paying part of the cost as a DAP.

One consideration to keep in mind is that if you sell your home, your means-tested aged care fees will be assessed at a much higher rate. For example, if you sell your home for $600,000, and the proceeds of your sale are in the bank. You’ll be assessed at $600,000 plus the rest of your assets. Your age pension might also drop, making your overall cash flow worse than if you hadn’t sold in the first place. 

To discuss the details of your aged care RAD, speak with an Altus Adviser. When you have a personalised plan at the ready, you’ll be well prepared for the future.


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