Where your means assessment says you contribute towards the cost of your room, you can pay in one of three ways: a lump sum, a daily payment, or a mix of both. There is no universally "right" choice - it depends on your finances and preferences.
The refundable accommodation deposit (RAD)
A RAD is a lump sum, set at the room's agreed price. It is fully refundable to you or your estate when you leave the home (less any amounts you have agreed to have drawn from it). Because it is a lump sum, there is no ongoing interest-style cost - but it does tie up a large amount of capital.
The daily accommodation payment (DAP)
A DAP is a daily amount, a bit like rent, calculated from the room price using a Government-set interest rate. You pay no lump sum, which keeps your capital free, but the daily payments are an ongoing cost that is not refunded.
A combination
You can also pay part as a lump sum and part as a daily payment, in whatever split works for you - a middle path many families choose.
What to weigh up
- Do you have, or want to free up, a large lump sum (for example, from selling a home)?
- How do you value keeping capital and liquidity available?
- How might each option affect your age pension and overall means-tested fees?
- What are your estate planning wishes? A RAD is refundable to the estate.
You get time to decide
You do not have to choose immediately. On entering care you have up to 28 days to decide how to pay, and you pay a daily payment in the meantime - so there is no pressure to commit to a lump sum on day one.
This is a genuinely financial decision, and an aged care financial adviser can model the options against your pension and estate. See how it fits the bigger picture in our guide to aged care costs, or read about what happens to the family home.