Aged Care Costs in Australia: RAD, DAP and Fee Reforms Explained

What are aged-care costs in Australia?

"Aged-care costs" in Australia usually refer to the fees paid by, or on behalf of, a person receiving Australian Government-subsidised residential aged care. Residential aged care is the regulated care that used to be described as a "nursing home" — it is a different regime from a retirement village, which is governed by state-based retirement-village legislation and is not aged care.

Residential aged-care costs generally break into four categories:

• Accommodation payment — the price for the resident's room and shared facilities, payable as a RAD, a DAP, or a combination.
• Basic Daily Fee — a daily fee every resident pays, set as a percentage of the single-person basic age pension.
• Means-tested care contribution — for residents assessed by Services Australia as able to contribute towards their care costs.
• Additional or extra service fees — optional, for higher-standard accommodation or additional services offered by the provider.

RAD, DAP and combination payments explained

A resident's accommodation price is agreed with the provider before entry and set out in the Accommodation Agreement. The resident then chooses how to pay it.

Refundable Accommodation Deposit (RAD)

A RAD is a lump-sum payment for the right to occupy the room. It is refundable to the resident (or their estate) on departure, subject to permitted deductions under the aged-care legislation. RAD balances are backed by the Commonwealth Government's Accommodation Payment Guarantee Scheme if an approved provider becomes insolvent.

Daily Accommodation Payment (DAP)

A DAP is the equivalent daily amount, calculated by applying a legislated interest rate — the Maximum Permissible Interest Rate (MPIR) — to any unpaid portion of the agreed accommodation price. Unlike a RAD, a DAP is not refundable; it is a rental-style payment for the period of occupancy.

Combination payments

Most residents pay a combination — for example, a partial RAD with a DAP on the balance. The chosen split determines how much of the resident's capital is tied up in the RAD, and how much is paid out of income or drawn from the RAD over time. The decision has legal, financial, Centrelink and estate-planning consequences and should not be made in isolation.

Other aged-care fees families may encounter

• Basic Daily Fee — a set daily fee charged to all residents; the rate is legislated as a percentage of the single age pension and updated in line with pension indexation.
• Means-tested care contribution — an assessed contribution towards the cost of care, based on a Services Australia income and assets assessment. Annual and lifetime caps apply.
• Additional or extra service fees — charged where a resident chooses a higher-standard room or additional services (for example, premium meals or lifestyle programs).
• Hotel-style incidentals — hairdressing, private telephone, pay-TV and similar items are usually billed separately.

Under the aged-care legislation, providers cannot ask a resident to pay both a RAD and a DAP on the same portion of the accommodation price — the resident chooses the payment structure. However, the ongoing care fees above apply regardless of the accommodation payment structure.

What changed under the newer aged-care framework

The Aged Care Act 2024 (Cth) commenced on 1 November 2025, replacing the earlier Aged Care Act 1997 (Cth). At the same date, Support at Home replaced Home Care Packages and Short-Term Restorative Care as the primary Commonwealth in-home aged-care program.

Broadly, the reforms updated:

• the regulatory framework for approved providers;
• the statement of residents' rights and quality standards;
• arrangements for resident contributions towards care and everyday-living costs; and
• reporting, funding and complaint-handling processes.

Importantly for families making decisions today:

• Residential aged-care accommodation is still paid via RAD, DAP or a combination.
• The Basic Daily Fee, means-tested contribution and additional-service concepts continue, with updated settings.
• Support at Home is a separate in-home program and does not itself involve a RAD or DAP — this article does not deal with Support at Home in detail.
• Specific dollar figures, contribution caps and interest rates change from time to time and should always be confirmed as at the date of the decision.

Legal issues families should check before agreeing to aged-care costs

The financial side of an aged-care decision belongs to financial advisers and accountants. The legal side is where Parke Lawyers helps. Before any Accommodation Agreement is signed or any RAD paid, we routinely check:

• The Accommodation Agreement itself — the agreed accommodation price, the payment method chosen, extra-service inclusions and any additional charges.
• The Resident Agreement — the terms of occupancy, service inclusions and complaint mechanisms.
• Who has authority to sign — a valid enduring power of attorney is usually essential; without it, VCAT administration may be required.
• Any retirement-village exit entitlement — often the pool of money that will fund the RAD or DAP. See our retirement village agreement checklist for the exit-side detail.
• Sale of the family home — timing, contract terms and how the proceeds will be applied.
• Interaction with the Will and estate plan — the RAD refund will usually pass through the estate.

Capacity, powers of attorney and who can sign documents

By the time a residential aged-care decision arises, the resident's capacity may already be reduced. Two questions drive what happens next: does the person still have decision-making capacity for the specific decision, and if not, who has legal authority to act?

A valid, current enduring power of attorney is the simplest answer. An attorney can generally sign Accommodation and Resident Agreements, deal with the provider, pay the RAD, negotiate additional services and manage ongoing fees — provided the appointment is broad enough and the attorney acts in the principal's best interests. See our guide to powers of attorney in Victoria for the framework.

Where no appointment exists, the appointment is narrow or was made after capacity was lost, an application to VCAT for administration (financial) and, if needed, guardianship (personal and health) may be required — usually at short notice. A short pre-signing scope-of-authority check by a lawyer often avoids that scramble.

How aged-care costs affect estate planning

A move into aged care is one of the best triggers for an estate-plan review. Key points that commonly change:

• The RAD refund is generally payable to the estate on death, subject to permitted deductions and statutory refund timeframes — and may become one of the estate's largest assets.
• Specific gifts of the family home may be defeated if the home is sold to fund the RAD; gifts of "the balance of my bank account" may take on a very different meaning.
• Superannuation death-benefit nominations may need revisiting where superannuation is drawn down to fund accommodation.
• Executors will need to deal with RAD refunds and provider account reconciliations — see our guide to probate in Victoria for the estate-administration framework.
• Family dynamics change when one child bears the day-to-day burden and another does not — refreshing the Will and enduring appointments avoids later disputes.

Coordinated advice from our wills and estate planning and retirement living and aged care teams keeps the aged-care decision, the estate plan and the family's decision-making authority pulling in the same direction.

Practical checklist before agreeing to RAD or DAP arrangements

• Copy of the proposed Accommodation Agreement and Resident Agreement obtained.
• Agreed accommodation price confirmed in writing.
• RAD-only, DAP-only and combination options modelled with the family's financial adviser.
• Current Maximum Permissible Interest Rate (MPIR) confirmed as at the date of decision.
• Basic Daily Fee and any means-tested contribution estimate obtained (Services Australia assessment lodged if not already done).
• Extra-service or additional-service inclusions and pricing understood.
• Enduring power of attorney reviewed for scope; alternative arrangements (VCAT administration) considered where the appointment is inadequate.
• Interaction with any retirement-village exit entitlement mapped, including timing risk.
• Impact on the family home reviewed — sale, retention or family use.
• Will and superannuation nominations reviewed for consistency with the new arrangements.
• Refund-on-death timeframe and process for the RAD confirmed.
• Complaints and dispute-resolution processes noted.

When to seek legal advice

We recommend obtaining independent legal advice — coordinated with the family's financial adviser and accountant — before:

• signing an Accommodation Agreement or Resident Agreement;
• paying a RAD from the sale of the family home or a retirement-village exit;
• an attorney signs aged-care documents on behalf of a parent;
• agreeing to additional-service fees;
• disagreements arise between adult children about funding or facility choice;
• a resident's capacity is uncertain and no valid enduring power of attorney is in place; and
• a resident has died and the estate needs to recover the RAD.

Frequently Asked Questions