Residential Accommodation Payments - RAD, DAP, RAC and DAC
Current funding for aged care requires individuals to pay for their accommodation in a residential aged care home based on a price set and published by the aged care provider. This price varies depending upon the location and quality of the accommodation, with a safety net in place for individuals with low or moderate means - respectively, they will pay no accommodation costs or make a partial contribution (through a RAC or DAC - see below).
Only individuals above a certain means tested thresholds will pay the full accommodation price or "Refundable Accommodation Deposit" (RAD) and/or its equivalent, the "Daily Accommodation Payment" (DAP).
In essence, an individual has the choice to pay for accommodation costs either as a lump sum (RAD or RAC), as a daily fee (DAP or DAC) or a combination of either - see the table below for a summary of all these (unfortunately confusing) acronyms.
| RAD Refundable Accommodation Deposit |
An individual's contribution to accommodation costs where they receive no Government support and they elect to pay as a lump sum rather than as a daily payment. This amount is fully refundable at the end of aged care |
| DAP Daily Accommodation Payment |
An individual's contribution to accommodation costs where they receive no Government support and they elect to make a daily payment |
| RAC Refundable Accommodation Contribution |
An individual's contribution to accommodation costs where they are partially supported by the Government and they elect to pay as a lump sum rather than as a daily payment. This amount is fully refundable at the end of aged care. |
| DAC Daily Accommodation Contribution |
An individual's contribution to accommodation costs where they are partially supported by the Government and they elect to make a daily payment. |
Note that there is a reasonably simple relationship between the lump sum payments (RAD and RAC) and the daily payments (DAC and DAP) - and they are convertible based on a published interest rate, the Maximum Permissible Interest Rate (MPIR). This is best described using a couple of examples below.
|
Note that you will have 28 days from when you become a resident in an aged care facility to decide whether you pay a lump sum (RAD or RAC), daily payment (DAP or DAC) or a combination of both. If you choose to pay a RAD you will have 6 months in which to pay, with a DAP payable in the interim period. |
Converting between Daily Fees and Refundable (Lump Sum) Deposits, and Vice Versa
Converting a RAD to a DAP
Assume that you intend to reside in an aged care home that has the room that you want available for $450,000. You have the option of paying for that room with one lump sum payment of $450,000 (RAD), or its equivalent in terms of paying a daily fee (DAP), or a combination of RAD and DAP. Let's look at those latter two options;
Option 1: DAP OnlyYou convert the RAD into a full DAP equivalent by multiplying it by the Maximum Permissible Interest Rate (MPIR) which is regularly published by the Government - it is currently 4.89% (April, 2020) and that is used for the examples below. So, $450,000 x 4.89% = $22,005 per annum Divide by 365 to obtain a daily rate: $22,005/365 = $60.29 per day which is not refundable Option 2: 50% RAD and 50% DAPYou pay your accommodation costs by paying the aged care provider a RAD of $225,000 which is fully refundable to you or your estate, as well as a daily payment (DAP) calculated as follows: So, $225,000 x 4.89% = $11,003 per annum Divide by 365 to obtain a daily rate: $11,003/365 = $30.15 per day which is not refundable |
Converting a DAC to a RAC
If you are informed that you must contribute a certain daily amount (DAC) to your accommodation costs you can opt to pay this fully as a Refundable Accommodation Contribution (RAC) or as a combination of RAC and DAC. In the examples below you have been notified that you must make a contribution of $25.70 as a DAC towards accommodation costs.
Option 1: DAC to RACYou convert the DAC into a full RAC equivalent by dividing it by the Maximum Permissible Interest Rate (MPIR) which is regularly published by the Government - as at April 2020 it is 4.89% and that is the rate used for the examples below. So, $25.70 per day x 365 = $9,381 per annum Divide $9,380.50 by 4.89% (MIPR) = $191,830 which is fully refundable at the end of aged care Option 2: 50% DAC and 50% RACYou pay your accommodation costs by paying the aged care provider a DAC of $12.85 per day and a RAC of $95,915.13 - the latter of which is fully refundable. The RAC is calculated as follows: So, $12.85 per day x 365 = $4,690.25 per annum Divide $4,690.25 by 4.89% (MIPR) = $95,915.13 |
If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.