Understanding RAD vs RAC in Aged Care

Understanding RAD vs RAC in Aged Care

How accommodation payments work for high-means and low-means residents (as at March 2025)

When moving into permanent residential aged care, you will often hear about Refundable Accommodation Deposits (RADs) and Refundable Accommodation Contributions (RACs). While they sound similar, they apply in very different situations depending on your assets and income.

This guide explains, in simple terms, how they work and why they matter.

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RAD = For High-Means Residents (The sticker price)

If you are assessed as a high-means resident, you will be asked to pay a RAD. Think of this like buying or renting a home in the private market — you pay the price advertised.

• The aged care provider will advertise a room price, e.g., $550,000.

• If you are a high-means resident, you are expected to pay that amount — either in full or partly.

• Any unpaid portion will attract interest. The current interest rate (called the MPIR) is 8.17% (as at March 2025).

Example:
If the RAD is $550,000 and you pay $300,000 upfront, you will pay interest (at 8.17%) on the remaining $250,000.

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RAC = For Low-Means Residents (A means-tested RAD)

If you are assessed as a low-means resident, you will instead pay a RAC. This is like a means-tested version of the RAD, adjusted based on what you can afford.

• The RAC is calculated by the government based on your assets and income.

• The lower your assets and income, the smaller the RAC.

• Some residents may pay no RAC at all, depending on their financial situation.

Simple Analogy:
The RAD is like paying full market rent.
The RAC is like paying an adjusted amount, similar to a housing commission or social housing model — the more you have, the more you contribute.

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How do I know if I am a low-means resident?

Your eligibility is assessed by Centrelink (or DVA) when you complete a Residential Aged Care Means Assessment. The key thresholds as at March 2025 are:

If your assets are below $206,633.20 (plus there is an income component), you will likely be assessed as a low-means resident and pay a RAC instead of a full RAD.

You will usually see the result of this assessment in your formal letter from Services Australia — but don't worry, we can help you work this out if you’re unsure.

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Why does the RAC vary?

Unlike a RAD which is simply the advertised price, the RAC varies because:

• It depends on your assets and income.

• It is affected by whether the aged care home is:

  • Standard

  • Refurbished

  • Has more or less than 40% low-means residents

These factors determine the final RAC calculation, which is why we will always check these details with the provider upfront.

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Interest and Daily Payments (DAPs & DACs)

Whether you are paying a RAD or a RAC, if you don't pay the full amount upfront, you will pay interest on the unpaid portion.

• For RADs, this creates a Daily Accommodation Payment (DAP).

• For RACs, this creates a Daily Accommodation Contribution (DAC).

• The interest rate (called the MPIR) is currently 8.17% (as at March 2025).

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Why do we ask for so much information upfront?

We need to:

• Confirm if you are a high-means or low-means resident.

• Calculate if you will pay a RAD or RAC.

• Estimate your potential DAP or DAC if you don’t pay the full amount upfront.

• Check the aged care provider’s current supplements, as they directly affect the RAC calculation.

This allows us to make sure:

• You pay the correct amount.

• Centrelink records match.

• You don’t run into any surprises later.

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TL;DR Version (Simple Summary)

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Reminder: If you’re not sure whether you are a low-means or high-means resident, don’t stress — we will help you check using your Centrelink letter and aged care provider information.