The Difference Between RAD and DAP – A Guide
This is your easy to understand guide about these tricky terms, that are commonly used when discussing Aged Care Home fees.
Refundable Accommodation Deposit (RAD) and Daily Accommodation Payment (DAP) are two terms that you’ll often see pop up during your search for Aged Care Home fees.
Simply put, these terms indicate how you will pay for your loved one’s room price in a Nursing Home. It’s important for you to understand the difference between the two terms and which option best suits you when deciding on a Nursing Home.
As soon as you start researching Aged Care Home options for your loved one, one thing becomes evident: not all Aged Care Homes are equal.
Not only do they have different levels of accommodation and service, but their fees can also vary dramatically. In fact, the average RAD’s for Aged Care Homes can amount to anywhere between $400,000 to $1 million.
If your means assessment requires you to pay for your loved one’s Nursing Home accommodation without subsidies, it can be pretty overwhelming to know the difference between RAD and DAP. So, let’s look at a simple breakdown of what they are and what they mean for you.
Before moving into a Nursing Home, you can choose to pay the room price upfront in full. This payment option is known as a Refundable Accommodation Deposit (RAD), in which a lump sum payment is paid-in-full by yourself and is fully refunded when your loved one leaves the Nursing Home.
RAD is a bond based on the type of room you choose, and this deposit can be subjected to a deduction on other fees you may have agreed to. The benefit of paying a RAD is that it’s fully refundable and doesn’t have any interest attached to it. Most carers opt for selling their loved one’s home to fund the lump sum, which is a possible option that you could consider.
However, if paying a lump sum doesn’t seem like a viable option, there is another approach that could be more suitable for you – DAP.
Daily Accommodation Payment (DAP) is structured like a rental. You can choose to pay your accommodation charges periodically (i.e. monthly or fortnightly) through this method. You also will be charged an interest rate set by the government known as the maximum permissible interest rate (MPIR).
DAP is calculated by multiplying the RAD with the current government interest rate and dividing it by the number of days in a year. For example, if your room price is $800,000, you would calculate a DAP as follows:
DAP = (room price × MPIR) / 365
= ($800,000 × 8.15%) / 365
A DAP is suitable for carers who do not wish, or are unable to pay, a lump sum to the Nursing Home. While some carers would sell the family home to pay via a RAD, some family homes could still be occupied or have sentimental value to the carer. In this instance, a DAP option may be better.
Besides that, a DAP would suit carers who are moving a loved one into a Nursing Home only temporarily for rehabilitation or palliative care, as it’s more flexible and less hefty upfront.
If the Nursing Home allows it, you can also pay for the Nursing Home accommodation through a combined payment of RAD and DAP. This can be done by paying some of the RAD as a lump sum and the remainder as a DAP.
When deciding on the best way to pay for your loved one’s Nursing Home costs, you should consider your current needs and circumstances before deciding. There are many financial experts who can help you make the best decision for you and your family.
At CareAbout, we understand that going through financial matters for a Nursing Home can be difficult and stressful. Our Aged Care Home Advisors are here to help, and they can connect you with the best financial experts to give you trusted advice at no cost. Call us today for a free personalised chat on your needs at 1300 722 518. Or visit our website to learn more.