The hospital discharge officer’s voice was polite but firm.
“You need to find a permanent bed for your mother by Friday,” she had said, leaving a sense of quiet panic hanging in the hallway.
For many families in Melbourne and regional Victoria, this is how the aged care journey begins—not with a proactive plan, but with an urgent ultimatum.
Usually, within 48 hours, they are presented with a contract for a ‘Refundable Accommodation Deposit’ (RAD) that looks like a mortgage: $550,000, $700,000, or more.
The instinctive reaction is to find a way to pay it in full, often by rushing a ‘fire-sale’ of the family home, just to make the problem go away.
The default move isn’t always the right one
When you are under real emotional pressure, writing a cheque for the full RAD seems like the simplest path. It stops the daily interest charges and secures the room.
However, rushing this decision is a common trap for the ‘sandwich generation’—those of us managing our own careers and kids while suddenly becoming the primary decision-maker for an ageing parent.
Paying the RAD in full is a permanent move with six-figure consequences.
While it’s ‘refundable’, that money is often locked away for years. Before you sign, you need to understand that how you pay for aged care changes how much Age
Pension your parent receives and how much cash flow is left to actually improve their quality of life inside the facility.
Understanding the RAD/DAP split
Aged care funding is rarely an all-or-nothing choice. You essentially have three levers to pull, and getting the mix right is where the real strategy happens:
- The RAD (Refundable Accommodation Deposit): A lump sum payment. It is government-guaranteed and generally exempt from Centrelink’s asset test for the resident, but it ties up significant liquidity.
- The DAP (Daily Accommodation Payment): Think of this as the interest on the unpaid portion of the RAD. It’s a non-refundable daily fee.
- The Combination: You can pay part of the RAD and part of the DAP.
The “trap” occurs when families don’t realise that the DAP can actually be a useful tool.
By paying a smaller RAD and keeping more cash in the bank (or keeping the family home for a period), you might maintain a higher Age Pension payment that covers the DAP cost.
It’s a delicate balance of math and Centrelink rules that is almost impossible to calculate on the back of an envelope.
The ‘Stay vs. Sell’ Dilemma
Aged care advice isn’t just about the facility fees; it’s about the ripple effect on the family estate.
For example, if a parent moves into care and the family home is kept, it is often treated differently by Centrelink for a period of time compared to if it is sold immediately to fund a RAD.
We often see families sell the home, pay the $600,000 RAD, and then realise their parent’s Age Pension has been cut significantly because they now have too much ‘cash’ (even if it’s tied up in the facility).
Suddenly, the parent has a beautiful room but no discretionary cash flow for clothes, hairdresser visits, or extra physio.
What to do in the first 48 hours
If you are staring at a contract today, remember that the system allows for a cooling-off period and timeframe to decide your payment method.
You don’t have to have the half-million dollars ready by Friday.
A sensible first step involves:
- Requesting a fee estimate: Ask the facility for a breakdown of the Basic Daily Fee, the Means-Tested Care Fee, and the RAD/DAP options.
- Checking the exemption status: Determine if the family home is an ‘exempt asset’ (for example, if a protected person like a spouse or long-term carer still lives there).
- Modelling the scenarios: Compare ‘Sell Everything and Pay RAD’ against ‘Keep Home and Pay DAP’ side-by-side to see the actual impact on the bank balance and pension.
- Involving a professional: Aged care funding is a specific area of financial planning. Getting an expert to run the numbers can reduce the family stress significantly.
This decision isn’t just financial—it’s personal. Our goal at EJM Advice is to provide the step-by-step guidance that ensures your parents are cared for without putting the rest of the family’s financial future at risk.
A conversation costs nothing, and it’s the easiest place to start when the pressure starts to climb.
Are you navigating an aged care decision for a loved one? Book your complimentary intro call today to gain clarity on your options.