People often get confused with so much information and terms relating to aged care. In order to help families, we will explain in the following article everything about aged care Bond/RAD.
What is an aged care “Bond”?
An aged care ‘Bond’ is known as Refundable Accommodation Deposit (RAD); which is one of the two types of accommodation payment that may have to be paid by a person who is going into aged care on a permanent basis.
There are a number of other types of fees that may have to be paid by a potential aged care resident. For a full description see here.
A RAD may not have to be paid by everyone going into permanent residential aged care. Read more information below on the circumstances where a RAD may be charged.
A RAD, as the name suggests, is fully refunded back to a resident or their family upon someone moving out of aged care. The base amount is repaid to the family – the interest earned on the RAD is kept by the provider.
How can the accommodation payment be made?
There are three main ways that an accommodation payment can be made.
The first method is by fully paying the amount as a RAD – or Bond.
The second method is by paying the amount as a daily fee (which is invoiced every month). This payment method is known as the Daily Accommodation Payment (DAP)
The third method is to pay the accommodation payment partially as a RAD (lump sum) and partially as a DAP (daily fee). This has the effect of lowering the upfront bond that must be paid.
How much is the Bond / RAD
The amount charged as a RAD will differ facility to facility, and will also differ from room to room inside an aged care facility.
Across Australia the average RAD is in excess of $400,000. In metropolitan cities like Sydney and Melbourne the RAD can reach up into the high hundreds of thousands of dollars, or even above a million dollars for more exclusive rooms.
Will we have to pay a Bond?
WARNING – We are entering into territory that constitutes financial advice. The below is a general description of circumstances where an accommodation payment (RAD or DAP) may be charged – for definitive answers you will need to seek your own independent financial advice.
Generally, a potential aged care resident will have to make an accommodation payment (which can be either the full RAD, a DAP, or a partial RAD and partial DAP) if their assets are above $165,271. This assessment is made as part of the Centrelink Assets & Income Assessment Form process (click here to view our Video Instructional Guide).
A family home (principal residence) will be counted up to a value of $165,271 if a spouse or carer is NOT living in the home. If a spouse or carer is living in the home, then the principal residence will not be counted towards the assets.
There are complex rules about who constitutes a carer for the purposes of an aged care accommodation payment liability. See questions 67-68 in the Centrelink Assets & Income Assessment Form for more information.
If a potential aged care resident has other, non primary residence assets, that add up to more than $165,271 then the accommodation payment (RAD or DAP) will have to be paid – regardless of whether a spouse or carer lives in the family home.
All that sounds complicated – can you simplify that for us?
Sure – the below infographic explains if someone is liable to pay an accomodation payment (RAD or DAP).
What is Daily Accommodation Payment?
Daily accommodation payment (DAP) is another kind of accommodation payment calculated by reference to the RAD - applying an interest rate (currently 6.01%), then dividing by 364- turning it into a daily fee.
How is the Daily Accommodation Payment worked out? Where can I find this amount?
The Daily Accomodation Payment (DAP) for a particular room is worked with by reference to the room’s RAD.
You can work out the full DAP by multiplying the RAD by a government set interest rate called the MPIR (currently 5.72%) then dividing that annual DAP by 364. That gives you the daily accommodation payment.
If your family choose to pay a part RAD and part DAP, the DAP is worked out on the amount that is not paid as a RAD.
How long do we have to pay the aged care bond?
A new resident to aged care has 30 days to decide how to pay an accommodation payment - either as the lump sum bond (RAD), or as a daily fee (DAP), or as a combination of both RAD and DAP.
If a resident chooses to pay a RAD, they have 6 months to actually pay the bond to the provider. In the interim the resident will be charged a DAP. The amount charged as a DAP is not refunded by a provider.