Refundable accommodation deposits explained

As people live longer, more will end up in aged care.

Refundable accommodation deposits explained

As people live longer, more will end up in aged care. The number of people in permanent aged care in Australia is expected to triple in the next 35 years, from 225,000 today to 700,000 in 2050.

Aged care is labour intensive, and land and buildings are expensive to buy and maintain. The owners of such facilities expect to make a return on their investment. From a client’s point of view, typical fees include accommodation deposits and charges, daily fees, extra services fees and means-tested fees.

Accommodation deposits (known as Refundable Accommodation Deposits, or RADs) can be as high as $2 million to secure a bed in an aged care facility.

In many cases, these RADs are negotiable and at times can be as much as halved. Willingness to negotiate on RADs depends very much on the demand for beds – and the supply of beds – in a particular aged care facility.

Many aged care facilities prefer the RAD to be paid as a lump sum upfront. However, it is possible to choose to make interest payments only, or pay with a combination of lump sum and interest payments. 

In a government-accredited aged care facility, the accommodation deposit is fully government guaranteed.

Before July 2014, the accommodation bond repaid to the family would be reduced by retention amounts deducted by the aged care facility.

Since July 2014, any lump sum paid as a RAD is now generally repaid in full at the end of the care period.

The RAD is an excluded asset for social security purposes. Therefore, in some cases, where existing cash is used to pay for a RAD, it can result in a new or increased Age Pension entitlement. 

More often, a family home is sold to fund the RAD. In this case, the proceeds from its sale are counted as an asset. As a result, the cash remaining after paying the RAD can often result in an Age Pension being reduced or lost entirely.

Are you considering moving a loved one into an aged care facility? Do you understand what is involved? Do you find the aged care system easy to understand or do you find it confusing? 

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    minnie orb
    27th Aug 2019
    This article opened more questions for me and answered almost none.
    invisible sock
    27th Aug 2019
    My father died last year and we had to come up with $350K as well as weekly charges.
    This involved selling shares etc.
    At no stage were we informed about this -

    "Many aged care facilities prefer the RAD to be paid as a lump sum upfront. However, it is possible to choose to make interest payments only, or pay with a combination of lump sum and interest payments."

    We were also given no choice about what home he would have to go into, and he ended up in one miles away from most of the family.
    Everyone else from the village, where he lived, were put in a home in the same town as the village.
    Chris B T
    27th Aug 2019
    The need to Pay Rental,Fees,Medication/Nursing,Extra Charges,Dietary Requirements(Mousy)
    Cleaning etc.
    Why So High In Bond Needed (Party Animals) and total refurbishment of Apartment/Room on leaving.
    I would have Thought $50,000.00 To Much.
    The Thieves are Just keeping up to Government Thieves.
    27th Aug 2019
    FYI Chris BT

    It was the Labor Government that brought in these policies (Living Longer Living Better - Minister Mark Butler now opposition spokesperson on climate change)

    For Minnie's information
    There are 50.3% of aged care residents who are not supported by Government - the rest are fully or fully supported by Government (Chris BT please note)

    For those who are not supported, they can pay for their accommodation anyway they like.
    No aged care provider can require/demand a new resident to pay a lump sum. Apparently this is not widely known as providers currently hold $27.5b of resident lump sums.

    40% of non-supported residents now pay daily for their accommodation - for a $500,000 for the cost of a room, that is $75.89 per day. It's a lot different from trying to find $500,000.
    Chris B T
    27th Aug 2019
    What's Up Your Nose, I don't Discriminate Between @'s either Government of the Day or for that Matter PM.
    I said $50,000.00 not $500,000.00
    Over charging and lack of services, siphon funds to prop up Profits.
    The Reason Why There Is Investigation Happening Is Because We Have A Great Government Watching ON.
    No Problems.
    No Worries.
    Ted Wards
    27th Aug 2019
    For those of you who are not aware of how any of this works, to be able to go into a residential care facility you have to be assessed in needing a level 4 package. This can be used in a residential care facility or level 4 home care package, if one is available. A home care package can be the better option as there are no RADS and bonds etc. You get the same level of care in your home, usually better care because when the care staff are there, you are the only one they are looking after in the time you are there. residential care is not there to provide medical assistance. They can issue tablets and so some of the work but if your loved ones get ill, they still need to go to hospital. There is no law stating that someone has to go into residential care, in fact the royal commission proves that it should only ever be a last resort and the family has to keep on top of what is happening, or is not happening. It is never as case of put them in there and they are fully looked after, I know from personal experience they are not looked after and, depending on where they are, they get less care than a home care package. I would never recommend placing a loved one is residential care unless the needs are so high that a level 4 package is not sufficient.
    Chris B T
    27th Aug 2019
    If your Ill in a Nursing Home, You Are Taken To Hospital By Taxi instead of Ambulance.
    Witnessed this on Many Occasions. Nothing New About That.
    This Is QLD.
    Where Ambulance Is covered for all Residents free.

    27th Aug 2019
    Tie me to the wheel of The Black Pearl and show me that horizon!! Keel-haul the refundable deposits .....
    27th Aug 2019
    My limited experience with the aged care system has only been positive. When my late Mother-in-Law had to go into aged care in March 2017 the not-for-profit facility laid out fully all the options available for paying her fees, including a full RAD, a partial RAD with monthly payments, or no RAD and paying the full daily fee. As my M-I-L had previously stated she did not want her house sold until after she was dead my wife and her brother chose the partial RAD option as the cash she put up (now exempt from the assets test) was more than her house (now subject to the assets test) was valued so no net increase in assets. When she passed away 9 months later the RAD was refunded in full within weeks (plus a small amount of interest for the period after her death).
    It was a lovely facility within easy walking distance from our home, only 30 beds, with wonderful staff and caring management. When I hear all these horror stories about aged carre I can truly say this was not my experience.
    miss marple
    27th Aug 2019
    I have just moved into an aged care facility where all you pay is 80% of your pension and all is done for you ie meals, laundry, meds, activities and I couldn't be happier, staff are wonderful
    miss marple
    27th Aug 2019
    I have just moved into an aged care facility where all you pay is 80% of your pension and all is done for you ie meals, laundry, meds, activities and I couldn't be happier, staff are wonderful
    Red 13
    27th Aug 2019
    This entire process was an agony for us. Then it took months to get the money back. The problem Ben overlooks is what happens to the spouse left behind if the family home has to be sold to pay the RAD and Pensions are lost?
    My other question is, what if the federal government brings in it's pension changes and forces the elderly to reverse mortgage their home to get a pension, meaning one is then in hock to the government for the value of the home to repay the loan?
    How then can anyone then afford a RAD if they have to go into care and what then happens to any remaining spouse?
    Who picks up those pieces?
    Not this government that's for sure, you would be truly on your own.
    We did not vote for this rubbish.
    27th Aug 2019
    No aged care for me. Euthanasia will solve these problems. They see old residents as "cash cows".
    28th Aug 2019
    Non Illegitimati Carborundum! Don't let the bastards grind you down - grind them down instead....

    After a lifetime of absolute dedication and relentless hard work - I thought it was time for peace and quiet - only to find that the battle had just begun....

    You have to be stronger than you ever thought you could be - for the sake of your future generations.... fight them now.
    28th Aug 2019
    My mum has been in care for 12 months, dad had passed so we only had mum to worry about. She had care coming into her home for quite awhile until dementia, a fall and a broken shoulder forced the move. We were fully informed by the nursing home of all of our options for payment and we chose to sell her home and pay the $480,000 RAD which we will get back fully on her passing and yes she also pays 85% of her pension. The management, staff, nurses etc have been wonderful and now at 96 years old I'm sure she will make 100 because of her care. The worry and stress on me has been taken away and we enjoy seeing her happy and well cared for. Just do your research but it is hard when things happen suddenly as you need to find a place which is suitable to you. Many times when you go in under the government payment only you have no choice where your loved one ends up which can be many many kilometers from where you live as they have to take the first place available for them. We are one of the happy families with a great outcome with the nursing home my mum is in.
    9th Jul 2020
    Thank you to all contributors for some very useful info about the pros and cons of transferring to a residential. Please keep it coming.

    We GAVE our house to our daughter under The Centrelink Granny Flat Rules, with no gifting penalty from Centrelink. In return she gives us accomodation based on a document titled 'Guaranteed Secure Tenure For Life'. Could be any type of accomodation: house, caravan, front room, granny flat, etc.

    Transferring to a residential when the time comes should be a lot easier as we won't have to sell a house.

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