How Australian Aged Care Works: Understanding ACAT Approvals, RAD vs. DAP Fees, and Means Testing
Expertly Reviewed by Lachlan Davies, Accredited Aged Care Specialist (AASA)
Updated on September 6, 2026
Key Takeaways
A definitive guide to Australian aged care costs and funding: navigating My Aged Care, ACAT assessments, Refundable Accommodation Deposits (RAD), and government caps.
Entering residential aged care in Australia requires an understanding of the Commonwealth regulatory framework overseen by the Department of Health and Aged Care. From obtaining an ACAT assessment to choosing between a lump-sum deposit or daily rental payment, the financial choices are structured under four distinct pillars.
1. Step One: My Aged Care and the ACAT Assessment
Before an older Australian can enter permanent residential care or receive a Home Care Package (HCP), they must undergo a clinical evaluation by an Aged Care Assessment Team (ACAT) (known as ACAS in Victoria). The ACAT assessor evaluates daily living autonomy, medical conditions, and cognitive impairment to issue formal Commonwealth approval.
2. The Four Fee Components in Residential Care
| Fee Component | Current Rate / Metric | Who Pays | Statutory Protection |
|---|---|---|---|
| Basic Daily Fee (BDF) | 85% of single Age Pension (~$63.57/day) | All residents | Indexed biannually (Mar/Sep) |
| Means-Tested Care Fee (MTCF) | Calculated by Services Australia | Means-tested residents | Annual cap ~$33.3k; Lifetime cap ~$79.9k |
| Accommodation (RAD or DAP) | Agreed facility price (or DAP via MPIR) | Non-supported residents | RAD is 100% government-guaranteed |
| Additional Service Fees | $15 – $75 / day | Optional opt-in | Contractual agreement |
3. Deciding Between RAD and DAP
Non-supported residents have complete flexibility in how they finance room accommodation:
- Refundable Accommodation Deposit (RAD): Paid as a lump sum. The capital is 100% guaranteed by the Commonwealth Government and is fully refunded to the resident or estate within 14 days of departure, minus any agreed drawdown fees.
- Daily Accommodation Payment (DAP): Paid as periodic interest on the unpaid RAD balance using the government's Maximum Permissible Interest Rate (MPIR). For example, on a $600,000 RAD with an MPIR of 8.38%, the DAP is approximately $137.75 per day.
- Combination Strategy: A family can pay 50% as a RAD and allow the remaining DAP interest to be automatically deducted from the deposit, preserving family cash flow.
4. Treatment of the Family Home
Under Centrelink assets testing, the family home is fully exempt if a protected person (such as a spouse, dependent child, or long-term carer) continues living in the property. If no protected person resides, the home's assessable value is capped at the statutory threshold (approx. $206,039), shielding the majority of home equity from excessive care fees.
Frequently Asked Questions
- What is the difference between a RAD and a DAP in Australian aged care?
- A Refundable Accommodation Deposit (RAD) is a lump-sum room price (typically $450,000 to $900,000+) that is 100% government-guaranteed and refunded upon departure. A Daily Accommodation Payment (DAP) is a daily interest charge paid if you choose not to pay the full RAD upfront, calculated using the government's Maximum Permissible Interest Rate (MPIR).
- What is the Basic Daily Fee for residential aged care in Australia?
- The Basic Daily Fee is indexed biannually and set at 85% of the single basic Age Pension (approximately $63.57 per day or ~$1,933 per month). Every resident in residential care pays this fee to cover meals, cleaning, utilities, and laundry.
- Are there government caps on aged care fees in Australia?
- Yes. The Means-Tested Care Fee is capped at approximately $33,309 per year and has a lifetime cap of approximately $79,942 across all residential and home care services, preventing excessive self-funding burdens.
How we research and verify this information
Our team compiles this listing from public records and provider data, and reviews it against authoritative sources.
- Aged-care services and eligibilityPublisher: Australian Government — My Aged Care. Supports: General senior-care planning information for this guide.. Review date not recorded.
- Aged-care policy informationPublisher: Australian Government Department of Health. Supports: General senior-care planning information for this guide.. Review date not recorded.