Beyond the fees, two choices shape the whole picture: how you pay for the room, and what happens to your home. Both interact with the Age Pension, so they matter more than they first appear.
RAD vs DAP: lump sum or daily
| RAD — lump sum | DAP — daily | |
|---|---|---|
| What you pay | The room price upfront (e.g. ~$570k) | Interest on the room price at the MPIR (~7.96%) |
| Refundable? | Yes — to you or your estate, less a small retained share | No — an ongoing cost that never comes back |
| Age Pension assets test | Exempt — paying it can lift your pension | The money stays assessable |
| Cash tied up | A large lump sum | Nothing large tied up |
| Typical cost | Retention ~2%/yr, capped at 10% | ~$45k/yr on a $570k room |
DAP per year = unpaid room price × MPIR (e.g. $570,000 × 7.96% ≈ $45,000)The family home
The home is usually the biggest asset and the hardest decision. For the aged-care means test a former home is counted only up to a capped value (~$214,884) — but its treatment for the Age Pension changes once you move into care:
- Exempt for 2 years from the day you enter care, if you keep it.
- After 2 years, a kept home becomes an assessable asset for the Age Pension (at market value), and you're treated as a non-homeowner (a higher assets free area partly offsets it).
- Rent it out and the rent is assessable income that helps pay the fees — but it can reduce your pension.
- A couple: if your partner still lives there, the home stays exempt — they're a 'protected person'. You also become an 'illness-separated' couple — still assessed on your combined assets, but each paid the higher single rate of Age Pension, which usually increases your combined pension.
Worked example: Margaret
Margaret is a single homeowner who retired at 67 with $500k super, $150k outside super and an $800k home, spending $52k/yr. At 85 she needs 3 years of residential care. Same person, same care — two funding choices:
- Keep the home, pay DAP — the accommodation adds ~$45k/yr on top of ~$71k of care and living fees, so about $116k/yr. Her $800k of home equity sits idle while she pays, and her ~$650k of super + savings runs short at 87.
- Sell the home, pay a $550k RAD — no DAP, so the cost drops to about $71k/yr; the $550k RAD is refundable to her estate and exempt from the assets test (so her Age Pension actually rises as she draws down); ~$250k of leftover proceeds plus her super keep the plan lasting past 92.
This doesn't make selling 'correct' — keeping the home can matter for family, a possible return home, or provider-refund risk. It shows the mechanism, so you can ask the right questions.