About RAD and RAC retention
Under the new Aged Care Act, providers will be required to regularly deduct part of each eligible resident’s refundable accommodation deposit (RAD) or refundable accommodation contribution (RAC).
These deducted amounts do not need to be refunded on exit and will help providers continue to provide high quality residential aged care, as well as support improvements and further investment.
The amount to be deducted will be calculated daily at a rate of 2% per annum and it will be limited to 5 years to protect residents who remain in care for a long time.
Provider responsibilities
As a provider, you are responsible for calculating and deducting retention amounts. You only need to do this for RADs and RACs paid by residents who retention applies to.
You must record all retention amounts in your refundable deposit register. These amounts are not refunded to residents when they leave care.
Who it applies to
RAD or RAC retention will apply to residents who contribute to their accommodation costs through a RAD or RAC, and:
- enter your aged care home on or after 1 November 2025; and
- are on the 1 November 2025 fee arrangements when they enter, including people who have moved to your aged care home after opting into the 1 November 2025 fee arrangements.
It will also apply to people who enter your aged care home under the 1 July 2014 fee arrangements, if they:
- enter residential care for the first time after 31 October 2025; or
- enter following a break in residential care of over 28 days after 31 October 2025.
Note: RAD or RAC retention will apply to people who were receiving a home care package, approved for home care, or were on the national priority list on 12 September 2024 based on the above criteria.
RAD and RAC retention does not apply to residents under the 1 July 2014 accommodation arrangements who pay a RAD or RAC, even if it is paid after 1 November 2025.
When retentions are deducted
Refundable accommodation deposits and RAC retentions are calculated based on the daily balance and deducted regularly.
After 5 years in care retentions can no longer be deducted. This 5-year period commences on the day a refundable deposit is first paid.
Residents can agree to have other fees deducted from their RAD or RAC. These include:
- daily accommodation payments (DAPs) or daily accommodation contributions (DACs)
- deductions that the resident has agreed to in writing
- any remaining DAP or DAC when the provider stops delivering ongoing services
- any RAD or RAC retention amounts.
Retention calculation
The retention rate is set in legislation at 2% per annum (applied as a daily rate). You cannot apply a different rate.
Retentions are calculated daily on the RAD or RAC balance. All deducted amounts reduce the total balance, and therefore further reduce any future retention deductions.
To calculate the daily retention amount, multiply the RAD or RAC balance by 2% then divide by 365.
The retention amount is the same for each day until the RAD or RAC balance changes. Changes in the balance will change the retention deduction amount. This includes changes to the balance from retention and other deductions as well as changes in the balance due to top-ups.
Example retention calculation
The daily retention amount for a resident with a balance of $200,000 is:
- 2% x $200,000 ÷ 365 = $10.96
If there were 30 days in the period between retention deductions, the amount deducted would be:
- $10.96 x 30 = $328.80
Example retention calculation – including changes to balance
The daily retention amount for a resident with a $100,000 balance, which decreases to $90,000 on day 10 of a 30-day billing cycle (for example, due to the deduction of outstanding fees) is:
- 2% x $100,000 ÷ 365 = $5.48
- 2% x $90,000 ÷ 365 = $4.93
In this case, the retention deduction for the 30-day billing cycle is the total of 10 days at $5.48 per day ($54.80) plus 20 days at $4.93 per day ($98.60)
- $54.80 + $98.60 = $153.40
“Topping up” retention deductions
You can’t ask a resident to maintain or “top up” a RAD or RAC for retention amounts deducted. This includes asking for a new or higher DAP or DAC, or to top up their RAD or RAC balance.
You can still ask the resident to maintain or “top up” the RAD or RAC for other amounts, such as fees you both agree to deduct from a RAD or RAC.
Maximum RAD or RAC a provider can accept
When a RAD is paid, the agreed price less previous retention deductions becomes the maximum amount of RAD a provider can accept.
For low means residents, the maximum RAC amount that you can accept is the RAC equivalent to the DAC payable, less any previous retention amounts.
Worked example: Alex
Alex enters care on 5 November 2025 and agrees to an accommodation price of $500,000 with their provider. They pay this accommodation price as a RAD on the day they enter care.
Alex does not have any other fees deducted from their RAD. The provider has chosen to charge fees, including RAD retentions, on the 28th day of each month.
The provider calculates the daily amount of RAD retention as follows:
- 2% x RAD balance ÷ 365 (rounded to 2 decimal places)
- Or: 2% x $500,000 ÷ 365 = $27.40 per day
As there are 24 days between Alex’s RAD payment and when their provider deducts the retention amount, the retention amount is:
- $27.40 x 24 = $657.60
The provider deducts $657.60 from the RAD balance, reducing it to $499,342.40.
The provider can’t ask Alex to “top-up" the RAD or pay a daily payment for the $657.60 that was deducted for retention purposes.