RAD retention: the 2% a year kept from a lump sum, explained
For people who move into an aged care home from 1 November 2025, the home keeps 2% a year of the refundable lump sum, for up to five years. Here is how much that is, and what it does and does not change.
By the AgedCareClear editorial team. Published 8 November 2026; last checked against the law on 8 November 2026 (what it relies on). Rates from the government schedule of 20 September 2026.
The rule
- The home keeps back 2% a year of the refundable accommodation deposit (RAD), worked out each day on the balance at the time (2% ÷ 365 a day).
- It is taken from the lump sum itself, at most once a month and at least every three months.
- It stops five years after the lump sum was first paid. After that the balance stays as it is.
- The home cannot ask your parent to top the lump sum back up, and cannot raise the daily payment because of what it kept.
- The rest is refunded when your parent leaves the home, and the refund is guaranteed by the Australian Government.
- It applies to everyone who first moves in from 1 November 2025, including people whose care fees stay on the older rules under "no worse off". People who moved in before then are not affected.
A worked example
A room at Calvary Ryde in Sydney is priced at $1,200,000 (operator website, prices correct as of 1 October 2026). Say the family pays $300,000 as a lump sum and the rest as a daily payment, and the home deducts the retention every month.
| Year | Kept back | Lump sum left |
|---|---|---|
| 1 | $5,945.00 | $294,055.00 |
| 2 | $5,827.20 | $288,227.80 |
| 3 | $5,711.95 | $282,515.85 |
| 4 | $5,599.25 | $276,916.60 |
| 5 | $5,488.25 | $271,428.35 |
On the first day the home keeps $16.44. Because the balance shrinks, each year's amount is a little smaller than the last: $5,945.00 in the first year, $5,488.25 in the fifth. Over five years it comes to $28,571.65, and $271,428.35 is left to be refunded.
The retention depends only on the lump sum, not on the room price. Paying $300,000 towards a $1,400,000 room costs the same $28,571.65 over five years.
Lump sum or daily payment?
Every dollar of the room price not paid as a lump sum is charged daily, at the interest rate fixed on the day the price is agreed (8.51% for prices agreed 1 Oct to 31 Dec 2026). In the example, the $900,000 left unpaid costs $209.84 a day, about $6,383 a month. Paying the $300,000 instead of leaving it unpaid saves $69.95 a day, against the retention of about $16.44 a day.
That comparison leaves out what the money would earn elsewhere, how the choice changes the means test and the age pension, and how long the stay lasts. It is worth a session with a financial adviser; Services Australia's Financial Information Service is free.