As Australia’s population ages, navigating the financial and legal complexities of residential aged care has become increasingly critical.
For families in Western Australia, understanding refundable accommodation deposits (RADs), their interplay with Centrelink assessments, and the role of protected persons is essential for making informed decisions.
This article synthesizes legislative frameworks, financial strategies, and guardianship considerations to provide clarity on these interconnected topics.
Refundable Accommodation Deposits: An Overview
Refundable Accommodation Deposits (RADs) are lump-sum payments made to aged care providers to secure accommodation for residents.
Under the Aged Care Act 1997, these deposits must be refunded in full (minus agreed deductions) within 14 days of a resident’s departure or death[1][11].
Residents may also opt for daily accommodation payments (DAPs), which represent interest on the unpaid RAD, calculated using the Maximum Permissible Interest Rate (MPIR)[7].
The choice between RAD and DAP hinges on factors like liquidity, estate planning, and means-testing outcomes[2][13].
Providers may use RADs for capital expenditures, such as constructing new facilities, but not for operational costs like staff wages[6].
This distinction ensures RADs remain protected assets, though their strategic use can influence aged care fees and pension entitlements.
Centrelink Treatment of RADs: Exemptions and Means Testing
Age Pension Assessments
For Centrelink’s Age Pension purposes, RADs are exempt from the assets test.
This exemption allows pensioners to retain higher Age Pension entitlements despite holding substantial lump sums[4][13].
For example, a resident paying a $500,000 RAD would not have this amount counted toward their asset threshold, potentially preserving their full pension[2].
Aged Care Means-Tested Care Fees
Contrastingly, RADs are included in the aged care means test, directly affecting the daily means-tested care fee (MTCF).
The MTCF calculation blends income and asset assessments, with RADs contributing to the latter[4][9].
A higher RAD increases the assets-tested component, potentially raising MTCF liabilities.
This dual treatment underscores the need for financial advice before committing to a RAD[9][13].
The Role of Protected Persons in Aged Care Planning
A “protected person” is an individual whose continued residence in the family home exempts the property from aged care means testing.
Under the Aged Care Act, protected persons include:
1. Partners - residing in the home.
2. Dependent children - under 18 or full-time students under 25.
3. Carers who have lived in the home for ≥2 years and receive income support.
4. Close relatives eligible for income support who have resided in the home for ≥5 years[5][10].
Impact on Aged Care Fees
If a protected person remains in the home, its value is disregarded in the aged care assets test, reducing MTCF obligations. For instance, a home valued at $800,000 with a protected occupant would not inflate the resident’s assessable assets[5][10]. However, Centrelink treats the home differently: after two years in care, the property is assessed unless a protected person (e.g., a spouse) remains[5][13].
Case Study: Balancing RAD Payments and Protected Person Status
Consider Mary, a single aged pensioner with a $800,000 home and $30,000 savings. Upon entering care, she opts for a $500,000 RAD.
- Centrelink Impact: Her RAD is exempt, preserving her Age Pension.
- Aged Care Impact: The RAD increases her assets-tested MTCF.
- Protected Person Scenario: If Mary’s brother (a carer receiving JobSeeker) remains in the home, the property is exempt from aged care assessments, lowering her MTCF[5][10].
Without a protected person, selling the home after two years would trigger Centrelink’s asset test, disqualifying her pension until the RAD is paid[10][13].
Sources
[1] Aged care home accommodation refunds https://www.myagedcare.gov.au/aged-care-home-accommodation-refunds
[2] Paying a parent's aged care accommodation costs | BT Professional https://www.bt.com.au/professional/knowledge-centre/client-strategies/retirement-strategies/paying-for-a-parents-aged-care.html
[3] Adult Guardianship (WA) - Court Lawyers https://www.gotocourt.com.au/civil-law/wa/adult-guardianship/
[4] Refundable Accommodation Deposit Assets Test Explained https://www.corevalue.com.au/refundable-accommodation-deposit-assets-test/
[5] What Is a Protected Person For Aged Care & Who Qualifies? https://www.corevalue.com.au/protected-person-aged-care/
[6] Permitted use of refundable deposits | Aged Care Quality and Safety ... https://www.agedcarequality.gov.au/providers/financial-prudential-standards/permitted-use-refundable-deposits
[7] RAD and DAP Frequently asked questions - Simply Retirement https://simplyretirement.com.au/aged-care-accommodation-payments-faqs
[8] Enduring Power of Guardianship - Government of Western Australia https://www.wa.gov.au/organisation/department-of-justice/office-of-the-public-advocate/enduring-power-of-guardianship
[9] Means assessment for residential aged care https://www.health.gov.au/our-work/residential-aged-care/charging/means-assessment
[10] Protected Person Status - General - Aged Care 101 https://forum.agedcare101.com.au/t/protected-person-status/773
[11] Refunding lump sums in residential aged care https://www.health.gov.au/our-work/residential-aged-care/charging/refunds
[12] Appoint a guardian or administrator https://www.sat.justice.wa.gov.au/A/appoint_a_guardian_or_administrator.aspx
[13] Aged Care Tips and Strategies - Financial Decisions https://financialdecisions.com.au/aged-care-tips-and-strategies/
[14] [PDF] Guardianship - Legal Aid WA https://www.legalaid.wa.gov.au/sites/default/files/inline-files/Video-Fact-Sheet-Guardianship.pdf
[15] FIS aged care refundable accommodation deposits (RADs) video https://www.servicesaustralia.gov.au/fis-aged-care-refundable-accommodation-deposits-rads-video?context=21836
[16] What is a Refundable Accommodation Deposit (RAD)? https://agedcaredecisions.com.au/what-is-a-rad/
[17] [DOC] video-transcript-refundable-accommodation-deposits.docx http://www.servicesaustralia.gov.au/sites/default/files/video-transcript-refundable-accommodation-deposits.docx
[18] Guardianship and administration | Legal Aid WA https://www.legalaid.wa.gov.au/find-legal-answers/managing-your-affairs/guardianship-and-administration
[19] Refundable accommodation deposits (RADs) - IHACPA https://www.ihacpa.gov.au/aged-care/refundable-accommodation-deposits-rads
[20] [PDF] Guardianship and Administration Act 1990 https://www.legislation.wa.gov.au/legislation/statutes.nsf/RedirectURL?OpenAgent&query=mrdoc_44836.pdf
[21] Refunding refundable deposits | Aged Care Quality and Safety ... https://www.agedcarequality.gov.au/resource-library/refunding-refundable-deposits
[22] Guardianship: OPA information - Government of Western Australia https://www.wa.gov.au/organisation/department-of-justice/office-of-the-public-advocate/guardianship-opa-information
[23] West Perth Accommodation Payments - Rosewood aged care https://rosewoodcare.org.au/aged-care-facilities/west-perth/accommodation-payments/
[24] [PDF] Guardianship and Administration Act 1990 https://www.legislation.wa.gov.au/legislation/prod/filestore.nsf/FileURL/mrdoc_28305.pdf/$FILE/Guardianship%20and%20Administration%20Act%201990%20-%20%5B05-j0-02%5D.pdf?OpenElement
[25] Understanding aged care home accommodation costs https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs
[26] CAP-02 Incapable Persons - Landgate https://www.landgate.wa.gov.au/land-and-property/land-transactions-hub/land-transaction-policy-and-procedure-guides/land-titles/proprietor/cap-02-incapable-persons/
[27] Aged care carer or close relative assessment - Services Australia https://www.servicesaustralia.gov.au/aged-care-carer-or-close-relative-assessment-for-aged-cost-care?context=23296
[28] Understanding Aged Care Costs: Unpacking the RAD & Its Impact ... https://www.laterlifeadvice.com.au/our-blog/refundable-accomodation-deposit
[29] The “protected person rule” – what happens if your spouse remains ... https://attwoodmarshall.com.au/the-protected-person-rule-when-does-it-apply/
[30] Assets test for Age Pension - Services Australia https://www.servicesaustralia.gov.au/assets-test-for-age-pension?context=22526
[31] Income and means assessments | My Aged Care https://www.myagedcare.gov.au/income-and-means-assessments
[32] Aged care: how a protected person protects the family home – CPSA https://cpsa.org.au/article/aged-care-how-a-protected-person-protects-the-family-home/
[33] Western Australian Enduring Power of Guardianship https://legalconsolidated.com.au/wa-medical-poa/
[34] Changes to aged care fees, annual and lifetime caps https://www.myagedcare.gov.au/changes-aged-care-fees-annual-and-lifetime-caps