When Australians begin researching residential aged care, the first figure they encounter is the Refundable Accommodation Deposit (RAD) — a number prominently displayed on facility websites and brochures, typically $750,000 or more. But focusing on that single figure tells only part of the story. In reality, there are five distinct fees that together determine the true cost of residential aged care, and understanding all of them is essential before making any decisions.
The five aged care fees every family needs to know
Each of the five fees covers a different aspect of residential care, and several are means-tested — meaning what you pay depends on your individual financial circumstances.
1. The Accommodation Cost
This is the cost of your room, and it can be paid in three ways. The first is the lump-sum RAD, which is refunded when you leave, less 2 per cent per annum, up to a maximum of 10 per cent. The second option is a Daily Accommodation Payment (DAP), calculated at the government-set interest rate of 8.43 per cent per annum on any unpaid RAD. The third is a combination of both, which can include deducting daily payments from the lump sum over time.
Importantly, the choice between these options is not simply a cash-flow decision. It can also affect your age pension entitlements, means-tested fees, and the capital available for future needs.
2. The Basic Daily Fee
Every resident, regardless of their financial situation, pays the Basic Daily Fee. Set at 85 per cent of the single basic age pension, this currently sits at $67 per day and contributes to everyday living expenses including meals, cleaning, laundry and utilities.
3. The Hotelling Contribution
The Hotelling contribution is a means-tested fee covering services such as meals, cleaning and laundry — similar in scope to the Basic Daily Fee but calibrated to individual assets and income. It is capped at $22 per day.
4. The Non-Clinical Care Contribution
This means-tested fee covers personal support such as assistance with showering and dressing. The amount varies based on assets and income, with a daily cap of $107. There is also a time-based lifetime cap of $137,917 — which includes any prior contributions made through home care — reached either at four years of care or when the dollar threshold is hit, whichever comes first.
5. The Higher Everyday Living Fee
Many residential facilities offer premium optional extras — wine with meals, newspapers, beauty services and entertainment programs. These are paid for on a user-pays basis through the Higher Everyday Living Fee, which varies by provider and the services chosen.
What the fees don't cover — and why payment strategy matters
Even after accounting for all five fees, residents still need to budget for personal day-to-day expenses such as clothing, toiletries, hairdressing and medications. The fees represent the cost of care itself, not the full cost of living.
Beyond calculating what you'll pay, how you pay matters enormously. Decisions around whether to sell or retain the family home, draw on savings or investments, or pay accommodation costs as a lump sum versus daily payments can all have cascading effects on pension eligibility, ongoing care fees and estate planning outcomes.
For families navigating long-term care planning more broadly, the complexity of the system underscores why professional financial advice is strongly recommended before committing to any arrangement. Aged care financial decisions are among the most consequential a family can make, and a misstep in structuring payments can prove costly over time.
With Australians living longer and demand for residential aged care rising, a clear-eyed understanding of the full fee structure — all five components — is the essential starting point for any family beginning this process.
