A recent amendment to the Subsidy Principles 2014 (“Principles”) is likely to discourage families from paying “third party RADs” for residents.

In the 2015 case of Whitby and Secretary, Department of Health, the Administrative Appeals Tribunal decided that a Refundable Accommodation Deposit ("RAD") paid by a resident’s family member should not be counted as the resident’s assets for the purposes of assessing the resident’s means tested care fees if the RAD was subject to a security or “charge” in favour of the family member. The Tribunal determined that RAD had to be reduced by the loan that was obtained to fund the RAD due to section 47 of the Principles incorporating to Division 1 of Part 3.12 of the Social Security Act 1991 (”SSA”).

The effect of this decision was that that residents’ families could contribute to their loved one’s accommodation costs without those funds counting towards the resident’s assets and thereby increasing the means tested care fee they are required to pay.

A recent change to the Principles has amended section 47 to exclude the operation of s 1221(1) of the SSA, relevant to calculating the means tested care fees.

This means that a RAD paid by a family member will now constitute part of the resident’s assets meaning the resident will have to pay a higher means tested fee. This is even if the family member’s contribution is only being done as a “loan” to the resident.

In Russell Kennedy’s view, the amendment is unfortunate because it will deter families from contributing to their loved one’s accommodation costs, thereby reducing the ability of poorer residents to access a higher standard of accommodation.