Aged Care Financial and Prudential Standards 2025

EXPLANATORY STATEMENT

Aged Care Act 2024

Aged Care Financial and Prudential Standards 2025

Purpose and operation

The purpose of the Aged Care Financial and Prudential Standards 2025 (Standards) is to make Financial and Prudential Standards that certain kinds of aged care providers must comply with as part of their registration as an aged care provider under the Aged Care Act 2024 (Act).

Under the new Aged Care Act, the Aged Care Quality and Safety Commission (Commission) is responsible, in consultation with the Department of Health, Disability and Ageing (Department), for developing and implementing a new set of Financial and Prudential Standards, which will come into effect from 1 November 2025 in line with the commencement of the Act. The Commission’s role in setting and monitoring provider compliance with the Standards complements the Commission’s current role in ensuring providers deliver sustainable high quality safe care.  

The new Standards comprise:

• the Financial and Prudential Management Standard 
• the Liquidity Standard, and
• the Investment Standard.

In summary, the Financial and Prudential Management Standard requires providers to have governance systems and strategies in place to ensure that the provider is managed in a financially sound manner. Providers must have in place a financial governance system with policies, procedures and strategies that focus on the safety, health, wellbeing and quality of life of individuals accessing funded aged care services. The financial and prudential management system must aim to achieve two key objectives – to ensure:  

• the financial viability and sustainability of the provider, and
• that refundable deposits are managed and refunded in accordance with the Act. 

Under the Liquidity Standard, a provider must ensure the sound management of their liquidity and liquidity risks. There are broadly two key requirements under this standard – namely, that providers must:

• maintain enough liquidity to meet their financial obligations as they are due, and
• have a written liquidity management strategy to manage and respond to liquidity risks.

All Australians should be confident that aged care organisations have strong financial governance systems in place that enable them to continue to operate and deliver safe and quality aged care services. An important part of a strong financial governance system is the effective management of liquidity. Having sufficient liquidity means that an organisation has access to reliable sources of cash and cash equivalents to meet payments that become due and payable – for many aged care providers this also means the ability to refund refundable deposits.

The Investment Standard requires a registered provider to adopt sound practices in relation to the selection, management and monitoring of their investments, including where the provider is investing refundable deposits. The standard requires providers to have broader risk management strategies to ensure investments support financial stability without compromising their liquidity or care quality. These strategies support providers to deliver safe, quality aged care services while meeting the regulatory requirements of the new Act. There are broadly three key requirements under this standard – the provider must:

• implement and maintain a written investment management strategy
• ensure that investment of refundable deposits is in accordance with that investment management strategy, and
• regularly review and improve the effectiveness of its investment management strategy. 

It is a condition of registration under section 150 of the Act that a registered provider must comply with the provisions of the Standards that apply to the provider. If a registered provider breaches a condition of registration, the provider may be liable to a civil penalty (see subsections 142(3) and (4) of the Act).

Background

In 2021, the Royal Commission into Aged Care Quality and Safety recommended improving the financial and prudential regulation of aged care providers (Recommendation 132). The Royal Commission recognised that the delivery of safe, quality care requires providers to manage a wide range of operational risks, including financial risks that can impact care delivery, as well as their capacity to appropriately manage refundable deposits. ​

The new Standards set out the minimum requirements for good financial and prudential management of registered aged care providers. They replace and expand on the current Prudential Standards which focus on the management and protection of refundable deposits paid to aged care providers by aged care consumers, and seek to improve the financial management of providers, by ensuring they have the appropriate systems in place to maintain financial viability.

In summary, the Standards are designed to ensure that:

• a provider’s governing body manages finances responsibly and considers how its decisions will affect the wellbeing of older people receiving Australian Government-funded aged care
• providers have enough funds to:
  • refund deposited amount balances in accordance with their conditions of registration
  • meet their financial obligations when they’re due
  • deliver safe and quality aged care services consistently
• providers understand and continue to review their liquidity requirements and liquidity management strategy to ensure they are prepared for, and can withstand, any periods of financial stress
• providers protect the continuity of care of older Australians; by making sure financial or operational challenges don’t disrupt the quality or delivery of services they provide to older people providers protect refundable deposit balances by making sure they properly manage these funds and hold them securely
• financial risks to the Australian Government are minimised, including claims on the Accommodation Payment Guarantee Scheme.

Noting the wide scope of changes being made through the aged care reform, an objective in developing the new Standards was to consolidate, where possible, similar types of obligations in the new legislation. This approach enables streamlining of the legislation and supports stakeholders to better navigate the various requirements. As such, some requirements in the Prudential Standards are not included in the new Standards but rather in the Aged Care Rules 2025. These are:

• the Records Standard requirement to maintain a refundable deposit register and to provide certain information about refundable deposits to people receiving care
• the Disclosure Standard requirement that providers must report information about refundable deposits and compliance with the Prudential Standards in the Annual Prudential Compliance Statement and to people receiving care.

These requirements are not being removed from aged care law, but rather reorganised within the structure of the legislation to enable these obligations to be aligned with other records, reporting and disclosure requirements. 

Authority

Subsection 376(1) of the Act provides that the Aged Care Quality and Safety Commissioner (Commissioner) may, by legislative instrument, make standards in relation to financial and prudential matters (the Financial and Prudential Standards).

Subsection 376(2) of the Act provides that the Standards may deal with requirements in relation to:

         the liquidity and capital adequacy of registered providers

         the keeping of financial records relating to the delivery of funded aged care services, including records about refundable deposits, fees, payments and contributions

         governance systems and strategies that registered providers must have in place to ensure that they remain:

o       financially viable and sustainable, and

o       able to comply with the other applicable requirements in the standards

         the disclosure and reporting, by registered providers, of information that may assist the Commissioner to:

o       monitor the financial viability and sustainability of registered providers

o       monitor the compliance of registered providers with the other applicable requirements in the standards, and

o       quantify prudential and financial risk relating to registered providers

         the management of investments by registered providers to ensure that they remain financially viable and sustainable

         any other prudential matter prescribed by the rules.

The Standards may also set out how a provision of the Standards applies to a registered provider (e.g. to all providers, to specified registration categories or specified kinds of providers) (see subsection 376(3) of the Act).

Reliance on section 4 of the Acts Interpretation Act

This instrument is made under section 376 of the new Act. Section 4 of the Acts Interpretation Act 1901 allows an instrument to be made before the commencement of the enabling provision, provided it is necessary or expedient for the instrument to have effect upon commencement. This instrument is made in reliance on section 4 to ensure that aged care providers have clarity and visibility of the new financial and prudential requirements in preparation for commencement, and to support a smooth transition to the new regulatory framework.

Commencement

This instrument commences at the same time as section 376 of the Act commences.

Consultation

In February 2025, the Commission undertook a four-week consultation process. This process included the release of an exposure draft of the proposed Standards and was supported through a webinar and guidance material which outlined and further detailed the proposed new Standards.

Aged care providers, provider and consumer peak bodies, aged care consumers and their families, as well as other interested parties were invited to review the proposed Standards, including the Commission’s draft guidance documents, and provide submissions directly via email and/or via an online survey. Detailed consultations were also undertaken through direct discussions and meetings with stakeholder groups and individual providers.

The key purpose of this consultation was to seek views and feedback from all stakeholders on the proposed Standards.

The consultation drew a high level of engagement and feedback from across the aged care sector. The Commission received approximately 32 written submissions via email and 134 responses through the online survey. While the majority (approximately 60 percent) of responders to the online survey were from metropolitan areas, almost 40 percent came from rural and regional locations.

Most submissions recognised the purpose and aims of the Standards to improve governance and financial stability within the sector.

Detailed feedback was mostly received in relation to either the calculation of the proposed minimum liquidity amount, the inclusion of refundable amounts relating to retirement villages and independent living units or seeking clarification of technical accounting definitions.

Several submissions expressed the view that the Liquidity Standard should more expressly state that providers can comply with the requirements of the Liquidity Standard if they can demonstrate to the Commission that they have acceptable alternative ways to access the required amounts of liquidity, such as through related party loans or lines of credit to manage their liquidity.

In response, the Commission worked with the external actuarial firm used to develop the initial minimum liquidity model to further test, validate and refine the model. A copy of the methodology used to develop and test the liquidity model was also made publicly available on the Commission’s website.

Some key changes to the draft Standards in response to consultation include:

• The minimum liquidity calculation was adjusted to 35% cash expenses, 10% of refundable amounts and 2% of retirement villages lump sum entry amounts.

This was in recognition that the turnover and timing of retirement village lump sum entry amounts is different to that of refundable deposits.  Further modelling showed the amount of liquidity required to be held against retirement village lump sum entry amounts could be reduced without significantly increasing liquidity risk to the organisation.

• Where providers could demonstrate that they had access to sufficient liquidity to meet the objects of the Liquidity Standard through other financial arrangements such as lines of credit or related party loans or arrangements, they could notify the Commission of those arrangements, including to provide the necessary evidence and the applicable amount of liquidity to be maintained.

Making this clarification in the draft Standards recognises that some providers may have more complex financial arrangements in place, which means the applicable amount of minimum liquidity is maintained in an alternative way, but does not otherwise increase liquidity risk.

• A definition of retirement villages was inserted consistent with the Social Security Act 1991. This definition is only intended to capture lump sum payments and not any other amounts that may, in other circumstances, be considered as forming part of a person’s entry contribution for a retirement village.

A detailed report on the consultation, key areas of stakeholder feedback and the Commission’s analysis and response to the feedback was published on the Commission’s website on 3 July 2025.

A revised draft of the Standards was published on the Commission’s website on 5 September 2025 to present in full the changes made to the draft Standards following stakeholder feedback.

Supporting educational guidance and tools have also been developed in line with consultation feedback support compliance with the Standards.

Section 377 of the Aged Care Act 2024

Section 377 of the Act includes matters that the Commissioner must have regard to before making this instrument.

This includes, in subsection 377(1), having regard to the Statement of Principles (set out in section 25 of the Act) and the following principles:

         for a registered provider to deliver ongoing quality and safe care, the registered provider must remain financially viable and sustainable;

         safeguarding of the refundable deposits of individuals that are held by registered providers is helped by registered providers:

o       remaining financially viable and sustainable; and

o       having responsible management.

Regard has been given to these Principles throughout the development of the Standards.

Additionally, each of the Standards emphasises the importance of strong governance to ensure not only policies and procedures are in place but roles and accountabilities are determined and clear and that there are systems of control and oversite within the organisation. The Standards also expressly require governing bodies to make a statement that implementation of the provider’s liquidity management strategy will achieve the objects expressed in the Standards.

The Commission has liaised closely with the Department through the development of the Standards (consistent with the requirement for consultation with the System Governor in subsection 377(2) of the Act). This ensures the System Governor maintains oversight of prudential regulation policy, while enabling the Regulator to maintain independence of prudential regulation (giving effect to Recommendation 132 of the Royal Commission into Aged Care Quality and Safety).

Consultation has primarily been achieved through the work of the Financial and Prudential Advisory Group, which is made up by both the Department and the Commission. The Deputy Secretary of the Department has confirmed in writing that they have been consulted in the development of the Standards.

Regulation impact assessment

The Office of Impact Analysis has advised that a detailed impact analysis is not required for the Aged Care Financial and Prudential Standards 2025.

Other details

Details of this instrument are set out in Attachment A.

This instrument is compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.

This instrument is a legislative instrument for the purposes of the Legislation Act 2003.

ATTACHMENT A

Details of the Aged Care Financial and Prudential Standards 2025

Part 1 – Preliminary

Section 1 – Name

Section 1 provides that the name of the instrument is the Aged Care Financial and Prudential Standards 2025.

Section 2 – Commencement

Section 2 provides that the instrument commences at the same time as section 376 of the Aged Care Act 2024 commences. The new Act will commence on 1 November 2025.

Section 376 of the Act is the enabling provision for the Standards. Aligning commencement in this way ensures that the Standards commence at the same time as the new Act.

Section 3 – Authority

Section 3 provides that the instrument is made under section 376 of the Aged Care Act 2024.

Section 4 – Definitions

Section 4 sets out definitions for terms used in the instrument. This includes, for example:

         Accounting standard, which has the same meaning as is used in the Corporations Act 2001. This ensures consistency across Commonwealth legislation where the terms are intended to have the same meaning.

         Default minimum liquidity amount, for a registered provider for a quarter, which has the meaning given in subsection 11(2) of the instrument and evaluated minimum liquidity amount, for a registered provider for a quarter, which has the meaning given in subsection 11(3) of the instrument.

         Relevant responsible person of a registered provider, which means a responsible person of the provider other than one who is a responsible person of the provider only because of subparagraph 12(1)(c)(i) of the Act, which refers to “any person who has responsibility for overall management of the nursing services delivered by the registered provider, or overall management of the nursing services delivered at an approved residential care home of the registered provider, and who is a registered nurse”. This ensures that only the appropriate subset of responsible persons as defined in the Act are referenced in subsection 8(5) of the Standards in the context of financial and prudential management requirements.

It also provides a collective term for the different types of lump sum deposits that a registered provider could hold. These are collectively referred to as a deposited amount and include:

         a refundable deposit; or

         an accommodation bond; or

         an entry contribution.

A collective term is also used to describe the balance of these amounts (deposited amount balance). This is a concept used in both the Financial and Prudential Management Standard and Liquidity Standard (for the purposes of calculating a provider’s default and evaluated minimum liquidity amounts) to reference the actual amount of a deposited amount that the provider holds at a particular time (i.e. the balance of the deposited amount paid by the resident).

Definitions are also included in respect of a retirement village (defined to have the same meaning as in the Social Security Act 1991), a retirement village lump sum entry contribution and a refundable retirement village entry contribution amount. These terms are included to support the calculation of a provider’s default minimum liquidity amount under subsection 11(2) of the instrument. The terms refer to:

         the lump sum payment that may be made by a person as part of their entry into the retirement village (i.e. the lump sum payment the person makes in accordance with a legally binding written agreement between the person and the operator of a retirement village, for the person’s current right to live in the retirement village), and

         the refundable amount of that lump sum that is refundable to the person (at a particular time), in accordance with that agreement, if the person were to cease to live in the retirement village.

Section 4 also provides that some expressions used in the instrument are defined in the Act. This includes, for example:

         accommodation bond

         entry contribution

         provider registration category

         refundable deposit

         registered provider.

Other terms are defined by reference to their meaning in the Aged Care Rules (for example, NATSIFACP) where the definition is common across both the Rules and the Standards. Others are by reference to their meaning in the Aged Care (Consequential and Transitional Provisions) Rules 2025 (for example, formal agreement).

Section 5 – Purpose of this instrument

Section 5 states that the purposes of the instrument are to:

         prescribe standards relating to financial and prudential matters

         provide for application of certain standards to registered providers in specified provider registration categories or specified kinds of registered providers.

Note 1 states that as compliance with the Standards is a condition of registration, a breach could result in a civil penalty being applied (as per subsections 142(3) and (4) of the Act).

Note 2 provides that one of the safeguarding functions of the Commissioner is to protect continuity of care through monitoring the compliance of registered providers with their financial and prudential requirements and taking proactive steps to prevent non‑compliance with those requirements (see section 349 of the Act).

Registered providers must be able to demonstrate compliance with the Standards including through written policies and procedures such as:

         documents that describe financial governance responsibilities

         position descriptions that clearly define roles and accountabilities

         regular reports that show management of financial systems, regular reviews and implementation of ongoing improvements

         Liquidity Management Strategy

         Investment Management Strategy.

The aim of the Commission’s compliance activities is to encourage, engage with and help providers and workers to understand their obligations and deliver best practice aged care services. Where providers are not willing or able to remedy non-compliance, or where there is serious or persistent non-compliance, the Commission will use its powers to prompt or compel action. The Commissioner’s power to impose conditions of registration may also be used to ensure any risks are managed, and that the Commission has proper assurance that alternative arrangements for meeting minimum liquidity requirements are in line with the objects of the Standards.

Section 6 – Objects of this instrument

Section 6 states that the objects of the instrument are to prescribe minimum standards relating to financial and prudential matters to:

         ensure the financial viability and sustainability of registered providers in relation to the delivery of funded aged care services by those providers

         enable registered providers delivering funded aged care services to individuals to offer continuity of care to those individuals, and

         facilitate a forward‑looking, sustainable and resilient aged care system.

In 2021, the Royal Commission into Aged Care Quality and Safety recommended strengthening the financial and prudential regulation of aged care providers (Recommendation 132). This recommendation recognised that delivering safe, quality care depends on providers effectively managing a range of financial and operational risks (in both residential care and home care).

The new Standards have been developed in recognition that more is expected from governing bodies in relation to the skills and responsibilities the people leading and managing aged care providers need. The objects outlined in section 6 serve as the foundation for maintaining a financially stable and effective aged care system.

Part 2 – Financial and prudential management

Section 7 – Application of Part

Section 7 describes the application of Part 2 of the instrument, which sets out the Financial and Prudential Management Standard.

The Financial and Prudential Management Standard applies to all registered providers registered in the personal and care support in the home or community category and/or the nursing and transition care category and/or the residential care category, that are not a government entity or local government authority. 

The application of this Standard expands on the Governance Standard in the previous Prudential Standards to include residential care registered providers whether or not they hold deposited amounts under the aged care legislation.

For the first time, it also includes providers of some funded aged care services delivered in the home or community (i.e. those delivering funded aged care services in the home or community category and/or the nursing and transition care category).

However, unlike the Governance Standard in the previous Prudential Standards, the Financial and Prudential Management Standard does not apply to government providers as they are already subject to a range of comparable state and territory legislation that addresses governance and reporting requirements.

Section 8 – Requirement to implement and maintain a financial and prudential

management system

Subsection 8(1) creates the requirement for a registered provider to implement and maintain a financial and prudential management system.

Having a strong financial and prudential management system supports providers to deliver safe, quality care. The Financial and Prudential Management Standard supports this by setting requirements for the systems and processes registered providers must have to be financially stable and manage risk.

Subsection 8(2) sets out that the objects of a provider’s financial and prudential management system must include:

         ensuring the financial viability and sustainability of the provider

         ensuring the provider is managed in a financially sound manner

         enabling financial and prudential decisions of the provider to focus on the safety, health, wellbeing and quality of life of individuals accessing funded aged care services delivered by the provider

         ensuring the provider’s compliance with the Financial and Prudential Management Standard

         for providers delivering residential care – ensuring the management and use of deposited amounts, and the refund of deposited amount balances is in accordance with the Act, the rules and the Standards.

Mandatory requirements for a provider’s financial and prudential management system are set out in subsection 8(3). As per subsection 8(6), these matters do not limit what the provider’s system may deal with. A provider’s system must:

         set out the roles (including accountabilities and responsibilities) of persons in the system, including in relation to the provider’s finances and, for providers registered in the residential care category, the management and use of deposited amounts and the refund of deposited amount balances

o       Subsection 8(4) further provides that a registered provider must ensure that persons are aware of, and understand, their roles, accountabilities and responsibilities in relation to implementing the provider’s financial and prudential management system.

         enable the provider to monitor and control any delegation or outsourcing of roles, accountabilities or responsibilities 

         include internal reporting mechanisms to enable the provider to effectively monitor and control the provider’s finances and, for providers registered in the residential care category, the management and use of deposited amounts and the refund of deposited amount balances

         enable any failure to comply with the system to be detected, recorded and responded to.

A provider’s financial and prudential management system helps them to connect financial and prudential governance with good corporate and clinical governance. Strong governance helps providers manage refundable deposits responsibly and plan for their permitted uses.

A note under subsection 8(3) flags that a registered provider may be required to give a report to the Commissioner, or another person, relating to specified financial and prudential matters under sections 166 and 167 of the Act, and that this is separate to the internal reporting mechanisms described in paragraph 8(3)(c).

Under subsection 8(5), a registered provider must ensure that relevant responsible persons of the registered provider are aware of, and understand, the following:

         the provider’s financial and prudential management system

         the Financial and Prudential Standards

         any requirements imposed on the provider by the rules that relate to financial and prudential matters, including:

o       the management and use of deposited amounts, and

o       record‑keeping, reporting and notification of financial and prudential matters.

The systems that a registered provider implements and maintains in accordance with this section is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003.

Section 9 – Review of financial and prudential management system

Subsection 9(1) states that a registered provider must review and assess the effectiveness of its financial and prudential management system in achieving the objects of the system, and what actions could be taken to improve the system.

Under subsection 9(2), the system must be reviewed and assessed regularly, and at least once in each financial year, and at other key times, including when the provider:

         considers that updates to the system may be required to achieve the objects of the system

         considers that the system, including its implementation, is not in compliance with the financial and prudential management requirements in Part 2 of the instrument

         identifies, or becomes aware of, new or evolving financial risks.

Subsection 9(3) provides that if, through the provider’s review, the provider determines that actions could be taken to improve its system, then the provider must ensure that:

         reasonable actions are taken, and

         the efficiency of those actions is monitored.

A clarifying note under subsection 9(3) states that monitoring of the system could form part of subsequent reviews or be a separate activity.

Part 3 – Liquidity

Section 10 – Application of Part

Section 10 describes the application of Part 3 of the instrument, which sets out the Liquidity Standard.

The Liquidity Standard applies to a registered provider in relation to a quarter if, on the first day of that quarter, the provider is registered in the registration category residential care, except where the provider is:

• a government entity or local government authority, or
• is delivering funded aged care services under the NATSIFACP.  

Note that the application of this Standard includes all residential care registered providers whether or not they hold deposited amounts (i.e. refundable deposits, accommodation bonds and/or entry contributions).

However, it does not apply to government entities or local government authorities. State and local government registered providers have been excluded as they are:

         subject to a range of State and Territory legislation that addresses governance and reporting requirements, and

         have access to other sources of funding through State and Territory and local government revenue sources.

Subsection 10(2) provides that the Liquidity Standard does not apply if, on the first day of the quarter, the provider is delivering funded services under the NATSIFACP.

The effect of this provision for non-government providers of residential care delivering funded aged care services under the NATSIFACP depends on whether they are delivering those services on the first day of a quarter. That is:

         if a provider is delivering funded aged care services under NATSIFACP on the first day of a quarter, the Liquidity Standard will not apply to the provider for the quarter (regardless of whether the provider ceases delivering such services under NATSIFACP during the quarter)

         if provider is not delivering funded aged care services under NATSIFACP on the first day of a quarter (but is a non-government provider delivering other services under the residential care category), the Liquidity Standard will apply to the provider for that quarter, even if the provider starts to deliver services under NATSIFACP during the quarter.

From 1 November 2025 providers that are delivering services under the NATIFACP will be registered under the Act, where they have previously been funded under grant agreements with the Department. However, the Liquidity Standard will not apply to these providers until a later date (not earlier than 1 July 2027). This exemption acknowledges that NATSIFACP providers are small services in rural and remote areas providing services to meet the needs of Aboriginal and Torres Strait Islander peoples and receive grant funding to provide a range of culturally appropriate services. From 1 November 2025 these providers will be transitioning from the current arrangements to the new Aged Care Act and the new regulatory model. Given the breadth and complexity of these changes, it is appropriate for those NATSIFACP organisations that are providing residential services be given time to transition to the new Financial and Prudential Standards. This will also allow time for the Commission to engage with these providers to ensure they are prepared and ready for when these Standards apply to them.

Section 11 – Registered provider must determine default minimum liquidity amount and evaluated minimum liquidity amount on a quarterly basis

Subsection 11(1) requires that a registered provider must determine, each quarter, the provider’s:

         default minimum liquidity amount, and

         evaluated minimum liquidity amount.

Each of these amounts must be set out in the provider’s liquidity management strategy (see section 16).

Each quarter, providers must make sure they have enough liquidity to meet their financial obligations and withstand sudden or unexpected financial shocks. The minimum amount of liquidity needed to meet the Standards is informed by quarterly determination of a provider’s default minimum liquidity amount and evaluated minimum liquidity amount for the quarter.

Default minimum liquidity amount

Subsection 11(2) sets out a formula that enables the calculation of a provider’s default minimum liquidity amount for a quarter.

A provider’s default minimum liquidity amount for a quarter is the amount worked out by adding the following amounts:

         the amount equal to 35% of the provider’s cash expenses for the previous quarter

         the amount equal to 10% of the deposited amount balances (if any) held by the provider at the end of the previous quarter

         if the provider is an operator of a retirement village—the amount equal to 2% of refundable retirement village lump sum entry contribution amounts (if any) held by the provider at the end of the previous quarter.

It is important to note that the default minimum liquidity amount is not a fixed threshold for the sector (i.e. it is not a specified minimum value) but is instead calculated using a standard formula that will produce a different amount relative to the size of each provider’s operations  (i.e. it will respond to inputs and naturally scale to the circumstances of each provider). In some circumstances, a provider’s governing body may determine that the provider needs to hold more liquidity than the minimum determined using the default calculation.

In developing the formula described at subsection 11(2), the Commission undertook extensive analysis to assess the financial resilience of aged care providers against both negative economic conditions and market shocks. This included working with actuarial experts on modelling, to determine the 35% and 10% threshold, which was identified as the level that will ensure majority of providers are able to manage short term financial stress scenarios.

To assist providers, the Commission has also developed a liquidity calculator, which is a downloadable tool for providers to use to calculate their default minimum liquidity amount each quarter. The tool is available on the Commission’s website.

The Commission will monitor compliance with the Liquidity Standards but has also committed to reviewing the minimum liquidity amount after the first year of operation, and thereafter periodically, to ensure it remains an appropriate amount considering changes in provider behaviour and/or external circumstances.

Evaluated minimum liquidity amount

Subsection 11(3) states that a provider’s evaluated minimum liquidity amount for a quarter is the amount that is sufficient for the provider to ensure that the provider can:

         meet the provider’s financial obligations as they fall due

         refund, in accordance with the Act and the rules, any deposited amount balances that can be expected to fall due in the following 12 months

         deliver safe and quality care to individuals accessing funded aged care services delivered by the provider, and

         withstand a sudden or unexpected financial shock.

In deciding their evaluated minimum liquidity amount for a quarter, providers should think critically about how much liquidity they need (i.e. what is sufficient) to achieve matters outlined in subsection 11(3).

Financial shocks include sudden drops in occupancy, increases or decreases in interest rates or any other large increase in operating costs.

Providers must set out in their liquidity management strategy the factors the provider considered in determining their evaluated minimum liquidity amount for the quarter. This gives visibility of the provider’s assessment that the evaluated minimum liquidity amount meets the requirements in subsection 11(3) – and can be used by those approving and reviewing the strategy internally and by the Commission in considering how reasonable the assessment is.

Subsection 11(4) specifies that if a registered provider has determined and is maintaining its evaluated minimum liquidity amount for a quarter, and a change in circumstances or an event occurs, and that means the provider’s evaluated minimum liquidity amount for the quarter does not meet the requirements set out in subsection 11(3), then the provider must redetermine the provider’s evaluated minimum liquidity amount for the quarter.

This reflects the fact that a provider’s minimum liquidity is not static and requires review in line with the changeable operating environment.

Timing

Subsection 11(5) sets out the period in which minimum liquidity determinations must be made for a quarter. That is, a registered provider must determine the provider’s default minimum liquidity amount and evaluated minimum liquidity amount for a quarter within the period of:

         for a quarter commencing on 1 January—45 days beginning at the start of the quarter; or

         any other quarter—35 days beginning at the start of the quarter.

These dates have been specified so that they align with the reporting requirements in the Aged Care Rules regarding Quarterly Financial Reports. So that, in the first quarter of the financial year, commencing on 1 July, a provider must use the data in its Quarterly Financial Report (QFR) for the previous quarter (Quarter 4 of the previous financial year), which must be lodged 35 days after the beginning of that quarter.

For example, at the last day of the 4th Quarter of the financial year 30 June, a provider will have 35 days in which to determine its financial figures and submit them as part of its QFR due on the 4th of August. During this time, once a provider has determined its cash expenses, current liquidity, and refundable deposit amounts it can calculate its liquidity needs for the coming quarter and ensure its liquidity for the quarter meets that amount.

Subsection 12(2) sets out the quarterly determination time and the period that a provider must maintain that liquidity amount.

Calculation of cash expenses

Subsection 11(5) states that a registered provider’s cash expenses are to be calculated for the purposes of this section in accordance with the relevant accounting standards that are in effect at the time the determination under subsection (1) is made. The term accounting standard is defined in section 4 of the instrument to have the same meaning as in the Corporations Act 2001. Subsection 11(5) further provides that this section has effect whether the accounting standard would otherwise apply to the provider.

Section 12 – Registered provider must maintain default minimum liquidity amount for a quarter unless an election is in force

Subsection 12(1) requires that a provider must, by default, maintain the provider’s default minimum liquidity amount that the provider has determined for the quarter.

A provider may only maintain its evaluated minimum liquidity amount for the quarter if the provider has made an election to maintain the evaluated minimum liquidity amount for the quarter, and that election is in force at the quarterly determination time for the quarter.

The quarterly determination time is defined in section 4 of the instrument to mean “the first time in the quarter when the registered provider has determined both the provider’s default minimum liquidity amount and evaluated minimum liquidity amount for the quarter”.

Subsection 12(2) states that the default minimum liquidity amount for the quarter must be maintained at all times during the period:

         starting at the quarterly determination time for the quarter, and

         ending immediately before quarterly determination time for the following quarter.

Subsection 12(3) states that a registered provider maintains the provider’s default minimum liquidity amount for a quarter if (and only if) the provider:

         holds the default minimum liquidity amount for the quarter as cash or cash deposit

         holds, or has access to, assets that are readily able to be converted to cash, being an amount of cash that is at least equal to the default minimum liquidity amount for the quarter, or

         holds a combination of the above (i.e. holds a portion of the default minimum liquidity amount for the quarter as cash and holds, or has access to, assets that are readily able to be converted to cash or cash deposit, being an amount of cash that is at least equal to the balance of the default minimum liquidity amount for the quarter).

Section 13 – Registered provider may make an election

Subsection 13(1) states that a provider may to elect not to maintain its default minimum liquidity amount for a quarter and to instead maintain its evaluated minimum liquidity amount in accordance with the requirements set out in section 14.

The evaluated minimum liquidity amount provides an alternative way to meet the Liquidity Standard. It is designed to be used in limited circumstances only, including where a provider can demonstrate to the Commission that the arrangements it has for meeting the minimum liquidity requirements do not pose a greater risk to older people or the continuity of their care.

For example, some providers, either through the process of growing their organisation or through an approach to managing risk may operate several separate registered provider entities. In these scenarios, funds may be pooled and centrally managed through related party loans to maximise revenue through economies of scale and thereby reduce organisational risk. Commercial agreements are commonly in place for the entities that have loaned funds to draw on those funds as required. In other instances, providers may have lines of credit with commercial lending institutions which allows them to invest otherwise liquid assets in longer term, higher yielding investments or capital works that meet the organisation’s objectives. In these, and other cases, providers may not hold the required amount of liquidity but can give the necessary assurance that they do not present a liquidity risk and that the requirements of section 14 can be met. Requiring providers to divest from these arrangements runs the risk of reducing organisational profitability and thereby increasing risk which is the opposite of what the Liquidity Standard is trying to achieve.  

For an election to be in force, the provider must have notified the Commissioner of the election. As per note 1, notification requirements are set out in section 15.

Note 2 states that a provider may only maintain its evaluated minimum liquidity amount for a quarter if an election under subsection 13(1) is in force at the quarterly determination time for the quarter (i.e. the first time in the quarter when the provider has determined both its default minimum liquidity amount and evaluated minimum liquidity amount for the quarter).

An election under section 13 can relate to a quarter, or multiple quarters. Singular can be taken as a reference to the plural, and vice versa by virtue of the operation of section 23 of the Acts Interpretation Act 1901.

Subsection 13(2) states that a provider may revoke an election made under subsection 13(1).

Subsection 13(3) states that election is in force (i.e. is in effect) during the period:

         starting on the day the provider notifies the Commissioner of the election (in accordance with section 15), and

         ending either:

o       on the day the provider notifies the Commissioner that the election is revoked (in accordance with section 15), or

o       if the provider specifies a later time the revocation notification – at that later time.

Subsection 13(4) notes that subsection (2) does not limit subsection 33(3) of the Acts Interpretation Act 1901, which permits a delegate to exercise a delegated power or function more than once and from time to time, unless the contrary intention appears. This clarifies that providers can revoke an election that is in force on more than one occasion.

The Commission may use conditions of registration to manage compliance with the Liquidity Standard, including around the appropriateness of elections and assurances about both the sufficiency and maintenance of an evaluated minimum liquidity amount.

Section 14 – Registered provider must maintain evaluated minimum liquidity amount for a quarter if an election is in force

If an election is in force at the quarterly determination time (as described in section 13), then a registered provider must maintain the provider’s evaluated minimum liquidity amount for the quarter in accordance with section 14.

As for the default minimum liquidity amount, subsection 14(2) consistently states that the evaluated minimum liquidity amount for the quarter must be maintained at all times during the period:

         starting at the quarterly determination time for the quarter, and

         ending immediately before quarterly determination time for the following quarter.

Subsection 14(3) states that a registered provider maintains the provider’s evaluated minimum liquidity amount for a quarter if (and only if) the provider:

         has arrangements in place that ensure the provider can:

o       meet the provider’s financial obligations as they fall due

o       refund, in accordance with the Act and the rules, any deposited amount balances that can be expected to fall due in the following 12 months

o       deliver safe and quality care to individuals accessing funded aged care services delivered by the provider, and

o       withstand a sudden or unexpected financial shock, and

         those arrangements do not pose a greater risk to:

o       the safety, health, well‑being and quality of life of individuals accessing funded aged care services delivered by the provider, or

o       continuity of care for individuals accessing funded aged care services delivered by the provider

than if the provider were to maintain the provider’s default minimum liquidity amount for the quarter.

Section 15 – Notification requirements

Section 15 sets out various notification requirements that specify the circumstances in which (when) a written notification must be made to the Commissioner. Each of these notifications must be made in the approved form (available on the Commission’s website).

Paragraph 15(1)(a) requires that a provider must notify the Commissioner if the provider makes an election to maintain the provider’s evaluated minimum liquidity amount for a quarter.

Paragraph 15(2)(b) requires that a provider must notify the Commissioner if the provider revokes an election to maintain the provider’s evaluated minimum liquidity amount.

Under paragraph 15(1)(c) the provider must also notify the Commissioner if the provider re‑determines the provider’s evaluated minimum liquidity amount for a quarter. Subsection 15(2) specifies that this notification must be made as soon as reasonably practicable following the re-determination and must include the re‑determined evaluated minimum liquidity amount for the quarter, and a description of the change in circumstance or event that led to the provider re‑determining the amount.

Note that requirements for a provider to notify the Commissioner if the provider is not maintaining, or is at risk of not maintaining, the provider’s default minimum liquidity amount for a quarter or evaluated minimum liquidity amount for a quarter (whichever they are maintaining) are set out in Aged Care Rules made for the purposes of section 167 of the Act.

Section 16 – Requirement to implement and maintain a written liquidity management strategy

Subsection 16(1) requires a registered provider to implement and maintain a written liquidity management strategy.

Subsection 16(2) sets out that the objects of that system must include ensuring:

         the sound management of the provider’s liquidity and the provider’s liquidity risks

         that the provider can:

o       meet the provider’s financial obligations as they fall due

o       refund, in accordance with the Act and the Rules, any deposited amount balances that can be expected to fall due in the following 12 months

o       deliver safe and quality care to individuals accessing funded aged care services delivered by the provider, and

o       withstand a sudden or unexpected financial shock

         compliance with the Liquidity Standard.

The matters that a provider’s liquidity management strategy must set out are detailed in subsection 16(3). These include:

         the provider’s current default minimum liquidity amount for the quarter and evaluated minimum liquidity amount for the quarter (i.e. the amounts determined in accordance with section 11)

         whether the provider is currently maintaining the provider’s default minimum liquidity amount for the quarter or the evaluated minimum liquidity amount for the quarter

          if the provider is maintaining the default minimum liquidity amount for the quarter (in accordance with section 12):

o       the manner in which the provider is maintaining the amount

o       where relevant – a description of the assets that are readily able to be converted to cash or cash deposit

         if the provider is maintaining the evaluated minimum liquidity amount for the quarter (in accordance with section 14) – a detailed description of:

o        the arrangements the provider has in place as required by paragraph 14(3)(a)

o       the provider’s assessment that those arrangements do not pose a greater risk, as required by paragraph 14(3)(b), than if the provider were to maintain the provider’s default minimum liquidity amount for the quarter, and

o       how the provider will monitor those arrangements and the provider’s assessment of the risk

         the factors the provider considered in determining its default minimum liquidity amount and evaluated minimum liquidity amount for the quarter and which to maintain

         how the provider’s income and expenses will be monitored

         the provider’s sources of income; loan arrangements; liquidity risks and the strategies to address those risks

         how new liquidity risks will be identified and mitigated

         how financial forecasting will be used to determine liquidity and to assess liquidity risks

         how the provider will undertake contingency planning for dealing with sudden or unexpected financial shocks

         the roles (including accountabilities and responsibilities) of persons in relation to the implementation of the strategy

o       Note that subsection 16(4) further provides that a registered provider must ensure that persons are aware of, and understand, their roles, accountabilities and responsibilities in relation to implementing the provider’s liquidity management strategy.

         how the provider will monitor and control any delegation or outsourcing of those roles, accountabilities or responsibilities

         internal reporting mechanisms for those roles to enable the provider to effectively monitor and control the provider’s liquidity and the provider’s liquidity risks

         how the provider will detect, record and respond to any failure to comply with its liquidity management strategy or Part 3 of the instrument more broadly

         the procedures the provider will follow, and the actions the provider will take, if the provider’s liquidity falls below the minimum amount of liquidity required to be maintained (in accordance with either section 12 or 14).

Importantly, paragraph 16(3)(s) requires that a provider’s liquidity management strategy includes a statement that the governing body of the registered provider is satisfied that implementation of the strategy will achieve the objects of the strategy. This requirement recognises the necessity of the governing body maintaining oversight of the strategy and its effective implementation, and the governing body’s role in monitoring the strategy to ensure the provider continues to meet its liquidity requirements.

As per subsection 16(5), these matters do not limit what the provider’s liquidity management strategy may deal with.

An effective liquidity management strategy should detail the factors the provider has considered in developing the strategy, which might include, for example, the organisation’s: 
 

         current state, for example size and number of individuals to whom residential care is delivered

         current financial position and access to financing (for example, cash reserves, the mix of short-term and long-term assets and liabilities, and access to financing options, such as credit facilities or emergency funding sources)

         changing market and industry conditions that may affect liquidity

         contingency planning for unexpected events, such as seasonable staffing increases or emergencies

         strategic goals and future capital needed to support sustainable growth.

The strategy that a registered provider implements and maintains in accordance with this section is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003.

Section 17 – Registered provider must comply with liquidity management strategy

Section 17 states that a registered provider must manage the provider’s liquidity, and the provider’s liquidity risks, in accordance with the provider’s liquidity management strategy.

The liquidity management strategy is the foundation governance document for the management of a registered provider’s liquidity – it is also a key driver of financial and prudential governance of the organisation overall. The key concepts of planning, implementing, and ensuring appropriate level of oversight and accountability of liquidity management are common to all aspects of financial management. This includes the setting of budgets and the monitoring financial performance, as well as longer term strategic planning.

Section 18 – Review of liquidity management strategy

Subsection 18(1) states that a registered provider must review and assess:

         the implementation of the provider’s liquidity management strategy, including its effectiveness in achieving the objectives of the strategy, and

         what updates could be made to the strategy, or other actions could be taken, to:

o       ensure the compliance with the Liquidity Standard, or

o       improve the management of the provider’s liquidity and the provider’s liquidity risks.

Under subsection 18(2), a provider’s liquidity management strategy must be reviewed and assessed regularly, and at least once in each financial year, and at other key times, including when the provider:

         considers there is a risk that the provider is not maintaining, or will be unable to maintain, the provider’s default minimum liquidity amount or evaluated minimum liquidity amount (whichever applies)

         considers that the liquidity management strategy, or its implementation, is not in compliance with the liquidity requirements in Part 3 of the instrument

         identifies, or becomes aware of, new or evolving liquidity risks.

As per the note under subsection 18(2), a registered provider must update the provider’s liquidity management strategy each quarter to, at least, set out the provider’s default and evaluated minimum liquidity amount for that quarter (as per subsection 16(3)).

Subsection 18(3) states that if the provider identifies that updates could be made to its liquidity management strategy or actions could be taken to ensure compliance and/or to improve the management of the provider’s liquidity and the provider’s liquidity risks, then the provider must ensure that:

         those updates are made

         reasonable actions are taken, and

         the efficiency of those updates and actions is monitored.

A clarifying note to subsection 18(3) states that monitoring of the liquidity management strategy could form part of subsequent reviews or be a separate activity.

Section 19 – Requirements relating to loans

Section 19 specifies that a registered provider may only make a loan if:

         the loan is made on a commercial basis; and

         there is a written agreement in relation to the loan.

Note that section 19 of the Standards relates to any loan made by the provider and is therefore broader than section 310 of the Act, which is specifically about the permitted uses of refundable deposits held by the provider (including when the provider is permitted to use a refundable deposit to make a loan, where consistent but additional conditions for making a loan that includes refundable deposits are set out in paragraph 310(2)(c) of the Act). 

Part 4 – Investment

Section 20 – Application of Part

Section 20 describes the application of Part 4 of the instrument, which sets out the Investment Standard. The application of the Investment Standard is consistent with the application of the Liquidity Standard described in section 10 of the instrument.

That is, the Investment Standard applies to a registered provider that if, on the first day of the quarter, the provider is:

         registered in the registration category residential care, and

         is not a government entity or local government authority.  

The application of this Standard includes all residential care registered providers whether they hold deposited amounts or not.

Subsection 20(2) provides that the Investment Standard does not apply if, on the first day of the quarter, the provider is delivering funded services under the NATSIFACP.

From 1 November 2025 providers delivering services under the NATIFACP will be registered under the Act, where they have previously been funded under grant agreements with the Department. However, the Investment Standard will not apply to these providers until a later date (not earlier than 1 July 2027). These exemptions acknowledge that, to date, NATSIFACP providers have not taken deposited amounts or been regulated under the legislative framework. The proposed longer implementation timeframe will enable ongoing consultation with these providers, the majority of whom are small not-for-profit providers in rural and remote Australia, to support smooth transition for both providers and residents.

It is noted that:

         this will minimise additional regulatory burden on NATSIFACP providers in the short term, with a significant transition ahead for them to the new Act

         funding granted to NATSIFACP providers must be entirely used on service delivery under their grant agreement and should not be invested separately; nor can it be used for security for other loans etc.

Section 21 – Requirement to implement and maintain a written investment management strategy

Subsection 21 requires a registered provider to implement and maintain a written investment management strategy. A strong investment management strategy helps providers to:

         manage financial risks effectively

         build a financial buffer that maintains flexibility and supports informed decision making in uncertain circumstances

         adapt quickly to changes as they happen.

Providers must also have governance arrangements, structures and processes that support them to make informed and careful decisions about investments.

Subsection 21(1) details that a provider’s investment management strategy must set out:

         the provider’s investment objectives, which must include:

o       the adoption of sound practices in relation to the selection, management and monitoring of investments by the provider

o       ensuring the delivery of safe and quality care to individuals accessing funded aged care services delivered by the provider

o       protecting deposited amounts

         a strategy for achieving the provider’s investment objectives

         the roles (including accountabilities and responsibilities) of persons in relation to the implementation of the strategy

o       Note that subsection 21(2) further provides that a registered provider must ensure that persons are aware of, and understand, their roles, accountabilities and responsibilities in relation to implementing the provider’s investment management strategy.

         the skills and experience required for those roles

         how the provider will monitor and control any delegation or outsourcing of those roles, accountabilities or responsibilities

         internal reporting mechanisms for those roles to enable the provider to effectively monitor and control the provider’s investments and the implementation of the strategy

         processes for identifying, mitigating and addressing investment risks

         how the provider will detect, record and respond to any failure to comply with its strategy or Part 4 of the instrument more broadly.

As per subsection 21(3), these matters do not limit what the provider’s investment management strategy may deal with.

The strategy that a registered provider implements and maintains in accordance with this section is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003.

Section 22 – Investments must be in accordance with investment management strategy

Section 22 specifies that investments made by a registered provider must be made and managed in accordance with the provider’s investment management strategy.

Taking a strategic approach to the management of investments across the provider organisation helps providers to:

         be financially stable   

         have stronger governance  

         protect refundable deposits.

Section 23 – Review of investment management strategy

Consistent with requirements in sections 9 and 18 in relation to a provider’s financial and prudential management system and liquidity management strategy consecutively, a provider’s investment management strategy must also be regularly reviewed and updated.

Subsection 23(1) states that a registered provider must review and assess:

         the implementation of the provider’s investment management strategy, including its effectiveness in achieving the provider’s investment objectives

         what updates could be made to the investment management strategy, or other actions could be taken, to:

o       ensure the compliance with the Investment Standard, or

o       improve the effectiveness of the strategy.

Under subsection 23(2), the strategy must be reviewed and assessed regularly, and at least once in each financial year, and at other key times, including when the provider:

         considers that updates to its investment management strategy may be required to achieve the provider’s investment objectives

         considers that its investment management strategy, or its implementation, is not in compliance with the investment requirements in Part 4 of the instrument

         identifies, or becomes aware of, new or evolving investment risks.

Subsection 23(3) states that if the provider determines that updates could be made to its investment management strategy or actions could be taken to ensure compliance and/or to improve the effectiveness of the investment management strategy, then the provider must ensure that:

         those updates are made

         reasonable actions are taken, and

         the efficiency of those updates and actions is monitored.

A clarifying note under subsection 23(3) provides that monitoring of the investment management strategy could form part of subsequent reviews or be a separate activity.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Aged Care Financial and Prudential Standards 2025

This Disallowable Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Disallowable Legislative Instrument

The purpose of the Aged Care Financial and Prudential Standards 2025 (Standards) is to make Financial and Prudential Standards that certain kinds of aged care providers must comply with as part of their registration as an aged care provider under the Aged Care Act 2024 (Act).

Under the new Act, the Aged Care Quality and Safety Commission (Commission) is responsible, in consultation with the Department of Health, Disability and Ageing (Department), for developing and implementing a new set of Financial and Prudential Standards. The Commission’s role in setting and monitoring provider compliance with the Standards complements the Commission’s current role in ensuring providers deliver sustainable high quality safe care.

The new Standards comprise:

• the Financial and Prudential Management Standard 
• the Liquidity Standard, and
• the Investment Standard.

The new Standards set out the minimum requirements for good financial and prudential management of registered aged care providers. They replace and expand on the current Prudential Standards which focus on the management and protection of refundable deposits paid to aged care providers by aged care consumers, and seek to improve the financial management of providers, by ensuring they have the appropriate systems in place to maintain financial viability.

In summary, the Standards are designed to ensure that:

• a provider’s governing body manages finances responsibly and considers how its decisions will affect the wellbeing of older people receiving Australian Government-funded aged care
• providers have enough funds to:
  • refund deposited amount balances in accordance with their conditions of registration
  • meet their financial obligations when they’re due
  • deliver safe and quality aged care services consistently
• providers understand and continue to review their liquidity requirements and liquidity management strategy to ensure they are prepared for, and can withstand, any periods of financial stress
• providers protect the continuity of care of older Australians; by making sure financial or operational challenges don’t disrupt the quality or delivery of services they provide to older people providers protect refundable deposit balances by making sure they properly manage these funds and hold them securely
• financial risks to the Australian Government are minimised, including claims on the Accommodation Payment Guarantee Scheme.

The new Standards aim to strengthen the financial sustainability, accountability and prudential oversight of Commonwealth funded aged care providers, in line with recommendations from the Royal Commission into Aged Care Quality and Safety.

Human rights implications

The Standards engage the following rights:

• the right to an adequate standard of living in article 11(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) and article 28(1) of the Convention on the Rights of Persons with Disabilities (CRPD)
• the right to health in article 12 of the ICESCR and article 25 of the CRPD
• the right to work and rights at work in articles 4 and 6 of the ICESCR.

Right to an adequate standard of living

The right to an adequate standard of living, including adequate food, water and housing, and

to the continuous improvement of living conditions is contained in article 11(1) of ICESCR.

Article 28(1) of the CRPD also requires countries to take appropriate measures to ensure an

adequate standard of living and social protection for persons with disabilities, including clean

water services, access for older persons with disabilities to social protection programs,

appropriate and affordable services, devices and other assistance and public housing

programs.

The Financial and Prudential Standards are designed to promote financially sustainable aged care providers, which is essential to upholding this right. The capacity to deliver safe, quality and continuous aged care services are part of ensuring an adequate standard of living for older persons.

Older Australians receiving aged care services are entitled to an adequate standard of living, including access to appropriate accommodation, food, personal support and healthcare.

Setting requirements that support financial sustainability helps ensure consistent access to accommodation, food, hygiene and dignity. It also ensures providers assess, plan, manage and review their finances to meet other requirements in the Act that promote older people’s quality of life, such as those set out in the Quality Standards and Statement of Rights. This helps to realise the rights of older people accessing aged care services including, for example, rights to independence, inclusion, dignity and participation in the community. It also prevents harm that can arise through the financial collapse of an aged care service.

Financially stable and prudentially managed aged care providers are essential to upholding this right and enforcing older people’s right to live in dignity and security.

Right to health

The right to health is contained under article 12 of the ICESCR and article 25 of the CRPD.

These articles refer to the right of individuals, including persons with disability, to the highest

attainable standard of physical and mental health.

The proposed standards promote this right by supporting the long-term financial viability, stability and solvency of aged care providers, ensuring that older people receiving funded aged care services continue to receive safe, consistent and high-quality aged care services.

Financial mismanagement, instability or collapse within a provider can threaten or disrupt care delivery, placing the continuity of services and residents’ health at risk, undermining the right to health. Requiring providers to plan and manage their finances better ensures financial and/or operational challenges don’t disrupt the quality or delivery of services they provide to older people.

By mandating stronger financial governance, capital adequacy, liquidity management and risk controls, the standards reduce the likelihood of service interruption, thereby advancing the right to health for aged care recipients.

Requiring providers and their governing bodies to manage finances (including their liquidity and investments) responsibly promotes financial stability and solvency in aged care services, supporting older people’s access to safe, continuous and quality care.

Right to work and rights at work

Article 6(1) of the ICESCR protects the right to work, which includes ‘the right of everyone

to the opportunity to gain [their] living by work which [they] freely [choose or accept]’ and the right in Article 7 ‘to the enjoyment of just and favourable conditions of work, including fair wages, safe and healthy working conditions, equal opportunity for promotion, and rest, leisure and reasonable limitation of working hours…’

The aged care workforce depends on a stable and sustainable sector to maintain access to employment and just and favourable working conditions. The financial failure of an aged care provider can have a significant impact employment in the sector, resulting in job losses, reduced hours, unsustainable working conditions and staff displacement.

Requiring effective governance and prudential oversight of a provider organisation advances the right to work by helping to maintain sector sustainability. Financial sustainability improves a provider’s capacity to meet wage obligations and invest in safe and healthy workplaces.

By enhancing financial and prudential requirements, the Standards support continuity of care for older persons’, which in turn contributes to job security and stable employment for aged care workers. It also helps create an environment where aged care workers are more likely to experience fair remuneration, job security, safe working conditions and adequate support, in line with their rights under Articles 6 and 7 of the ICESCR.

Conclusion

The Standards are compatible with, and promote, a number of Australia’s human rights obligations, in particular the rights of individuals accessing funded aged care services to an adequate standard of living and the highest attainable standard of health. The Standards strengthen the protections for individuals by enhancing the financial stability and resilience of the aged care sector, protecting older persons’ access to safe, continuous and quality care and supporting workforce stability.

Liz Hefren-Webb

Aged Care Quality and Safety Commissioner