User Rights Amendment Principles 2008 (No. 3)

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Ageing

Aged Care Act 1997

User Rights Amendment Principles 2008 (No. 3)

The Aged Care Act 1997 (the Act) provides for the funding of aged care services.  Persons who are approved under the Act to provide aged care services (approved providers) can be eligible to receive subsidy payments in respect of the care they provide to approved care recipients. 

Subsection 96-1(1) of the Act allows the Minister to make Principles providing for various matters required or permitted by a part or section of the Act. 

One set of Principles made under the Act is the User Rights Principles 2007 (the User Rights Principles).

The purpose of the User Rights Amendment Principles 2008 (No. 3) (the Amending Principles) is detailed below.

The Amending Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

User Rights Amendment Principles 2008 (No. 3)

The purpose of these Amending Principles is to make consequential amendments to the User Rights Principles that flow from changes made to the Act by the Aged Care Amendment (2008 Measures No. 2) Act 2008.

For example, the changes to the Principles:

• provide additional detail about the operation of the protections for accommodation bonds and like payments; and
• enable the financial hardship provisions to apply in cases where the Secretary determines that a person must not be charged more than a specified maximum amount of accommodation bond or accommodation charge.

The changes also clarify a number of technical matters about the timing of changes to interest rates and the content of bond registers.

Consultation

The policies reflected in the Amending Principles were the subject of consultation with the aged care sector through the Ageing Consultative Committee, which comprises peak industry, professional and consumer bodies.  Sector feedback was considered in the development and fine tuning of the complex legislative and policy reform process.

Regulation Impact Statement

The Office of Best Practice Regulation has advised that no Regulation Impact Statement is required (OBPR ID 9978).

Details of the amendments to the User Rights Principles are listed at Attachment A.

ATTACHMENT A

NOTES ON CLAUSES

Clause 1 states that the name of the Amending Principles is the User Rights Amendment Principles 2008 (No. 3).

Clause 2 states that the Amending Principles commence on commencement of the Aged Care Amendment (2008 Measures No. 2) Act 2008.

Clause 3 states that Schedule 1 amends the User Rights Principles.

Clause 4 provides that the amendments in item 31 apply to an entity that becomes a former approved provider after 31 December 2008.

Schedule 1 Amendments

Item 1

This item amends the definition of key personnel in section 23.3 so that instead of referencing 9-1(2)(a) of the Act, it references new section 8-3A.  This change is consequential to changes made to the Act through the Aged Care Amendment (2008 Measures No. 2) Act 2008.

Items 2, 7, 9, 11, 13 to 16, 19 to 25, 27, 29 and 30

The Aged Care Amendment (2008 Measures No. 2) Act 2008 amended section 57-14(1) and 57A-9(1) so that the Secretary could not only determine (in accordance with the User Rights Principles) that a person must not be charged an accommodation bond or charge because of financial hardship but also to enable the Secretary to determine that the person must not be charged an accommodation bond or charge of more than a specified maximum amount (because paying a higher amount of accommodation bond or charge would cause the person financial hardship). 

These changes to the Act, have meant that wherever in the Act there is reference to a determination that a person not be charged an accommodation bond or charge, these references have needed changing so that they also refer to where it has been determined that a person must not be charged more than a specified amount of accommodation bond or charge.  Similarly, references to section numbers (previously 57-14(1) and 57A-9(1)) have also been changed so as to distinguish between hardship determinations whereby no bond or charge is payable (under paragraphs 57-14(1)(a) and 57A-9(1)(a)), and those where only a specific maximum amount is payable because of a financial hardship determination (under paragraphs 57-14(1)(b) and 57A-9(1)(b)).

These items make consistent changes to all relevant sections in the User Rights Principles including:

• paragraph 23.30(1)(b) (Item 2)
• subsection 23.38(1) (Item 7)
• paragraph 23.53(a) (item 9)
• subsection 23.56(2) (item 11)
• section 23.57 including the note (items 13 and 14)
• paragraph 23.58(b) (Item 15)
• section 23.75A (Item 16)
• paragraph 23.81C(2)(d) and the note in the same section (Items 19 and 20)
• paragraph 23.81E(1)(b) (Item 21)
• section 23.81G (Item 22)
• section 23.81K (item 23)
• subsection 23.81M(1) (Item 24)
• paragraph 23.81R(a) (Item 25)
• subsection 23.81U(2) (Item 27)
• section 23.81W (Item 29)
• paragraph 23.81W(b) (Item 30)

Items 3 to 5

These items amend section 23.28 to require that an approved provider must record the date when amounts of base interest and maximum permissible interest were paid.

Item 6

This item amends section 23.40 to require that the Annual Prudential Compliance Statement submitted by each approved provider holding accommodation bonds includes a statement regarding the approved provider’s compliance with requirements to pay interest on the refund of accommodation bond balances and entry contribution balances.

Item 8

The Aged Care Amendment (2008 Measures No. 2) Act 2008 amended section 14-5 of the Act to allow the Secretary to impose conditions upon a new allocation of places requiring  new approved providers seeking Commonwealth funding under the Act to refund any ‘pre-allocation lump sums’ taken prior to becoming an approved provider.

This item inserts a new section 23.49A to establish the timeframe for payment of an accommodation bond by an existing resident, who had paid a pre-allocation lump sum prior to the aged care service receiving its initial allocation of places, to an aged care service that receives its first allocation of residential aged care places.

In summary, if the Secretary has imposed a condition of allocation requiring the refund of a pre-allocation lump sum, then an accommodation bond must not be charged until that pre-allocation lump sum has been refunded and the approved provider becomes eligible to charge bonds (because the approved provider complies with the rules in section 57-2 of the Act).

If the approved provider does not comply with the rules in section 57-2, an accommodation bond is not payable. 

New section 23.49A provides that if the approved provider does not comply with the rules in section 57-2 until after the period for refund of the pre-allocation lump sum, then the accommodation bond can not be charged until a minimum of 21 days after the approved provider complies with the rules in section 57-2.  This new section 23.49A is designed to deal with the situation where an approved provider might have refunded a pre-allocation lump sum but the residential care service is not certified.

Under paragraph 57-2(a), the residential care service must be certified for an accommodation bond to become payable.  This means that an accommodation bond can not be charged in place of the pre-allocation lump sum until after the residential care service is certified.  In this case, the resident may have re-invested the pre-allocated lump sum.  The resident should not be required to pay the bond until 21 days after the approved provider meets the eligibility criteria, to allow the resident additional time to access that sum, as there is no way for the resident to predict in advance when certification may be granted for a particular residential care service.

Items 10 and 26

These item amend the definition of ‘unrealisable asset’ in subsections 23.56(1) and 23.81U(2) to reflect changes to section numbers within the Social Security Act 1991.

Items 12 and 28

These items amend sections 23.56 and 23.81U to set out the matters that the Secretary may consider when making a financial hardship determination in respect of an accommodation bond or charge.

The Secretary may consider:

• the person’s financial arrangements;
• whether any assets of the person are assets to which he or she does not reasonably have access;
• if the person has significant assets – whether the assets are unrealisable assets; and
• whether the person has recently gifted any assets.

The Secretary is not compelled to look at these matters, but may consider them to assist the Secretary in making a determination.  The Secretary may also consider any other matters the Secretary considers relevant.

Item 17

This amendment to the definition of base interest rate in section 23.79B clarifies that changes in the base interest rate payable on accommodation bond refunds take effect on the first day of the month following the determination of the below threshold rate.  This will enable approved providers time to become informed of changes and have certainty about the date from which the revised interest applies.

Item 18

In situations in which the base interest rate changes while interest is accruing on an accommodation bond refund, the rate to be used in calculating interest is to be that which applied at the time that base interest rate first became payable.  That is, the first rate remains applicable for the whole period in which base interest is accruing on the bond refund.

This item amends section 23.79D to clarify that only one rate of base interest rate applies during a refund period.  This will bring the base interest rate in line with provisions contained in subsection 23.79D(2) (where the maximum permissible interest rate is set at the applicable rate on the first day it applies), and clarify a matter that has created uncertainty for approved providers and care recipients.

Item 31

The Aged Care Amendment (2008 Measures No. 2) Act 2008 amended the Act to impose a requirement on former approved providers to pay interest on the refund of accommodation bonds and entry contributions (sections 57-21A and 57-21B).

This item amends sections within Division 14 “Payment of interest on accommodation bond balance” and Division 15 “Payment of interest on entry contribution balance” of the User Rights Principles to ensure that the obligation to pay interest on the refund of accommodation bonds and entry contributions also applies to former approved providers.  The new provision only applies to those entities that become former approved providers after 31 December 2008.