Upcoming Financial and Prudential Standards – Open for Consultation

Overview

The Australian Government has introduced draft Financial and Prudential Standards as part of the new Aged Care Act, set to commence from 1 July 2025. These new standards aim to strengthen financial governance, liquidity management, and investment oversight for registered aged care providers to ensure financial stability and service continuity.
The government has now opened a consultation on these standards, providing an opportunity for aged care providers and stakeholders to review, understand, and provide feedback before they become legally binding. It is critical for providers to familiarise themselves with these proposed changes and start considering what they need to do to comply.

Key Changes and Implications for Providers

The new framework simplifies and replaces the existing four prudential standards (Liquidity, Governance, Records, and Disclosure) with three updated and consolidated standards:  

What is Coming and What Providers Need to Know

1. Financial and Prudential Management Standard

What’s New?
All aged care providers (including home care services) must meet minimum financial governance and prudential standards for the first time.
Stronger reporting, transparency, and risk management requirements.
Governance bodies must actively monitor financial performance and document clear roles and responsibilities for financial decision-making.
What Providers Should Do Now:
Review existing financial governance frameworks to ensure they meet the new documentation, reporting, and accountability requirements.
Identify gaps in financial oversight and update risk management processes.
Prepare to engage in consultation to provide feedback on the feasibility of these new governance requirements.

2. Liquidity Standard

What’s New?
New minimum liquidity amount calculation formula:
35% of cash expenses + 10% of refundable deposit liabilities (if applicable).
All providers must maintain, monitor, and report liquidity levels quarterly.
Liquidity risks must be actively managed, ensuring providers can refund deposits and cover costs in financially challenging periods.
What Providers Should Do Now:
Calculate projected liquidity needs using the proposed formula and assess financial resilience.
Review and update Liquidity Management Strategies (LMS) before the July 2025 implementation.
Provide feedback on whether the new liquidity requirements are practical and achievable.

3. Investment Standard

What’s New?
All residential providers investing funds (not just those holding refundable deposits) must have an Investment Management Strategy (IMS).
IMS must be documented, regularly reviewed, and approved by governing bodies.
Investments must not compromise liquidity or quality of care delivery.
What Providers Should Do Now:
Review current investment policies and ensure they align with responsible investment practices.
Prepare an Investment Management Strategy (IMS) and assess whether governance structures need strengthening.
Submit feedback on whether these new requirements are proportionate and reasonable for providers.

Next Steps: How to Engage in Consultation

These draft standards are open for consultation, and provider input is crucial. The government seeks feedback to refine the requirements before they are finalised.
Providers should take this opportunity to:
Understand the proposed changes and assess their financial and operational impact.
Identify any challenges or areas requiring further clarification.
Engage with industry bodies to provide collective feedback on feasibility and compliance expectations.
For more details and to participate in the consultation, visit: agedcarequality.gov.au

Final Thoughts

These Financial and Prudential Standards represent a significant shift in aged care financial governance and compliance requirements. Now is the time for providers to prepare, assess their current systems, and provide feedback to shape the final regulations before they take effect in July 2025.
By proactively engaging in the consultation process, providers can help ensure the new standards are practical, achievable, and support sustainable aged care services.

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