Office of Aged Care Quality and Compliance (OACQC)
Protecting Residents’ Savings – arrangements for accommodation bonds
Aged care accommodation bonds changes from 1 October 2011.
From 1 October 2011, there are clearer and stronger arrangements to protect residents’ savings held in the form of accommodation bonds (bonds). The arrangements clarify the intended purpose for bonds as a source of capital for investment in aged care infrastructure. They also improve governance arrangements for bonds and provide greater transparency and accountability for bonds. This will improve consumer confidence in the aged care sector by assuring residents that their funds are being used for intended purposes and that their bond balances will be refunded when they fall due.
The arrangements:
- clarify the permitted uses of bonds
- introduce a two year transition period for approved providers to adjust and fully comply with the permitted uses
- introduce a new Governance Standard for approved providers holding bonds
- improve reporting and disclosure for greater transparency and consumer confidence
- introduce additional information gathering powers for monitoring compliance
- remove restrictions on the use of income from bonds, retention amounts and accommodation charges
- introduce criminal penalties for the misuse of bond funds.
These changes are part of the More Support for Older Australians in the National Health and Hospitals Network (2010–11 Budget Measure) and have been developed in close consultation with the aged care industry, consumer groups and the financial services sector.
More information
Information has been prepared to assist in understanding the new arrangements.Information sheets for approved providers
Protecting Residents’ Savings – information for approved providersDisclosure Standard – information for approved providers
Governance Standard – information for approved providers
More details for approved providers
Protecting Residents’ Savings – a guide to the arrangements for accommodation bonds from 1 October 2011Information sheets for residents
Information Sheet No. 16 – Accommodation Bonds for Residential Aged CareConsultation on possible amendments to permitted uses
This paper has been prepared by the Department of Health and Ageing (the department) for consultation with consumers of residential aged care services, the aged care industry and the general public regarding legislative changes being considered as part of continuous improvement to the enhanced prudential regulation of accommodation bonds (bonds).This paper aims to guide consultation and discussion by providing an overview of the issues identified to date in respect of enhanced prudential regulation of bonds. These issues include the restrictions which the 2011 regulatory amendments placed on:
- permitted uses of loans made using bonds
- investments in Religious Charitable Development Funds (RCDFs)
Issues Paper – Proposed Legislative Amendments
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Protecting Aged Care Residents' Savings - Frequently Asked Questions
The following Frequently Asked Questions (FAQs) relate to current requirements of the Aged Care Act 1997 and User Rights Principles 1997.Information relating to the “Living Longer. Living Better” aged care reform package can be found at the Living Longer. Living Better. website.
Detailed information relating to the refunding of bonds and other prudential requirements can be found in The Residential Care Manual website and also at the Accommodation Bond Balance Refund Interest Rates webpage.
Where can I access information relating to the legislative reforms for accommodation bonds (bonds)?
Protecting Residents’ Savings ─ A guide to the arrangements for accommodation bonds from 1 October 2011 along with three information sheets have been designed to assist approved providers.To assist residents, prospective residents and their representatives Information Sheet 16 ─ Accommodation Bonds for Residential Aged Care has been updated.
The Aged Care Act 1997 and the User Rights Principles 1997 are also available on the ComLaw website.
How do the legislative reforms affect the way an approved provider can use retention amounts, accommodation charges and income derived from bonds?
The use of retention amounts, accommodation charges and income derived from the investment of bonds is no longer regulated. This means that an approved provider may use retention amounts, accommodation charges and income derived from the investment of bonds received at any of its facilities, regardless of when they were received, for any purpose, including operational expenses such as repair costs. An approved provider that has multiple facilities may combine retention amounts, accommodation charges and income derived from bonds received at all of its facilities, and use it as it chooses.Where can I access information outlining what an approved provider needs to disclose to residents in order to comply with the Disclosure Standard?
The information sheet Disclosure Standard ─ information for approved providers, includes a statement the Department considers compliant with the disclosure requirements; however, approved providers may draft their own.A template has also been developed by Leading Age Services Australia – Victoria to assist approved providers in complying with the Disclosure Standard requirements. This template along with other helpful templates are available at the Leading Age Services Australia (LASA), Victoria website.
Does section 23.43, Disclosure to prospective care residents of the User Rights Principles 1997, relate to all prospective residents or only those eligible to pay a bond?
A prospective resident is a person approved as a recipient of residential care who is considering receiving residential care. With regards to disclosure to residents there is no distinction between prospective residents eligible to pay a bond, and other prospective residents.For further clarification, please refer to:
Protecting residents’ savings—a guide to the arrangements for accommodation bonds from 1 October 2011.
Along with the information sheet
Disclosure Standard – information for approved providers.
What are the permitted uses for bonds charged on or after 1 October 2011?
Approved providers must use bonds charged on or after 1 October 2011 for purposes that are permitted uses as specified in the Aged Care Act 1997 and the User Rights Principles 1997; however, a two year transitional period is in place (see below).These permitted uses include:
- Capital expenditure:
- to acquire land for building residential care facilities or flexible care facilities
- to acquire, build or significantly alter premises for providing residential care or flexible care
- to acquire or install furniture, fittings or equipment used in providing residential care or flexible care where the premises are erected or following a significant extension, a significant alteration or significant refurbishment
- directly attributable to the above.
- Investment in particular financial products including:
- deposits with an authorised deposit-taking institution made available in the course of its banking business
- debentures, stocks or bonds issued by the Commonwealth, States or Territories
- securities
- registered managed investment schemes
- unregistered managed investment schemes established for the purpose of investment in residential care or flexible care.
- Loans for such capital expenditure or investments made:
- on a commercial basis
- by written agreement
- not to an individual.
- Refunding of bond balances or entry contribution balances.
- Repayment of debt:
- accrued from capital expenditure as outlined above
- accrued from the refunding of bond balances
- accrued before 1 October 2011, for the purpose of providing aged care.
- To meet an approved provider’s reasonable business losses during the first 12 months of the approved provider’s operation of a residential or flexible care service.
Where an approved provider invests bonds, regardless of when they were received, in investments other than deposits with an authorized deposit-taking institution made available in the course of its banking business, investment risk must be assessed. This risk must be also managed by having an investment management strategy in place prior to making such investments.
Further information relating to permitted uses is outlined in: Protecting Residents’ Savings – A guide to the arrangements for accommodation bonds from 1 October 2011.
Is an approved provider required to track the way it uses bonds?
Yes, an approved provider holding one or more bonds is required to implement and maintain a governance system that ensures bonds are used only for permitted uses. The system must provide for reporting mechanisms that ensure the approved provider can effectively monitor and control the use of bonds.Can an approved provider use bonds to repay debt for the purpose of capital expenditure or refunding bond balances?
Yes, an approved provider may repay debt that has been accrued through capital expenditure with bonds.The capital expenditure must be:
- to acquire land for building residential care facilities or flexible care facilities
- to acquire, build or significantly alter premises for providing residential care or flexible care
- to acquire or install furniture, fittings or equipment used in providing residential care or flexible care where the premises are erected or following a significant extension, a significant alteration or significant refurbishment
- directly attributable to the above.
Can an approved provider use bonds to repay the debt of another entity?
No, bonds may be not be used to repay debt accrued by another entity, including where the debt was accrued for the purpose of capital expenditure.When operational places are transferred due to one approved provider (transferee) purchasing another approved provider (transferor) what will the transferee’s responsibilities for bonds associated with these places be? Will these responsibilities be different for a bond that was received prior to 1 October 2011?
The transferee will have exactly the same responsibilities with regards to each bond that the transferor had on the day immediately prior to the transfer. This requirement remains unchanged by the legislative reforms for accommodation bonds.If a resident agrees with their approved provider to roll over a bond from one service to another service, including moving from a low-care service to a high-care service, does this bond get treated as a bond received before 1 October 2011 or after 1 October 2011?
If a bond is rolled over to a service operated by a different approved provider, including from a low-care service to a high-care service, it will be treated as a new bond. If a bond is rolled over to a service operated by the same approved provider, including from a low-care service to a high-care service, it will be treated as a bond received prior to 1 October 2011 if the bond was originally received prior to 1 October 2011.Do bonds received prior to the 2011–2012 financial year need to be reported in the Permitted Uses Statement in the Annual Prudential Compliance Statement (APCS)?
The annual Permitted Uses Statement is a requirement of the APCS from 2012 and must include the total value of bonds received by the approved provider during the 2011–2012 financial year.Receipt of bonds prior to the 2011–12 financial year does not need to be included in the ‘Permitted Uses Statement’ of the 2012 APCS.
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