Managing Prudential Risk in Residential Aged Care

Prudential standards outline how providers must manage their finances and the refundable accommodation payments of their residents. We are looking at ways to strengthen the standards. This will help residential care providers become more sustainable and protect the interests of residents.

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What will change?

We want to strengthen the prudential standards for residential care providers.

We’re considering changes such as requiring providers to:

  • give more financial detail about their corporate structures
  • report changes to those structures and ownership
  • meet a liquidity threshold to ensure they have enough money to refund accommodation deposits
  • hold a level of net assets that will support their ongoing viability
  • provide more transparent information on the management of resident accommodation deposits
  • report changes that put them at risk of not delivering aged care services
  • strengthen their governance arrangements including the accountabilities of directors

We’re still working out which changes will be the most effective. To help us do this, we’re reviewing the expert advice and submissions we have received. We will also consult more with the aged care sector through the Prudential Advisory Group (PAG) meetings.

What are prudential standards?

The current prudential standards are set out in the Fees and Payments Principles 2014 (No 2). Provider reporting requirements are set out in the Accountability Principles 2014.

They outline how providers must:

  • manage and protect the refundable accommodation payments or deposits of their residents
  • give us information about their finances

Who was consulted?

We held a public consultation between 1 February 2019 and 15 March 2019 seeking views on the different ways we can strengthen prudential standards.

We have also consulted with technical experts and peak organisations in the aged care sector.

Why is this important?

We need stable and sustainable aged care providers to help us face challenges such as:

  • an ageing population
  • increase in chronic disease

We also want to make sure that residential providers in particular:

  • have the money to refund lump sum accommodation payments or deposits when a resident leaves their care
  • are less likely to have financial issues that can affect residents

Who will benefit?

Stronger prudential standards will benefit:

  • residential care providers — by improving their financial management and reducing their risk of business failure
  • aged care home residents — by avoiding disruption to their care and ensuring they get refunds when they leave care


Prudential risk in residential aged care reforms contact

Contact us if you have questions about managing prudential risk in residential aged care reforms.

FFBConsultation [at]

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Last updated: 
22 January 2020

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