The new Standards aim to strengthen financial governance, ensure the consistent delivery of quality care and safeguard the wellbeing of older Australians. With a focus on improving transparency, financial resilience and risk management, these changes represent a major shift in how providers must operate financially. This article includes a brief outline of the changes and what they mean for providers come 1 July, 2025.

What do the new Standards mean for providers?

The new Standards simplify the previous framework by consolidating the four existing standards (Governance, Liquidity, Disclosure and Records) into three focused areas: Financial and Prudential Management, Liquidity and Investment.

• The Financial and Prudential Management Standard requires all relevant providers to establish governance systems to ensure sound financial practices and to enable them to make fair, reasonable and independent business decisions that prioritise the best interests of people receiving care. In addition to residential care homes, this standard will now apply to providers delivering personal and care support in the home, as well as community, nursing and transition care. The Standard sets clear expectations for the systems and processes providers must implement to be financially stable and to manage risk, including reporting processes and clear lines of responsibility for financial governance
• The Liquidity Standard introduces, for the first time, a minimum liquidity requirement that providers must maintain, calculated quarterly. This ensures that providers can continue to meet financial obligations such as refunding deposits, paying wages and covering operational costs during times of financial stress. Notably, this Standard now applies to all residential aged care providers, not just those holding refundable deposits, following a key recommendation from the Royal Commission into Aged Care Quality and Safety 
• The Investment Standard ensures providers manage their investments responsibly to protect refundable deposits and maintain financial stability. The Standard now applies to all residential care providers, not just those holding refundable deposits. Providers will need to develop a comprehensive investment management strategy (IMS), which outlines investment objectives, permissible assets, risk management strategies and governance structures and responsibilities. This helps providers make wise investment choices, manage risks to liquidity and their ability to refund deposits as well as effectively respond to emerging risks in the sector

Aged care providers will be supported through educational materials and guidance as they transition to the new Standards. Compliance will be monitored through audits, and a risk-based regulatory approach will be applied, with enforcement action where necessary. Importantly, providers are encouraged to focus on continuous improvement by regularly reviewing their financial frameworks, liquidity levels and strategies and investment plans to ensure resilience and adaptability.

What do providers need to do to prepare?

Providers may wish to review the guidance document outlining the changes, as well as the proposed draft rules which will incorporate the new Standards into the Aged Care Rules. In the lead up to the full release of the Standards, providers should start to review their own processes and consider what they may need to do to meet the new requirements.

This may include:

• Reviewing and updating governance frameworks to include a written financial and prudential management system which clearly documents roles, responsibilities and reporting processes for financial governance
• Ensure governing bodies actively monitor financial stability, with a focus on refundable deposits management
• Developing a liquidity management strategy that outlines how liquidity will be maintained, including the new minimum liquidity amount
• Create or revise an investment management strategy that defines permissible investments, risk mitigation strategies and oversight processes. The strategy should ensure that investments prioritise the security of refundable deposits and support service delivery and quality care
• Strengthen reporting and compliance processes by setting up internal monitoring to detect, record and respond to compliance issues early
• Identify and train staff responsible for financial governance, liquidity management and investment oversight on the new Standards
• Document all accountabilities clearly in position descriptions and internal policies
• Participate in training sessions and review educational resources provided by the Aged Care Quality and Safety Commission
• Use available tools (like the liquidity calculator) to test systems ahead of the compliance deadline

Conclusion

The new Financial and Prudential Standards mark a significant step toward a stronger, better managed and more sustainable aged care sector. Providers must act now to review and align their systems, strategies and governance practices to meet these new requirements. By embedding robust financial management and risk mitigation measures, aged care providers will not only ensure compliance but also build greater trust and security for older Australians in their care.

 

Nick Edwards

Nick is a Legal Content Senior Associate at Ideagen CompliSpace. Nick has several years' experience designing and administering eLearning for the aged care sector and holds a Bachelor of Laws from the University of Technology Sydney with First Class Honours.

 

 

Nicole Chen

Nicole is a Principal Consultant at Ideagen CompliSpace with a background in the healthcare industry across acute, aged, and community services. Throughout her career, she has held various management and clinical positions, contributing significantly to both research and higher education within the sector. Nicole provides valuable knowledge and insights from both a clinical perspective and a nuanced understanding of the operational and strategic aspects of healthcare. She holds a Doctor of Philosophy (PhD), a Postgraduate Certificate and a Bachelor in Nursing.