The New Aged Care Financial and Prudential Standards

The introduction of the Financial and Prudential Standards under the Aged Care Act 2024 represents one of the most significant changes to aged care financial governance in recent years. The Aged Care Financial and Prudential Standards 2025 commenced on 1 November 2025 alongside the new Act and related Aged Care Rules 2025. The framework brings financial governance, liquidity and investment requirements into an integrated prudential regime focused on effective oversight and risk management.

For boards, executives and finance teams, the reforms are more than a regulatory update. They reflect growing expectations that aged care providers can demonstrate strong financial stewardship and understand how financial decisions may affect the quality and continuity of care provided to residents.

Under the previous framework, providers complied with separate prudential requirements relating to governance, liquidity, records and disclosure.

The integrated framework places greater emphasis on how organisations identify, monitor and manage financial risks, as well as whether they meet the specific requirements prescribed by the Standards.

This approach recognises the direct link between a provider’s financial health and its ability to deliver safe, high-quality care.

The precise obligations differ according to a provider’s registration category, whether it is a government provider and, for some requirements, whether it holds or invests refundable deposits. Providers should confirm which requirements apply to their circumstances by reference to the Aged Care Financial and Prudential Standards 2025 and current guidance from the Aged Care Quality and Safety Commission.

Providers must establish and maintain a documented financial and prudential management system.

This system should address governance structures, financial controls, risk management processes, escalation procedures and monitoring arrangements. Boards and executives should be able to demonstrate how financial risks are identified, managed and reviewed over time.

Importantly, providers are expected to consider how financial decisions affect care recipients. Financial management is now viewed as a key contributor to both care quality and organisational sustainability.

The Liquidity Standard introduces a more structured approach to liquidity management.

The Liquidity Standard applies to non-government providers registered in category 6, including providers that do not hold refundable deposits. These providers must determine both a default minimum liquidity amount and an evaluated minimum liquidity amount each quarter, select the amount they will maintain, and hold sufficient liquidity to meet financial obligations, refund relevant refundable deposits, continue providing safe and quality care, and withstand financial shocks.

The emphasis has shifted from simply having enough cash available to demonstrating that liquidity is actively monitored and managed.

Providers to which the Investment Standard applies must implement and maintain a written Investment Management Strategy covering their investment objectives, risk appetite, governance arrangements, decision-making processes and monitoring procedures. Investments must be selected, managed and monitored in accordance with that strategy, including where refundable deposits are invested.

Investment decisions, particularly those involving refundable deposits, are expected to be supported by formal policies and appropriate oversight.

One of the most significant practical changes is the introduction of the minimum liquidity amount framework, under which applicable providers calculate default and evaluated minimum liquidity amounts each quarter and determine the amount they will maintain. Providers must also maintain and annually review a written Liquidity Management Strategy that explains how the chosen amount will be maintained.

The strategy must identify the provider’s default and evaluated minimum liquidity amounts for the current quarter, state the chosen minimum liquidity amount method, explain how that amount will be maintained, and include a statement that the governing body is satisfied that the strategy meets the objectives of the Standard. Providers should support the strategy with cash flow forecasting, monitoring, stress testing and contingency planning appropriate to their circumstances.

For many organisations, the challenge will be strengthening documentation and evidence rather than implementing entirely new processes.

While many providers already have strong financial management practices in place, the new framework may highlight gaps in governance, documentation and oversight.

Providers should consider reviewing the following areas against the requirements that apply to their registration category:

In many cases, the necessary controls already exist but may not be documented in a way that clearly demonstrates compliance. Performing a gap assessment and formalising governance, liquidity and investment management processes can help reduce compliance risk and strengthen organisational resilience.

The new Financial and Prudential Standards represent a significant governance shift for the aged care sector. While the principles behind the reforms are clear, translating legislative requirements into practical governance frameworks can be challenging.

At Accru Melbourne, we audit a number of aged care providers, giving our team valuable insight into the sector’s evolving financial, prudential and governance requirements. We combine this specialist expertise with a practical approach to help providers strengthen compliance, manage risk and build sustainable financial frameworks that support the delivery of quality care.