Australia: Accommodation bonds: Amendments to User Rights Principles and Aged Care Act

In October 2011 the amendments to the Aged Care Act 1997 (Cth) commenced. Simultaneously, amendments to the User Rights Principles 1997 (Cth) were also introduced. The Principles combined with the Act deal with the key requirements as to the payment and protection of accommodation bonds. (For more information in relation to the amendments to the Act, see our June update here).

The amendments to the Principles include:

1. the introduction of a fourth Prudential Standard, called the Governance Standard which requires approved providers to establish a governance system and Investment Management Strategy;
2. in respect of permitted uses of accommodation bonds:
3. 1. expansion of permitted uses to allow recovery of business losses within the first 12 months of operation; and
   2. expansion of the definition of 'financial products' in respect of investing accommodation bonds in 'aged care investment schemes'; and
4. amendment to the Disclosure Standard to include further reporting obligations.

The Governance Standard (point 1 above) will commence operation on 1 February 2012 while the Amending Principles (points 2 and 3 above) commenced on 1 October 2011.

Governance Standard

The Governance Standard requires approved providers to implement and maintain a governance system for managing accommodation bonds held on behalf of residents. The Governance Standard requires approved providers to establish:

• a governance system; and
• an investment management strategy.

These systems are prescriptive as to key personnel and executive obligations. Approved providers will need to review and if necessary, re-draft, their current governance processes to meet the standards required. Amendments to the Disclosure Standard

The amendments to the Disclosure Standard expand the matters that must be disclosed to care recipients and prospective care recipients and to the Department regarding accommodation bonds and their management by the approved provider.

Further information now required to be provided to the Department as part of the Annual Prudential Compliance Statement and to care recipients generally includes information as to how accommodation bonds have been spent, investments that have been made and compliance with the permitted uses of bonds.

Contact Gadens if you would like assistance in understanding how these changes may affect your operations or to review your processes for compliance with the new Governance Standard.

For more information, please contact:

This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.