The new Prudential Standards were largely drafted in-line with expectations including the expansion of the Financial and Prudential Management Standards to all registered providers (including Support at Home). Each new Prudential Standard, as it applies to the registration categories, is identified in the table below.

However, one surprising inclusion was the reference to retirement village funds in the new Liquidity Standards.

As currently drafted, the Liquidity Standards only apply to residential aged care providers that are not government or state entities. The Liquidity Standard requires a residential aged care provider to maintain minimum liquidity amounts where the provider holds a deposited amount including a 'refundable retirement village payment amount' or 'refundable independent living payment amount'. Unhelpfully, both terms are defined by reference to the Aged Care Rules, which have not been released. Further, none of the guidance material mentioned the inclusion of retirement village funds in the new Liquidity Standards and it was not mentioned in the webinar hosted by the Aged Care Quality and Safety Commission (Commission).

It appears that the proposed minimum liquidity standard would capture providers that are registered in the category of residential aged care and may also capture residential aged care providers that operate retirement village. In those circumstances, the provider would be required to, amongst other things:

• hold a minimum liquidity amount equal to 35% of the provider's cash expenses for the previous quarter, 10% of the deposited amount balances held by the provider at the end of the previous quarter (if deposited amount balances are held), and 10% of refundable independent living payment amounts (if any) held by the provider at the end of the previous quarter; and
• report on the minimum liquidity amount held by the provider; and
• redetermine their minimum liquidity amount where there is a change in circumstances (this will presumably be linked to similar provisions as the current material change notification requirement in sections 9-1A and 9-2 of the Aged Care Act 1997 (Cth)).

As you may recall, the Government originally included in the Exposure Draft to the Aged Care Bill a reference to retirement villages in the definition of a 'residential aged care home'. That inclusion was promptly removed following significant concern by retirement village operators and the sector more broadly. However, a place within a retirement village may still be caught by the definition of a 'residential care home' in the new Aged Care Act 2024 (Cth) and, as such, may provide sufficient nexus requiring a retirement village operator to comply with the new Liquidity Standards.

Even if retirement village operators are caught, another question arises about whether the Commonwealth has the requisite jurisdiction to regulate retirement villages.

Importantly, in response to sector concern, consultation on the new Prudential Standards has been extended by one week to 14 March 2025.

We've heard a lot of concerns about these changes and our aged care and retirement villages team have been assisting providers with their submissions in response to proposed changes and the potential impact of these changes on a provider's operations given that many retirement village operators have varying financial models.

Should we be able to assist you in any way with these changes, we would be very happy to discuss further.