Following robust consultations with the aged care and retirement living industries, the Aged Care Quality and Safety Commission (ACQSC) has introduced a more flexible framework to ensure providers can meet their financial obligations without being constrained by rigid requirements.
These changes, detailed in a recent Ageing Australia member alert, address earlier concerns about the feasibility of proposed rules and aim to balance financial security with operational practicality.
A shift from rigid ratios to flexible compliance
In February 2025, the ACQSC proposed stringent liquidity requirements, mandating that residential aged care providers with independent living units (ILUs) and retirement village operators hold 10% of refundable amounts, such as Refundable Accommodation Deposits (RADs), in liquid funds.
Additionally, providers were expected to maintain 35% of their quarterly expenses in cash. With approximately $40 billion in RADs across the sector, this would have required operators to secure around $4 billion in cash – a daunting prospect for many, particularly smaller and mid-sized providers.
Industry experts, including Shalain Singh of Arrow Advisory Group, warned that these measures could cripple operators, stall new developments, and negatively impact valuations, potentially driving smaller providers out of the sector.
Following feedback described as “robust” by ACQSC Commissioner Liz Hefren-Webb, the Commission has revised its approach. Providers will now have two options to demonstrate compliance with the new liquidity standards:
Apply a Formula: Providers can use a prescribed formula to calculate their liquidity, with the required liquid funds for those with ILUs and retirement villages reduced to 2% of refundable amounts, down from the originally proposed 10%.
Demonstrate Robust Liquidity Management: Alternatively, providers can submit their own liquidity policy and strategy to the ACQSC, showcasing effective financial management processes without adhering to a strict ratio.
This dual approach has been welcomed by industry leaders. Grant Simpson, CEO of NoosaCare, a not-for-profit aged care provider on Queensland’s Sunshine Coast, praised the flexibility, stating, “This adaptability is crucial for diverse providers operating under varying financial circumstances.”
Ageing Australia echoed this sentiment, noting that the clarification addresses concerns raised on behalf of its members.
Addressing earlier concerns
The original proposal sparked significant alarm when it was announced in February 2025. The requirement to hold 10% of RADs and 35% of quarterly expenses in cash was seen as unfeasible, particularly for operators already navigating tight cash flows.
The sector is also bracing for a transition to payments in arrears from 1 July 2026, which is expected to further strain liquidity. Critics argued that the rules could halt acquisitions and new builds, with smaller operators at risk of being forced out.
Shalain Singh highlighted the challenge of raising $4 billion in cash, noting that operators might need to turn to banks, increasing costs and risks at a time when financial stability is critical.
The updated standards reflect a more pragmatic approach, acknowledging the diverse financial realities of aged care providers.
By lowering the liquid funds requirement to 2% for providers with ILUs and offering an alternative compliance pathway, the ACQSC has alleviated some of the pressure while still aiming to ensure providers can meet their obligations to residents.
What’s next?
The ACQSC is expected to release a detailed report on the liquidity ratio consultations in July 2025, providing further clarity on the final standards.
For now, the sector is preparing for the 1 July implementation, with providers encouraged to assess whether the formula-based approach or a tailored liquidity strategy best suits their operations.
The revised standards mark a significant win for the aged care sector, balancing the need for financial stability with the practical challenges of operating in a complex and evolving industry.
As Ageing Australia noted, the changes reflect a collaborative effort to create a sustainable framework that supports providers while protecting residents. With four weeks to go, operators are gearing up to adapt to these new requirements, hopeful that the flexibility will pave the way for a stronger, more resilient aged care system.
