The Minister for Ageing, Julie Bishop, said the legislation will provide financial security for residents and their families and strengthen the sector’s prudential standards, in the event that an aged care provider is unable to repay bonds.

"Many residents of residential aged care services have paid bonds and there has been a substantial increase in the value and the number of bonds being held by the sector," Ms Bishop said.

"The new prudential standards will enhance the management of accommodation bonds and, together with the fiscal requirements of the conditional adjustment payment will, over time, strengthen financial and performance management by the businesses that operate more than 2,900 services caring for the nation’s 160,000 residents of Australian Government-funded aged care facilities.

"This will work to make the residential aged care sector more sustainable and we can now expect to see the development of improved financial and performance management across the sector."

Ms Bishop said the new prudential standards will be complemented by a scheme to guarantee the repayment of residents’ bond balances if their aged care provider defaults.

"Initially, the Australian Government will step in to repay bond balances, with interest, to residents if a provider defaults, that is, becomes bankrupt or insolvent. The government will recover these payments by pursuing the defaulting provider and, if necessary, will levy all aged care providers who hold bonds," Ms Bishop said.

"By ensuring that bond balances will be paid, even if a provider defaults, the government will provide extra financial security for residents of aged care facilities and their families."
Ms Bishop said the introduction of these protections underlines the Australian Government’s commitment to high-quality aged care which delivers affordable and accessible services to meet the individual needs and choices of older Australians.

"The new prudential standards will lead to a more efficient and sustainable aged care sector that has greater standing with the capital markets," she said.

"The new standards also mean residents will be better informed about the financial health of providers.

"There will be greater transparency to the current bond holdings of providers and their ability to refund residents’ bonds."