By Arun Yuvarajah, Project Director at MakeSpace - a housing advisory and project delivery for community, affordable and specialised housing providers
Published on August 15, 2026
The Aged Care Act 2024 commenced on 1 November 2025, introducing three new Financial and Prudential Standards that all registered residential aged care providers must now meet as a condition of their registration. The most significant change for providers managing capital works and development programs is the new Liquidity Standard, which introduces an enforceable minimum liquidity amount calculated quarterly.
What does the Aged Care Act 2024 change?
The Act replaced three pieces of legislation: the Aged Care Act 1997, the Aged Care (Transitional Provisions) Act 1997, and the Aged Care Quality and Safety Commission Act 2018.
On the prudential side, four existing standards (Liquidity, Governance, Records, and Disclosure) have been consolidated into three updated standards:
Note: NATSIFAC (National Aboriginal and Torres Strait Islander Flexible Aged Care) Program providers are exempt from both the Liquidity and Investment Standards.
Home care providers in categories 4 and 5 are now subject to the Financial and Prudential Management Standard for the first time. This is a new compliance obligation for this cohort, requiring formal governance documentation and active board oversight of financial performance.
The intent across all three standards is the same: to improve financial sustainability, strengthen governance, and protect the people receiving care, not just to generate compliance paperwork.
What is the new Liquidity Standard and how is the minimum liquidity amount calculated?
The Liquidity Standard requires non-government residential aged care providers to hold a minimum level of liquid assets, calculated quarterly, and to document their approach in a written Liquidity Management Strategy (LMS).
The prescribed formula:
The minimum liquidity amount (MLA) must be at least equal to the sum of:
- 35% of cash expenses from the previous quarter
- 10% of Refundable Accommodation Deposits (RADs) held at the end of the previous quarter
- 2% of refundable retirement village or independent living payment amounts held (if applicable)
The 2% rate for retirement village and independent living payments reflects a post-consultation reduction from the originally proposed 10%. Following more than 160 responses from the sector, the ACQSC recognised that these liabilities carry lower financial risk than RADs and adjusted accordingly. Trade receivables are also now included in what qualifies as liquid assets, providing providers with additional flexibility in meeting the threshold.
The alternative pathway:
Providers who do not meet the prescribed formula have a second compliance option: submitting an evaluated minimum liquidity amount (evaluated MLA). This involves demonstrating to the ACQSC that alternative forms of liquidity are sufficient to meet financial obligations, refund deposited amounts as they fall due, and maintain safe and quality care for residents. A 12-month rolling cashflow forecast (covering both operating and capital expenditure, updated quarterly) is one form of evidence that can support this pathway, but the evaluated MLA is a broader concept and covers any documented alternative assurance acceptable to the ACQSC.
All providers must have a written Liquidity Management Strategy, regardless of which pathway they use.
According to the ACQSC's August 2025 consultation summary report, just under 84% of residential aged care providers already hold liquid assets at or above the minimum amount required by the prescribed formula. For most providers, the compliance challenge is less about the liquidity threshold itself and more about the documentation, governance, and capital planning disciplines the new standards require.
Does the Liquidity Standard apply to retirement village operators?
The Liquidity and Investment Standards apply to non-government providers registered in category 6 under the Aged Care Act 2024, that is, registered residential aged care providers. Operators of retirement villages who are not also registered aged care providers are not directly subject to these standards.
However, for providers who are registered aged care providers and who also operate retirement villages or independent living communities, refundable retirement village and independent living payment amounts are included in the minimum liquidity calculation at 2%. The ACQSC has explained this inclusion clearly: these payments share similar features and financial risks to aged care RADs (Refundable Accommodation Deposits), and their inclusion is for calculation purposes only, not a broader extension of federal regulation over the retirement living sector, which remains primarily a state and territory responsibility.
The practical implication for operators working across both aged care and retirement living: your consolidated liquidity position and capital planning need to account for both components, and your Liquidity Management Strategy should reflect that.
Providers should seek advice specific to their registration status and the structure of their operations.
What does this mean for capital works and development programs?
The new standards do not prevent capital investment, but they add a financial discipline dimension to how development programs need to be planned and staged.
Providers now have a regulatory obligation to maintain minimum liquidity buffers. At the same time, the aged care and retirement living sectors face a significant and growing need for capital investment in new beds, facility upgrades, and development programs. As the NHSAC State of the Housing System 2025 notes, only 2,600 new public dwellings were completed in 2024 against a pipeline requirement that is growing alongside an ageing population. The same supply pressure applies to residential aged care.
The liquidity requirements change the financial sequencing discipline required around capital programs in several ways:
- Cashflow forecasting is now both a financial planning and a compliance tool. A 12-month rolling cashflow forecast covering operating and capital expenditure can be used to support the evaluated MLA pathway, which means the financial modelling that good project governance already requires can serve a dual purpose.
- Capital program staging matters more. How committed and planned capital expenditure affects your quarterly liquidity calculation needs to be understood at each quarter point, not just at financial year-end.
- The Investment Standard adds governance discipline. All residential providers must now have a documented Investment Management Strategy (IMS), covering investment objectives, permissible assets, and risk management. The requirement that investment decisions must not compromise liquidity or the standard of care for residents is directly relevant for providers using capital reserves to fund development.
For context on the scale of the development need driving these pressures, our blog on what the demographic shift means for aged care and retirement living development in Australia covers this in detail.
What should providers be doing now?
The Act has commenced. This is now about implementation, not preparation. For providers still working through what the new standards require, the immediate priorities are:
- Calculate your minimum liquidity amount using the ACQSC's liquidity calculator, available on the ACQSC website
- Review and update your Liquidity Management Strategy to meet the new written documentation requirements
- Prepare or update your Investment Management Strategy if you are a residential provider, including providers who do not hold RADs
- For providers using the evaluated MLA pathway: Establish a documented 12-month rolling cashflow forecast covering both operating and capital expenditure, aligned to budget and updated quarterly
- For providers with development pipelines: Review how planned and committed capital expenditure affects your quarterly liquidity position, and how this is reflected in your compliance documentation
The Annual Prudential Reporting Statement (APCS) for 2025–26 will be the first reporting cycle under the new standards. The ACQSC will provide updated guidance on reporting requirements ahead of that date.
How MakeSpace supports aged care and retirement living providers through the new standards
The new standards add a layer of financial governance discipline to an operating environment that is already complex. For residential aged care operators and retirement living providers managing capital programs, the challenge is not just meeting the liquidity threshold. It is managing the intersection of regulatory obligations, development feasibility, and project governance at the same time.
MakeSpace works with aged care operators and retirement living providers on feasibility, procurement strategy, and project governance across residential aged care and specialised accommodation programs. The ability to demonstrate to a board, a funder, or the ACQSC that a capital program is being managed with financial rigour and clear governance is increasingly part of what sound oversight requires, and what experienced housing advisors can help support.
Our blog on aged care project delivery: why building good aged care starts with dignity covers the design and operational considerations that should sit alongside the financial planning the new standards require.
If your organisation is working through the capital planning implications of the new standards, or is managing a development program alongside these requirements, get in touch.
Frequently Asked Questions (FAQs
When did the Aged Care Act 2024 commence?
The Aged Care Act 2024 commenced on 1 November 2025, replacing the Aged Care Act 1997, the Aged Care (Transitional Provisions) Act 1997, and the Aged Care Quality and Safety Commission Act 2018. The three new Financial and Prudential Standards, Financial and Prudential Management, Liquidity, and Investment, took effect on the same date. Non-government providers registered in category 6 (residential care) must comply with all three standards as a condition of their registration. Home care providers in categories 4 and 5 are subject to the Financial and Prudential Management Standard only.
How is the minimum liquidity amount calculated under the new Liquidity Standard?
The minimum liquidity amount is calculated as the sum of three components: 35% of cash expenses from the previous quarter; 10% of Refundable Accommodation Deposits (RADs) held at the end of the previous quarter; and 2% of refundable retirement village or independent living payment amounts held (if applicable). This calculation must be performed quarterly. Providers who do not meet the prescribed formula may submit an evaluated minimum liquidity amount, demonstrating alternative financial assurance through documented evidence such as a 12-month rolling cashflow forecast. All providers must maintain a written Liquidity Management Strategy.
What is the Investment Management Strategy requirement?
Under the new Investment Standard, all non-government providers registered in category 6, including those who do not hold refundable deposits, must prepare and maintain a written Investment Management Strategy (IMS). The IMS must document investment objectives, permissible assets, risk management strategies, and governance responsibilities, and must be regularly reviewed and approved by the governing body. The requirement applies across the board and is designed to ensure providers manage their investment portfolios in a way that does not compromise their liquidity position or their ability to care for residents.
Do the new standards apply to retirement village operators?
The Liquidity and Investment Standards apply to non-government providers registered in category 6 under the Aged Care Act 2024, not to retirement village operators as a standalone category. However, for aged care providers who also operate retirement villages or independent living communities, refundable retirement village and independent living payment amounts are included in the minimum liquidity calculation at 2%. The ACQSC has confirmed this inclusion is for calculation purposes only and does not represent a broader extension of federal aged care regulation over the retirement living sector. Providers should seek advice specific to their registration status and the nature of their operations.
Sources: ACQSC — New Financial and Prudential Standards; ACQSC — About the Financial and Prudential Standards; ACQSC — FAQ: New Financial and Prudential Standards; ACQSC — Consultation Summary Report; Department of Health, Disability and Ageing — Aged Care Act Resources for Providers
Last updated on August 15, 2026
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