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Government seeking input from aged care providers on prudential regulation of accommodation bonds

16 Jan 2013

In October 2011, legislative changes were made to the Aged Care Act 1997 and User Rights Principles 1997 to clarify what would be a "permitted use" of accommodation bonds. Severe penalties were also introduced for misuse of bond payments.  The policy reasoning behind these amendments was to improve protection for bond paying residents and to encourage capital expenditure in aged care facilities.  Providers were given two years (until October 2013) to review and modify their practices in order to comply with the changes.

An issues paper discussing these legislative changes has recently been released.  The paper prepared by the Department of Health and Ageing, foreshadows that the legislation may need to be amended further and seeks feedback from the aged care industry to assist in this process.

A key focus of the review relates to a provider's ability to use accommodation bonds in order to make particular types of loans.  The paper also seeks consultation in relation to investments in Religious Charitable Development Funds.  A copy of the issues paper is available here.

The issues paper clarifies the Department's interpretation of the current legislation.  In relation to accommodation bonds, it notes that once the transitional period ends, providers cannot loan monies received from bonds to other parties for what would otherwise be a permitted purpose (such as to repay debt accrued for the purposes of capital expenditure or refunding bond balances).  The Department has recognised that this interpretation could disadvantage providers in a corporate group structure, who may legitimately need to move accommodation bonds between entities for the purposes of meeting capital expenditure and refund needs.  Modifying these corporate structures to comply with the current legislation is likely to have significant and unintended cost consequences for the provider.

Is this an issue that affects your organisation or would you like to know more about the impact it may have on the industry?  If you wish to respond to the issues raised in the paper, or any other issues you believe should be brought to the Minister's attention, we can assist you in drafting submissions.  Submissions must be lodged by 31 January 2013, so please contact Julie McStay before then to make sure your opinion is heard.  We can also provide you with information and advice if you have any questions about the permitted use of accommodation bonds.

It is intended that any feedback received through submissions will form the basis of the Department's advice to the Minister, and in particular whether a recommendation should be made to amend the legislation.

Contact:

Julie McStay, Director
Phone: +61 7 3193 0503
Email: julie.mcstay@hyneslegal.com.au