Targeted Review on the New Liquidity Standard — What Category 6 Providers Need to Know

The Aged Care Quality and Safety Commission (ACQSC) has announced that from July 2026 it will begin a targeted review of the Liquidity Standard — one of the three new Financial and Prudential Standards that took effect when the Aged Care Act 2024 (Cth) commenced on 1 November 2025. All non-government providers registered in Category 6 (residential care) must comply with the standard, and the Commission has updated its supporting resources to help providers understand and meet their obligations.

The targeted review begins in July 2026

Targeted reviews focus on a specific issue or a specific group of providers. Their purpose is primarily educational — they help the Commission see how well providers understand and comply with an obligation, and they help the Commission educate and support providers to get it right. Where a review finds that a provider is not complying, the Commission can work with that provider to fix the issues rather than moving immediately to enforcement.

Through this review, the Commission wants to understand how well providers understand and comply with the obligations in the Liquidity Standard under the Aged Care Act.

Which providers will be selected?

The Commission may select a provider for this review if:

• the provider is at risk of not meeting its financial and prudential obligations
• the provider has not met its financial and prudential obligations in the past
• the organisation is in a location, or of a size or type, that the Commission wants to work with
• the Commission considers the review would benefit the provider.

After completing a review, the Commission produces a report to share its findings, including common mistakes and issues for providers to think about. Selected providers will be contacted in July.

How the Liquidity Standard fits: three Standards, not four

When the Aged Care Act 2024 commenced, the ACQSC simplified the prudential framework — replacing the previous four standards (Liquidity, Governance, Records and Disclosure) with three updated Financial and Prudential Standards 2025, made by the Commissioner as a legislative instrument under section 376 of the Act:

• Financial and Prudential Management Standard — applies to all registered providers in Categories 4, 5 and 6 (excluding government providers). It requires a documented financial and prudential management system, approved and overseen by the governing body, with sound decision-making and internal monitoring of compliance.
• Liquidity Standard — applies to residential care providers in Category 6 only (excluding government and NATSIFAC providers).
• Investment Standard — also applies to residential care providers in Category 6 only (excluding government and NATSIFAC providers). It requires a written investment management strategy, defined permitted assets and limits, and ongoing monitoring of investment risk.

Category 6 covers residential care (including respite), so a residential provider must meet all three standards, while home and community providers in Categories 4 and 5 must meet the Financial and Prudential Management Standard.

What the Liquidity Standard requires

The Liquidity Standard is designed to ensure a provider has the systems and strategies to manage cash flow and financial risk. In practice it requires:

• a quarterly calculation of a minimum liquidity amount (MLA) — providers calculate both a default and an evaluated amount and hold to their elected MLA
• a written Liquidity Management Strategy, reviewed and updated regularly (at least annually)
• the capacity to refund refundable deposits, accommodation bonds and entry contributions as they fall due
• consideration of financial stress scenarios in setting the amount.

A provider that elects to use the evaluated MLA must notify the Commission using the evaluated MLA notification form.

The governance stakes

Compliance with the Financial and Prudential Standards is a condition of registration under section 150 of the Aged Care Act 2024. Contravening a condition of registration is a civil penalty provision under section 142 — carrying up to 250 penalty units, or up to 500 penalty units where the failure is significant or part of a systematic pattern of conduct (section 142(4)).

The penalty unit value is indexed periodically under the Crimes Act 1914 (Cth) section 4AA. Confirm the current value before relying on any dollar conversion.

Beyond the provider-level penalty, responsible persons owe a due diligence duty under section 180 of the Act — including maintaining current, documented knowledge of the standards and ensuring the provider has appropriate resources and processes to comply. And where a provider holds refundable deposits, accommodation bonds or entry contributions, it must maintain a refundable deposit register under section 150A.

The standards are also grounded in the principles in section 377, which direct that providers remain financially viable and sustainable so they can continue to deliver safe, quality care, and that residents' refundable deposits, accommodation bonds and entry contributions are safeguarded.

Six questions for the board

These questions distil the obligations into board-ready governance prompts. They are designed to surface evidence gaps — not to substitute for a full gap analysis.

1. Has our governing body formally approved a documented financial and prudential management system, and is that approval recorded in the minutes?
2. Can we show that our financial and prudential decisions support the provider remaining financially viable and sustainable, so we can continue to deliver safe, quality care?
3. Is our Annual Prudential Compliance Statement audit-ready under the Aged Care Rules 2025 (sections 166-380 and 166-385), with director-level visibility of conformance and at-risk items?
4. Are our responsible persons equipped to exercise due diligence under section 180 — including current, documented knowledge of the Financial and Prudential Standards?
5. Are related-party transactions and conflicts of interest identified, registered and managed transparently?
6. If we hold refundable deposits, accommodation bonds or entry contributions, are they safeguarded, properly accounted for, and recorded on the refundable deposit register required under section 150A?

If your board cannot answer "yes" — with documented evidence — to all six, it is likely carrying material compliance risk under the Aged Care Act 2024.

Updated resources for the Financial and Prudential Standards

Alongside the review, the Commission has updated several of its Financial and Prudential Standards resources. The updates include:

• clearer definitions of cash expenses, and of cash and cash equivalents, under the Liquidity Standard
• detailed explanations for calculating and holding the default and evaluated minimum liquidity amounts (MLA)
• changes to the form used to notify the Commission about an evaluated MLA
• improved checklists.

The following resources have been updated:

• Financial and Prudential Standards: Guidance for providers
• Fact sheets for each standard
• Evaluated minimum liquidity amount (MLA) notification form
• a poster about the new Financial and Prudential Standards.

What providers should do now

1. Confirm your registration category and which standards apply. Category 6 (residential) providers must meet all three; Categories 4 and 5 must meet the Financial and Prudential Management Standard.
2. Review your Liquidity Management Strategy and confirm it reflects the updated definitions of cash expenses and cash and cash equivalents.
3. Recalculate your default and evaluated minimum liquidity amounts using the updated guidance, confirm your elected MLA, and check you are holding sufficient liquidity.
4. If you notify the Commission of an evaluated MLA, make sure you are using the current version of the notification form.
5. Work through the improved checklists and the updated Liquidity Standard fact sheet, and address any gaps before you are contacted.
6. Bring the six questions above to your next board meeting, identify your weakest evidence, and minute the owners and deadlines.

Providers can find more information on targeted reviews and the Financial and Prudential Standards on the Aged Care Quality and Safety Commission's website.

Sources & verification

• ACQSC, Aged Care Quality Bulletin #6-2026 — announcing the July 2026 targeted review of the Liquidity Standard and the updated Financial and Prudential Standards resources.
• Aged Care Act 2024 (Cth), commenced 1 November 2025 — sections 142, 150, 150A, 180, 376, 377. (legislation.gov.au)
• Aged Care Financial and Prudential Standards 2025 — legislative instrument made by the ACQSC Commissioner under section 376 of the Act.
• Aged Care Rules 2025 — Annual Prudential Compliance Statement requirements at sections 166-380 and 166-385. (legislation.gov.au)
• ACQSC, New Financial and Prudential Standards and Liquidity Standard guidance.
• Crimes Act 1914 (Cth), section 4AA (penalty unit value).

This article is published by Holistic Governance for sector information purposes only. It reflects the position as at the date of issue and does not constitute legal, regulatory, audit or financial advice. Verify any specific provision on the Federal Register of Legislation (legislation.gov.au) and current ACQSC guidance (agedcarequality.gov.au) before relying on it. © Holistic Governance 2026.