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© Russell Kennedy Pty Ltd 2012
Accommodation Bonds:
Use and Governance Requirements
Rosemary Southgate
Principal
20 June 2012
2220607
Use of Accommodation Bonds• Use of an accommodation bond by an
approved provider is permitted if the bond is: • used for capital expenditure • invested in a financial product • used to make a loan in specified circumstances • used to refund accommodation bond balances
or entry contribution balances
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Use of Accommodation Bonds (cont)
• used to repay debt accrued for the purposes of capital expenditure or refunding accommodation bond balances
• used to repay debts accrued before 1 October 2011, if that debt was accrued for the purpose of providing aged care to aged recipients
• used as permitted by the User Rights Principles to meet reasonable business losses incurred in the first 12 months of operation
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Permitted Uses for “capital expenditure”
• Where it is reasonable in the circumstances this includes: • acquiring land on which is (or will be) built a
premises for providing residential or flexible care
• acquiring, erecting, extending or significantly altering premises used (or proposed to be used) for residential or flexible care
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Permitted Uses for “capital expenditure” (cont)
• acquiring or installing furniture, fittings or equipment for premises used (or proposed to be used) for providing residential or flexible care – as part of the construction of new premises or extension/significant alteration/ refurbishment of existing premises
• The capital expenditure must be directly attributable to any of the above categories
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Permitted Uses for investment in a “financial product”
• Investment in a financial product: • any deposit-taking facility made available by
an authorised deposit-taking institution• a debenture, stock or bond issued by the
Commonwealth, a State or a Territory • a security (i.e. shares)
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Permitted Uses for investment in a “financial product” (cont)
• in relation to a registered scheme, may include life insurance, superannuation or a retirement savings account
• a financial product specified in the User Rights Principles (namely, an interest in an aged care investment scheme)
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Permitted Loans
• A loan is permitted if the following conditions are satisfied: • the loan is not made to an individual • the loan is made on a commercial basis • there is a written agreement in relation to the
loan • the money received under the loan can only
be used for permitted capital expenditure or investment in a permitted financial product
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Transitional Arrangements
• Accommodation bonds charged after 1 October 2011: • two year transitional period • during this time, bonds must be used for a purpose
relating to providing residential care or the new requirements
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New Governance Standard
• Commenced 1 February 2012
• Must have a governance system that: • ensures accommodation bond balances are
used only for permitted uses• ensures accommodation bond balances are
refunded to residents as required under the Act
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New Governance Standard (cont)
• The governance system must provide for:• allocating responsibilities to key personnel in
relation to the management of bond balances• monitoring and controlling any delegation or
outsourcing of these responsibilities • reporting mechanisms to ensure the provider
effectively monitors and controls the use of bond balances
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New Governance Standard (cont)
• ensuring that key personnel, as well as any person contracted by the provider, is aware of their obligations in relation to bonds under the Act and Principles
• detecting, recording and responding to any failure to comply with these requirements
• The governance system must be documented, up-to-date and modified or replaced as required
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Investment Management Strategy
• Required if the provider invests in other than ADIs
• Must set out the provider’s investment objectives and assessment of the level of risk to the provider’s ability to refund bond balances
• Strategy for achieving investment objectives, while ensuring ability to refund bond balances when due
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Investment Management Strategy (cont)
• Asset classes the provider will invest in and investment limits for each asset class that are consistent with the objectives in the investment strategy
• Ensure key personnel with the appropriate skills and experience are responsible for implementing the IMS
• The provider must ensure the investment occurs in accordance with the IMS
• The strategy must be up-to-date and comply with the Act and Principles and must be modified or replaced as required
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Key Dates
Date Description
1 October 2011 New requirements commenced (excluding new governance standard) and subject to transitional provisions
1 February 2012 New governance standard commenced
30 April 2012 First APCS due under new requirements if your financial year is 1 January to 31 December
30 October 2012 First APCS due under new requirements if your financial year is 1 July to 30 June
30 September 2013 Transitional provisions in relation to use of bonds end
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Questions?
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DISCLAIMER
The information contained in this presentation is intended as general
commentary and should not be regarded as legal advice. Should you require specific advice on the topics or areas discussed please contact
the presenter directly.
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