The Aged Care Act

The Australian aged care sector is in the midst of its most significant legislative transformation in history. The foundational Aged Care Act 1997 (Cth), which has governed the industry for nearly three decades, is being replaced by a new, rights-based Aged Care Act, set to commence on 1 November 2025.

This transition, a direct response to the findings of the Royal Commission into Aged Care Quality and Safety, is not merely a legislative update. It represents a fundamental shift in the philosophy, regulation, and financial structure of aged care.

For the governing bodies of aged care providers, this new Act introduces a new standard of accountability. Understanding this new framework is a critical governance priority, impacting everything from board composition and strategic risk to financial oversight and clinical care models. This glossary entry provides a comprehensive overview of the outgoing 1997 Act, the framework of the new Act, and the critical implications for your organisation's governance and frameworks.

The Foundation: The Aged Care Act 1997 (Cth)

To understand the magnitude of the current changes, one must first understand the legislation being replaced. The Aged Care Act 1997 was introduced to consolidate and reform the sector, moving it from a patchwork of state-based nursing home regulations to a unified, federally funded system.

Core Objectives of the 1997 Act

The 1997 Act's primary objects were to:

  • Provide for the funding of aged care, taking into account the quality and type of care provided.

  • Promote a high quality of care and accommodation for recipients.

  • Protect the health and well-being of care recipients.

  • Ensure aged care services were targeted to those with the greatest needs.

  • Facilitate access to aged care services regardless of background or location.

  • Ensure that aged care services were accountable for the funding received.

Key Components of the 1997 Framework

The 1997 Act established the architecture of the modern aged care system, which included:

  1. Provider Approval: It created the status of an "Approved Provider," a legal entity approved by the government to receive subsidies and provide care.

  2. Funding Model: It detailed the mechanisms for government funding, including residential care subsidies (like the Aged Care Funding Instrument, or ACFI, now AN-ACC) and the Home Care Packages (HCP) Program.

  3. Financial Regulation: It established the rules for resident fees, including the Basic Daily Fee, Means-Tested Care Fees, and accommodation payments (Refundable Accommodation Deposits or RADs, and Daily Accommodation Payments or DAPs).

  4. Quality & Regulation: It established the legislative basis for the Aged Care Quality Standards and the Charter of Aged Care Rights.

  5. Regulatory Body: It provided the powers for a regulatory body, which is now the Aged Care Quality and Safety Commission (ACQSC), to accredit, monitor, and enforce compliance.

Why the 1997 Act is Being Replaced

The Royal Commission into Aged Care Quality and Safety delivered a scathing report, Neglect, which found that the 1997 Act was no longer fit for purpose. Key findings included:

  • The Act was not effective in delivering uniformly safe and high-quality care.

  • Its focus was on funding providers rather than on the rights and needs of older people.

  • It was complex, difficult to navigate, and lacked strong enforcement mechanisms.

The Royal Commission's primary recommendation was the creation of a new Act, fundamentally reframing aged care around a human rights-based approach.

The New Framework: The New Aged Care Act (Commencing 1 November 2025)

The new Aged Care Act is the government's response to the Royal Commission. It dismantles the 1997 Act's provider-centric model and replaces it with a system designed to place the rights, choices, and dignity of older Australians at its centre.

For boards, this means that compliance is no longer just a technical, "check-the-box" exercise. It is about demonstrably embedding a person-centred culture and upholding a new Statement of Rights.

Key Pillar 1: The Statement of Rights

The most profound change is the introduction of a Statement of Rights. Unlike the previous Charter of Rights, this Statement will be a legally enforceable component of the Act.

Providers will be legally obligated to uphold these rights, and the regulator (the ACQSC) will have new powers to enforce them. This places a direct responsibility on the governing body to ensure its organisation's culture, policies, and care delivery models are compatible with this rights-based framework.

Key Pillar 2: The New 'Support at Home' Program

The new Act completely overhauls in-home care. The existing Home Care Packages (HCP) Program and the Commonwealth Home Support Programme (CHSP) will be replaced by a single, unified Support at Home Program.

Implications for Providers and Boards:

  • New Funding Model: The program moves away from the "package" model to a more flexible, fee-for-service model based on assessed need.

  • Financial Re-modelling: Boards must oversee a complete strategic and financial pivot for their home care operations. This includes new pricing strategies, rostering systems, and cash flow management.

  • New Contribution Framework: A new contribution framework for Support at Home will be introduced, based on an individual's income and assets.

Key Pillar 3: Changes to Residential Care Funding and Fees

While the Australian National Aged Care Classification (AN-ACC) funding model remains, the resident contribution side of the ledger is changing.

  • National Care Contribution Cap (NCCC): A new National Care Contribution Cap (NCCC) will be introduced. This lifetime cap (e.g., $130,000, indexed) will limit the total amount a resident has to pay towards their care (excluding accommodation and everyday living costs).

  • Basic Daily Fee: All residents will continue to pay the basic daily fee.

  • Means-Testing: The means-assessment process will continue, but the new Act introduces changes to how contributions are calculated.

For the board, these changes have direct implications for , revenue forecasting, and the management of accommodation deposits (RADs), which remain a critical part of the capital funding model.

Key Pillar 4: Strengthened Aged Care Quality Standards

The existing eight Aged Care Quality Standards are being revised and strengthened to align directly with the new Act's rights-based focus. The new, strengthened Standards will have a clearer focus on key areas identified by the Royal Commission, such as:

  • Dignity, choice, and inclusion.

  • Clinical governance and the delivery of safe, quality care.

  • Food and nutrition.

  • Dementia care.

  • The role of the governing body in overseeing quality.

The Regulator: The Aged Care Quality and Safety Commission (ACQSC)

The Aged Care Quality and Safety Commission (ACQSC) is the independent, statutory body responsible for regulating the aged care sector. Its role is not created by the new Act, but its powers will be significantly strengthened under the new framework.

The ACQSC is the body that governing boards are ultimately accountable to for their organisation's performance.

Key Functions of the ACQSC:

  1. Provider Registration & Accreditation: The ACQSC manages the registration of aged care providers and accredits residential services. Under the new Act, provider registration will be more rigorous.

  2. Monitoring and Assessment: The Commission actively monitors providers against the Aged Care Quality Standards through site audits, reviews, and risk-based assessments.

  3. Complaints Handling: It provides a free, confidential complaints resolution service for anyone to raise concerns about an aged care service.

  4. Enforcement: The ACQSC has a range of enforcement powers to deal with non-compliance, including issuing notices, applying sanctions, and, in severe cases, revoking provider status.

  5. Incident Management: It oversees the Serious Incident Response Scheme (SIRS), a mandatory reporting framework for all approved providers covering incidents like unexplained death, assault, neglect, and psychological abuse.

Under the new Act, the ACQSC will have an enhanced "proportionate, risk-based" regulatory model, with stronger powers to intervene early and hold providers accountable for failures in care.

Critical Governance Implications for the Board

The legislative reforms place the governing body of an approved provider squarely at the apex of accountability. The "Strengthening Provider Governance" reforms, which commenced in 2022 and 2023, are now fully embedded in the new Act's governance expectations.

Boards cannot delegate this accountability.

Specific, Legislated Governance Responsibilities

Governing bodies of aged care providers have specific, legally mandated responsibilities. A board's failure to meet these requirements can result in non-compliance and regulatory action.

  • Governing Body Composition: The board must have a majority of independent non-executive directors. At least one member must have experience in providing clinical care.

  • Quality Care Advisory Body: Providers must establish and maintain a Quality Care Advisory Body to provide the board with regular reports on the quality of care. The board must consider this advice when making decisions.

  • Key Personnel Suitability: The board must ensure that all "key personnel" (including directors, executives, and senior managers) are "fit and proper" persons and must notify the Commission of any changes.

  • Annual Statement on Operations: Providers must produce a publicly available Annual Statement on Operations, signed by the 

  • Culture of Accountability: The board is explicitly responsible for setting and promoting a culture within the organisation that prioritises the safety, health, and well-being of care recipients.

  • Staff Capability: The board must ensure the organisation has systems in place to ensure its staff have the appropriate skills, training, and support to deliver safe and quality care (e.g., meeting mandatory care minute requirements in residential care).

Board-Level Accountability Under the New Act

The new Act intensifies these duties. The board is ultimately responsible for:

  1. Strategic & Financial Viability: Successfully navigating the organisation through the transition to new funding models (Support at Home, NCCC) and managing prudential responsibilities (like RADs) is a primary function.

  2. Clinical Governance Oversight: The board must ensure its clinical governance framework is effective and that the Quality Care Advisory Body is not just a "tick-box" committee but a genuine and effective part of the governance structure.

  3. Transitional Risk Management: The move to a new legislative framework is a significant strategic risk. The board must oversee the plan for this transition, covering legal, financial, operational, and human resource risks.

  4. Embedding the 'Statement of Rights': The board must lead the cultural change required to move from a compliance-led mindset to a rights-based one. This must be a standing item on the board agenda.

In essence, the new Aged Care Act transforms the role of an aged care director. It codifies the expectation that the board is not just a financial steward, but the ultimate guardian of the quality and safety of care.

Frequently Asked Questions (FAQ)

Q1: When does the new Aged Care Act 2025 actually start? The new Aged Care Act is scheduled to commence on 1 November 2025. From this date, it will fully replace the Aged Care Act 1997 as the primary legislation for the sector.

Q2: What is the single biggest change in the new Aged Care Act? The most significant change is the philosophical shift to a "rights-based" system. This is legally established through the new Statement of Rights, which places the rights and preferences of older people at the centre of the system and makes upholding these rights a legally enforceable provider obligation.

Q3: What happens to the Home Care Packages (HCP) Program? The Home Care Packages (HCP) Program, along with the Commonwealth Home Support Programme (CHSP), will be replaced by the new, unified Support at Home Program. Existing recipients will be transitioned to the new program.

Q4: As a board member, what is my single most important governance responsibility under these reforms? Your most important responsibility is ensuring your organisation's governing body is compliant with the "Strengthening Provider Governance" requirements. This includes ensuring correct board composition (majority independent, clinical expertise) and establishing an effective Quality Care Advisory Body to inform the board's decisions on care quality. The board is ultimately accountable for all care and services provided.