By Louise Cantrill, Partner and Melanie Farry, Law Graduate
Commencing on 1 November 2025, the new Aged Care Act 2024 (Cth) will increase protections for elderly Australians and promote more rights-based aged care service provision.
In doing so, the new legislation imposes new risks for aged care providers and insurers due to the higher standards of care and stricter regulatory oversight mechanisms that are being introduced.
Aged care providers will need to closely review insurance policies and internal practices to ensure that the new legislation is complied with.
The Aged Care Act 2024 (Cth) (the Act) was passed on 25 November 2024 and will replace the Aged Care Act 1997 (Cth) and the Aged Care Quality and Safety Commission Act 2018 (Cth). The new legislation is rights-based and will come into effect from 1 November 2025.
The Act includes a Statement of Rights which emphasises the centrality of independence and choice for older Australians in obtaining care services, as well as the need for equitable access to quality and safe aged care services. The Act aims to improve access to the aged care system for older Australians by introducing a single-entry point system and includes new rules on supported decision-making to ensure individuals are given greater control and choice in the care services they receive. The Act also addresses the importance of privacy and the right of individuals to make complaints without fear of reprisal in the delivery of aged care services.
Several key changes to the legislation which will impact aged care providers and their insurers include:
After registering with the ACQHC to become a ‘registered provider’ of aged care services, providers will need to update their internal procedures and operations to comply with the stricter provisions of the new legislation. In particular, providers will need to implement practices which ensure compliance with the Statement of Rights which underpins the Act as well as the new statutory duties. Failure to do so may result in serious civil penalties.
Aged care providers will need to ensure that all staff possess the necessary qualifications, skills and experience required under the Act and may therefore be required to pay for training of both existing and new staff to ensure such standards are met. Providers will also need to ensure that they have at least one registered nurse on-site 24 hours a day, 7 days a week. A contingency plan should also exist in the event that unforeseen circumstances lead to staff shortages.
Providers also need to understand the statutory funding conditions that apply to financial assistance granted to registered providers and the relevant rules around what the funding can be used for under the Act. Providers must also understand their reporting and disclosure obligations under the new legislation.
One of the major risks arising out of the new legislation is the concept of ‘associated providers.’ Under section 11(6) of the Act, an associated provider is one who ‘engages in conduct under an arrangement with a registered provider relating to the registered provider’s delivery of funded aged care services.’ The Act establishes that the registered provider will be held vicariously liable for the actions of the associated provider because in such circumstances, it will be ‘as if the registered provider had engaged in the conduct.’
This means that a registered provider will be held to have contravened a condition to which the registered provider’s registration is subject if the associated provider contravenes that condition. It also means that registered providers are likely to be found responsible for acts and omissions of associated providers and those employed in connection with associated providers, including claims of professional negligence and malpractice.
Insurers will need to consider whether coverage should be extended to include associated providers given the liability of registered providers for the conduct of associated providers. However, the terms of any additional coverage will need to be carefully considered as it runs the risk of increased claims.
The potential for increased investigations under the Act by the ACQSC, in conjunction with the increased compliance requirements, also poses a risk to aged care providers and insurers. This is likely to result in increased legal fees for providers and insurers, particularly given the liability of registered providers for the acts and omissions of associated providers. Given the new statutory duties for registered providers and responsible persons, there is a heightened risk that providers will be found to have breached their legal obligations under the Act.
In a similar vein, the higher standards of care established by the ACQSC and renewed emphasis on the rights of older Australians, with additional statutory duties leaves open the potential for more complaints which may lead to regulatory action and civil claims. Greater protections for whistleblowers also increases the risk of additional complaints and disclosure.
It is important that insurance policies of aged care service providers are reviewed ahead of the commencement on 1 November 2025 of the new aged care legislation. Policies need to be assessed to ensure adequate coverage for the new duties imposed by the legislation. Coverage should also take into account the potential new liabilities introduced by the Act and ensure that policy limits are appropriately adjusted to accommodate the increased civil penalties for non-compliance. Providers of aged care services will need to engage in extensive review of their current practices to mitigate risks and ensure that existing policies accord with the new legislation.
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