The Liquidity Standard makes sure providers have systems and strategies to manage cash flow and financial risks. As a provider, you should always have the ability to meet your short-term financial obligations, including operating expenses and refundable deposits. This is having adequate liquidity.
Who the Liquidity Standard applies to
The Liquidity Standard applies to non-government providers registered in category 6. It applies even if you don’t hold refundable deposits.
It doesn’t apply if you’re a:
- government organisation
- local government authority provider, including government multi-purpose service providers
- National Aboriginal and Torres Strait Islander Flexible Aged Care Program provider.
What’s required
Providers are required to calculate and maintain a minimum liquidity amount (MLA). The MLA sets the baseline level of liquidity you must hold to make sure you can:
- meet your financial obligations when they’re due
- refund the balance of any refundable deposits that will be due in the next 12 months
- provide safe and quality care
- cope with a financial shock.
To meet the Liquidity Standard, you must:
- calculate both your default MLA (calculated using the formula in the Standard) and evaluated MLA (based on the provider’s individual financial situation) each quarter. Decide which one you’ll maintain. This is your chosen MLA method. If the default MLA is considered adequate for your organisation’s needs, then your evaluated MLA can be equal to your default MLA.
- have and maintain a written liquidity management strategy (LMS) that you review and update at least once each financial year
- assess your liquidity status each quarter as part of preparing your Quarterly Financial Report
- follow compliance procedures such as notifying us if you fall below your chosen MLA.
If you don’t hold the default MLA but can show you have reliable access to alternate sources of liquidity (for example, through lines of credit or related-party loans), you can submit an Evaluated MLA notification form to demonstrate that you can:
- meet your financial and refunding obligations
- provide safe and quality care
- cope with unexpected financial changes.
Your LMS should :
- include both the default MLA and evaluated MLA for the current quarter
- state your chosen MLA method
- explain how you’ll maintain this liquidity.
- include a statement from the governing body that it is satisfied that the LMS meets the objectives of the Standard.
You can use our liquidity calculator to enter your data to work out your default MLA.
You can use our Liquidity Standard checklist in the Liquidity Standard fact sheet to confirm your organisation meets the Standard each quarter.
More information
The Financial and Prudential Standards Guidance for Providers has more information about:
- the MLA and related definitions
- the difference between default and evaluated MLA
- how to calculate your default and evaluated MLA
- liquidity management strategies
- what to do if you exceed the MLA or don’t meet the MLA.
Download the Liquidity Standard fact sheet.
Watch the Liquidity Standard video.
Read the legislation which outlines these requirements.
Download our liquidity calculator to enter your data to assess your current liquidity status.
Download the evaluated MLA notification form.
You can find a summary of the 3 standards in the new Financial and Prudential Standards poster.