The Liquidity Standard makes sure providers have systems and strategies to manage cash flow and financial risks. As a provider, you always need to have access to enough cash or cash equivalents to meet your financial obligations, including operating costs and refundable deposits. This is known as 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
To meet the Liquidity Standard, you must:
- calculate both your default minimum liquidity amount (MLA) and evaluated MLA each quarter. Decide which one you’ll use to show that you comply. This is called your elected MLA.
- have and maintain a written liquidity management strategy (LMS) that you update at least once each financial year
- manage financial risks related to your assets and liabilities
- hold refundable deposits in line with your elected MLA and use them only for permitted uses
- follow compliance procedures such as notifying us about changes in your MLA.
You can submit an Evaluated MLA notification form to show that your organisation’s other forms of liquidity are enough for you to:
- meet your financial obligations when they’re due
- refund any deposited amount balances that will be due in the next 12 months – provide safe and quality care
- cope with financial shocks.
Your LMS should include details such as:
- your MLA
- the type of MLA you’ll use to show compliance (evaluated or default)
- the types of liquidity your organisation holds (for example, cash or lines of credit)
- the steps you’ll take to comply, if you aren’t already meeting the MLA.
You can use our liquidity calculator to enter your data to assess your current liquidity status.
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.
