People entering permanent residential care can choose to pay a lump sum for their accommodation. As a provider, you can use these lump sums, known as refundable deposits, to generate income for your business.
The Financial and Prudential Management Standard requires you to have a written financial and prudential management system to help you manage refundable deposits. This governance system needs to have proper reporting and controls. It also needs to make sure that you:
- only use refundable deposits for permitted uses
- refund refundable deposits when they’re due.
The factors that often lead to provider non-compliance with the permitted use requirements, include:
- a lack of board capability and control
- poor governance and reporting
- poor financial systems and controls
- too much authority vested in one or two key individuals without accountability
- lack of understanding of provider responsibilities
- inability to adequately plan
- diversification to non-aged care business lines – such as retirement ventures and independent living units.
Permitted uses of refundable deposits
You can use refundable deposits to generate additional income. This can:
- help you improve your services for older people
- help ease financial pressures
- give you more liquidity.
Permitted uses of refundable deposits include:
- capital expenditure and related debt
- investments
- refunding refundable deposits
- loans
- reasonable business losses.
You can find more information in Section 310 of the Aged Care Act 2024 (Aged Care Act) and Section 310-30 of the Aged Care Rules 2025 (Aged Care Rules).
Capital expenditure and related debt
You can use refundable deposits to invest in new residential aged care infrastructure. This can include:
- buying land with an existing aged care service
- buying land for a new aged care service
- buying, building or altering premises for aged care
- buying or installing furniture, fittings or equipment for providing care (for premises that have been newly built or significantly altered or refurbished)
- covering costs that are directly related to any of the above
- repaying debt directly related to any of the above.
Investments
You can invest refundable deposits in certain financial products. These products are given in the Aged Care Act and the Aged Care Rules. You can use the income you make to improve your service in any way you choose.
To invest refundable deposits, you must start, implement, and maintain an Investment Management Strategy.
You can find more information in:
- Section 310 of the Aged Care Act
- Section 310-30 of the Aged Care Rules
- our Investment Standard fact sheet.
Refunding refundable deposits
You can use refundable deposits to refund other refundable deposits. When refunding a refundable deposit, you must:
- maintain sufficient liquidity
- make refunds in line with the Aged Care Act.
You can find more information on our Liquidity Standard page.
Loans
You can loan refundable deposit funds to other providers, under specific conditions.
You must:
- not make a loan to an individual
- make the loan on a commercial basis
- have a written agreement that includes:
- the condition that the loaned money can only be used for:
- capital expenditure
- investing in financial products
- refunding refundable deposits
- repaying debt accrued for the purposes of capital expenditure or refunding refundable deposits
- any other conditions specified in the Rules.
Reasonable business losses
When you build a new aged care service or buy an existing one, your business could experience losses. You can use refundable deposits for the first 12 months of running your business to cover reasonable business losses.
You must make sure you always have enough liquidity to repay refundable deposits when they're due. You can learn more on our Liquidity Standard page.
Non-permitted uses of refundable deposits
You can’t use refundable deposits for:
- day-to-day operating costs, such as staff wages or consumables
- general repairs and maintenance
- business activities other than residential aged care
- personal gain or gratification.
You can find a summary of the permitted and non-permitted uses on our quick reference poster.
More information
An effective governance system makes sure you use refundable deposits in the right way. You can find more information about effective governance on our Financial and Prudential Management Standard page.
