Accommodation bonds were established to give approved providers a source of capital funding for investment in residential aged care infrastructure. Essentially, they are an interest free loan from the aged care resident to an approved provider.

Providers have a responsibility to repay the bond when the resident leaves the aged-care service. In the event that an approved provider goes into liquidation owing bond refunds, the Australian government makes those refunds through the Accommodation Bond Guarantee Scheme (ABGS).

Since the introduction of the ABGS in May 2006 (ensures that the Australian Government will pay 100% of the bond balance (or entry contribution) owed to residents (with interest) in the event that a provider becomes bankrupt or insolvent and unable to repay bonds. ), it has been activated on five occasions with around 150 accommodation bonds refunded at a cost of approximately $24.5 million to the taxpayer (instead of recovering costs through the imposition of the industry levy).

In 2009, the Australian National Audit Office reported that there must be better monitoring of bond money.

Update - 27 May 2011: Aged Care Amendment Bill 2011 introduced to parliament

The Minister for Mental Health and Ageing, Mark Butler, introduced the Aged Care Amendment Bill 2011 to parliament on 27 May 2011, to better protect accommodation bonds paid by residents of aged care facilities and improve the complaints scheme

The Bill implements the Department of Health and Ageing’s Consultation Paper, Enhanced Prudential Regulation of Accommodation Bonds, February 2011 (Paper).  The Bill’s primary intention is to provide clarity about the uses of accommodation bonds.  Once the Bill is passed, the reforms are scheduled to commence on 1 October 2011.

Whilst there are some better protections proposed in the Bill for accommodation bonds, ACC are concerned about the removal of current restrictions on the retention amounts and accommodation charges.

Aged care bond facts for: 2009 - 2010

• As at 30 June 2010, approved providers held more than $10.6 billion in bonds on behalf of more than 63,000 aged-care residents and is continuing to grow on average of 20% per year.
• The average total bond holding held by an individual approved provider is $11.2 million
• The average new accommodation bond charged during the financial year was around $232,000
  (there is evidence of much higher amounts being paid - up to $2.6 million dollars - that we know of)
• The total value of accommodation bonds held by approved providers has more than doubled since 2004 - 2005, equating to an average increase of 20 per cent per annum

More information:

• Accommodation Bonds for Residential Aged Care - Department of Health and Ageing Fact Sheet
• Up to $2.6m demanded for nursing home places
• Seniors hit out at bond extension
• Aged Care (Bond Security) Act 2006
• Accommodation bonds - are they (really) protected? (Slater & Gordon)
• Nursing home bonds monitoring inadequate