Rights, Remedies & Reform - An analysis of the new compensation pathway in the new Aged Care Act 2024
12 September 2025
After hearing harrowing stories of abuse and neglect in the aged care system, the Royal Commission into Aged Care Quality and Safety recommended a new compensation pathway for individuals who experience abuse, neglect, or substandard care.
The recommendation was ultimately[1] included in the new Aged Care Act 2024 (Cth) (the Act), which will come into force on 1 November 2025.
What you need to know
The new pathway has several important implications:
- It may reduce the financial and administrative burden on individuals seeking compensation by enabling the Commissioner to bring the action on their behalf (with their consent).
- It could lead to efficiencies if civil penalty applications run concurrently with applications for compensation.
- In some cases, this new pathway may effectively extend the limitation period for individuals to bring a claim. For instance, individuals might be out of time for a personal injury claim, but still eligible to bring a claim under the Act.
- Due to these factors, the pathway may lead to an increase in claims; however, we do not expect this increase to be substantial, as it will depend on the resources allocated to the Commissioner to bring such claims.
Our clients in the insurance and aged care sectors have been asking about the implications of the compensation pathway. This article anticipates how we expect it will work.
Section 186 of the Act provides for an additional pathway for aged care residents to receive compensation for serious injury or illness under the following conditions:
- The aged care entity is liable for a civil penalty for contravening ss 179(3) or (5).[2] These sections provide that an aged care provider, while delivering funded aged care services, is required to ensure its conduct does not cause adverse effects to the health and safety of those in care, as far as reasonable practicable.
- The serious injury or illness has resulted from the contravention.
It is important to note that claims under s 186 are limited to those seeking compensation for serious illness or injury, which individuals may already pursue through other means. The Act also separately provides for civil penalties, which are intended to punish and deter non-compliance. Therefore, it is not readily apparent what additional benefits or changes this new pathway introduces to the regulation of the aged care sector.
Serious injury or illness is defined to include:
(a) immediate treatment for:
(i) the amputation of any part of the individual's body; or
(ii) a serious head injury; or
(iii) a serious eye injury; or
(iv) a serious burn; or
(v) the separation of the individual's skin from an underlying tissue (such as degloving or scalping); or
(vi) a spinal injury; or
(vii) the loss of a bodily function; or
(viii) serious lacerations; or
(ix) a serious wound or pressure injury; or
(b) medical treatment within 48 hours of exposure to a substance.
Each of these injuries and circumstances could already be pursued by way of civil claim.
For a claimant to take this new route, they must first establish liability to a civil penalty. This means that the first hurdle for a claimant (or the Commissioner) seeking to pursue this option is to demonstrate that liability to a civil penalty exists.[3] Unless a civil penalty has already been imposed, a claimant must first establish:[4]
- the provider has a duty pursuant to s 179 of the Act (i.e., they receive funding for provision of services)
- the provider has breached that duty, without reasonable excuse, and
- the conduct amounts to a serious failure.
The conduct of a registered provider amounts to a serious failure if it exposes an individual, for whom a duty is owed, to a risk of death, serious injury or illness; and the conduct involves a significant failure or is part of a systematic pattern of conduct.
Once this has been established, a claimant must prove that the serious injury or illness related to their claim resulted from the provider’s breach of duty.
At first glance, this hurdle is just as challenging as establishing duty, breach, causation, and loss to a civil standard in a personal injury claim.
The Commissioner, with the individual’s consent, or the individual themselves may apply for the order.
Parties have six years to make a claim after the contravention occurs. In many states, the limitation period for bringing personal injury claim is three years from the date of discovering the injury.[5] This means that, in some cases, individuals may have available a longer timeframe to bring their claim than with an ordinary personal injury claim.
The compensation pathway is not intended to replace existing avenues for compensation for personal injury, and it is important to note that the Act provides that individuals cannot ‘double dip’ and receive compensation twice for the same injury.
Legislation with purpose
Commissioner Lewis noted in the Royal Commission Final Report that: 'There are no mechanisms under the aged care legislation by which people receiving aged care services who have been harmed as a result of substandard care can be compensated.'[6]
An example of where the Commission considered another pathway may have been useful was the MiCare Case Study. In that particular case, after an audit of the facility in question, it was found that the health or wellbeing of fourteen residents may have been placed at serious risk. Sanctions were imposed by the Commissioner, but they were unable under the existing law to ensure that those residents were compensated for that harm.[7]
It was observed that pursuing civil proceedings may not be feasible for individuals for financial reasons and due to the likely duration of the litigation process, which can take years to resolve. Additionally, the stress of litigation may prevent claims from being pursued, especially for individuals who are frail or cognitively impaired.[8]
The new pathway aims to address these concerns by enabling the Commissioner to bring compensation proceedings on behalf of individuals, alleviating the administrative and financial burden they might face.
It may also be more efficient for the Commissioner to initiate these proceedings concurrently with applications for civil penalties.
The effectiveness of this new compensation pathway will largely depend on the resources the government allocates to the Commissioner to pursue compensation claims.
Conclusion
While the new pathway provides aged care residents with greater options for pursuing compensation and may extend the timeframe within which claims can be made, we consider the new pathway will be used sparingly and is unlikely to significantly increase the number of claims seen in this space.
[1] The Commonwealth Government’s response to the Royal Commission final report was published on 11 May 2021 noted that this recommendation was under consideration and would be considered as part of the drafting of the new Aged Care Act 2024 – it was ultimately included.
[2] Section 179 of the Act provides that an aged care facility providing funded aged care services must ensure, so far as is reasonably practicable, that their conduct does not cause adverse effects to the health and safety of individuals to whom the provider is delivering services).
[3] We read this to mean that the provider would be liable to a civil penalty – but a civil penalty does not need to have been imposed.
[4] S 179 of the Act.
[5] See s14 Limitation Act 2005 (WA), s5A(3) Limitation Act 1974 (TAS), s12 Limitation Act 1981 (NT), s50C(1)(a) Limitation Act 1969 No 31 (NSW) (but see also s50C(1)(b)), s11 Limitation of Actions Act 1974 (QLD), s27D(a) Limitations of Actions Act 1958 (VIC) (but see also s27D(b) (and ACT already has six years from the cause of action – see s16B Limitations Act 1985 (ACT)).
[6] See paragraph 16.4.2 of the Royal Commission into Aged Care Quality and Safety Final Report Volume 3B.
[7] Without the individuals bringing their own separate claims for personal injury.
[8] See paragraph 16.4.2 of the Royal Commission into Aged Care Quality and Safety Final Report Volume 3B.
