The prospect of the Albanese government introducing an aged care levy appears less likely than two months ago.
The idea gained traction back in June when federal aged care minister Anika Wells was interviewed on ABC’s Insiders program.
A tax or levy was first recommended in 2021 by the Royal Commission into Aged Care Quality and Safety. The previous Morrison government, which initiated the commission, opted not to adopt it.
But the idea was brought back before last year’s election when Anthony Albanese suggested Labor had no plans for such a levy either.
In the Insiders ABC interview, Ms Wells said: “We’re still not advocating any particular proposal.”
A task force on the proposal then met in July, broadly coming to a consensus against an aged care levy. Some task force members believe such a levy would further enshrine generational inequality.
Aged care levy or tax – is there a difference?
While levies and taxes are both payments made to governments, the term ‘levy’ generally applies to funds collected for a specific purpose. Taxes collected are used where needed by governments, ostensibly for society’s overall benefit.
A levy implies the collected funds will be used for a specifically earmarked purpose. In this case, any funds collected would be used specifically to fund aged care, not diverted elsewhere.
Writing in the Revenue Law Journal in 2013, Bond University’s Madeline Taylor stated: “A levy is a temporary tax collected by federal, state or local governments and used for a stated public purpose.”
However, Australian history shows that the word ‘temporary’ perhaps doesn’t cut it. The Hawke government introduced the Medicare levy in 1984, and it remains today. It is used for a specific purpose, however.
Some levies truly are intended to be temporary, such as in 1996 when the Howard government added 0.2 per cent to the Medicare levy to fund a government gun buy-back scheme. Introduced in response to the Port Arthur shootings, the additional levy was removed after a year.
Though no decisions have been made, the expectation is that an aged care levy, if introduced, would be permanent.
A levy is one way, but is it the best way?
The task force members are not alone in their concerns about the introduction of an aged care levy. Writing for The Conversation, Nicole Sutton, senior lecturer in accounting at the University of Technology Sydney (UTS), outlined several concerns.
The introduction of an aged care levy would have several drawbacks, she said, adding more pressure to taxpayers already paying “the lion’s share of all aged care funding”.
This would in turn lead to younger generations paying more for services for their parents and grandparents. Australia’s population of over-65s is forecast to increase from 17 per cent to 20 per cent by 2060.
The levy in that scenario undermines intergenerational equity, Ms Sutton argues, leaving the cost to a proportionally shrinking younger generation.
Ms Sutton also suggests a levy would create a false perception that funding problems have been solved.
“It will likely still require further top-ups from other sources or further adjustments down the track,” she said.
So what’s the alternative?
Ms Sutton has not simply highlighted potential drawbacks of an aged care levy. She is a co-author of a UTS discussion paper that incorporates several recommendations:
- reducing the rate of growth of demand for subsidised aged care services
- improving the effectiveness of aged care services
- improving the efficiency of service delivery
- establishing more equitable funding for subsidised services.
Ms Wells says her department will continue working towards a solution, and also promises to incorporate public consultation and community engagement.
Do you have concerns about Australia’s funding of aged care in the future? What approach do you think the government should take? Let us know in the comments section below.
Also read: Aged care providers carrying estimated half a billion dollars in debt
It must not be a tax as the government of the day will use it for something else. It must be a levy for a purpose.
Nicole Sutton says “ Australia’s population of over-65s is forecast to increase from 17 per cent to 20 per cent by 2060.‘ So? Workers will have paid for their aged care for 40 years. User pays! Just don’t let it go the way of taxes put aside for the pension years ago when a percentage of your wage was put aside for the pension then the government spent it.
The first decision is to progressively remove lump sum accommodation payments. It is essentially a Ponzi scheme, whereby providers chase new residents for lump sums, in order to repay the lump sum due back to the previous resident. In 2009, the amount held by providers was $9.2B. It is now over $34b. The original need was to provide funding for new and refurbished facilities. There are no plans for that amount of costs. Why should today’s residents pay for future resident’s accommodation.
The daily accommodation payment be set to a level relevant to other forms of accommodation returns.
Allow residents to invest monies. The cost of the room which is partially funded by investment return shall be exempt for both pension and aged care means testing.
Investment returns above this threshold shall be means tested at a higher level than the current 2% above the second threshold.
Remove the annual/lifetime caps, so that those with capacity will contribute more.
for a start Govt needs to stop wasting billions on solar panels and windmills and put the money into aged care and hospitals
I just dispare at the continual campaign by the Industry association representing many of the profit based Agedcare homes.
The continual barrage of finance articles regarding funding rather than the care that is being delivered is not balanced as is evidenced by the Associations white Paper.
The word care is hardly mentioned.
The Committee pulled together by Government is not balanced as Seniors voices are minimal.
The Agedcare Homes should spend more time running their homes in. Consultation with the residents who pay for the product they deliver.
Senior management is too busy producing promotional material rather than getting close to their customers.
Reminds of the banks.
I commend an article in the Sunday times in Western Australia ,by their guru in Aged Care.
Perhaps you might find it beneficial to your readers as it would balance the one sided argued being presented.
Cheers
One very easy & quick way to save millions/billions would be to remove government restrictions on where one can buy living items from.
I am on a Level 3 Homecare Package of $35,000 per year … but I have buy all of my home care items, such as shower stools, toilet stands, recliner chairs etc from “government approved suppliers”.
This supplier industry is arguably Australia’s greatest rip-off industry. For example, I recently had to pay $250 for a replacement shower chair, which I could have bought for less than $100 on Amazon or eBay, or probably from Big W and the like.
Next Monday, I am going to look at a lift-up recliner chair that is probably going to cost the government over $5,000 … which I could purchase from a non-government approved supplier for $1,000-$2,000.
Anything that is classified as “medical assistance items” is quadruple or more the price of the same item from sa normal retailer.
And the point is, I AM NOT ALLOWED TO SAVE THE GOVERNMENT MONEY! I HAVE to go through one of these approved suppliers.
Bloody great rip-off of government funding!
It’s called KICKBACKS BigBadOzDave, to the MINISTER and or the rest of the Grubs who issue the the CONTRACTS to the various Agencies. They don’t go into Politics to help the average Australian, it’s all about greasing theirs and their mate’s palms. And to Hell with the Economy. Jacka.
I agree with David, I have experienced when I’ve needed anything medical or any products and are requested by OT or referrals from Dr. for anything medical the Service provider will only give approval to a Company they are affiliated with and they tell me to go there only, but always costs double the price as elsewhere. Does not make sense to the client as the funds are for their needs not the Service Providers workers.