Introducing a new 'Medicare-style' levy is not the answer when there are better revenue options available, says Chartered Accountants Australia and New Zealand (CA ANZ) today in response to the Royal Commission into Aged Care Quality and Safety.
"The Royal Commission final report is incredibly sobering reading, but while responses such as a new levy carry the right sentiment, they are the wrong solution," said CA ANZ Superannuation Leader Tony Negline CA.
The Government currently funds more than 90 per cent of home aged care costs and up to 81 per cent of residential aged care costs. The final report outlines changes that will substantially increase the cost of aged care, but we need to fund that in a way that doesn't cement inequality.
A mix of taxpayer funding and means tested co-contributions is an appropriate basis for financing Australia's aged care needs into the future, along with changes to policy settings in line with those outlined in the Retirement Income Review.
"While changes must be made, our view is that right now in the current environment, putting further impost on the income-generating capacity of workers is not an effective policy response," said Negline.
"From a long-term fiscal perspective, this is not the time for massive reforms when we can tinker with our existing tax policy settings to make them work better for us and strike the right balance.
"Australia's population is ageing, and already working-aged Australians are paying, and will continue to pay, a disproportionate cost to supporting and caring for our elderly."
The Retirement Income Review highlighted that most retirees, including those on the aged pension, die with more assets than they had when they first retired, so accessing equity in the family home should be on the table, says Negline.
"We shouldn't be slugging workers with a new levy when many of our retirees can access the equity of homes they own as well as other assets, increasing the proportion of retirement care that is self-funded.
"This seems sensible at a time where recent wage growth is lower than long term average increases and housing affordability is incredibly challenging, let alone many younger workers even being able to buy a home.
The weighted average house price index for eight capital cities over twenty years has increased by 234% at the same time as the average weekly ordinary time earnings over same period increased by 118%.
Notwithstanding, the Aged Care Royal Commission report tells an incredibly challenging story as to our aged care sector and the care of some of our most vulnerable, says Negline.
"A thoughtful, considered response to the incredibly important findings of the Royal Commission is both needed and will demonstrate what kind of society we are."
As part of its submission, CA ANZ recommended changes to help support the funding gap and the provision of a higher standard of aged care, including:
- Reducing the Capital Gains Tax (CGT) discount
- Easing accessibility into 'Reverse mortgages' including improving the government's Pension Loans Scheme
- Quarantining of super, especially any proposed increases in super contribution rates into a fund akin to the Future Fund, but for aged care
- The taxation of superannuation payments.
"Getting the policy and tax settings right is not easy but introducing a new levy is only going to entrench this intergenerational inequity further.
"Especially as a growing Federal and State 'debt mountain' has reached already eye-watering levels – which ultimately the younger generations of today will bear the cost of – and will still be paying off into their own retirement."
"Integrity in financial reporting is also critical to effective oversight of the aged care sector, and it is essential that any new requirements are proportionate and consistent with Australia's existing financial reporting framework," added CA ANZ Reporting & Assurance Leader Amir Ghandar FCA.
"In line with our submission, we welcome the recommendation that developing enhanced financial reporting requirements should be in consultation with the Australian Accounting Standards Board and other key financial reporting stakeholders, including the professional accounting bodies."