Mar 26, 2021

Could the increase in superannuation be used to fund aged care?

Superannuation fund

Liberal MPs Jason Falinski and Katie Allen have told The Guardian they would like to see the government consider using an increase in the superannuation guarantee from 10% to 12% to fund healthcare in later life and aged care services.

Changes to the way the family home is treated means testing should also be considered, according to the report in The Guardian.

The superannuation guarantee is legislated to rise from 9.5% to 12% by 2025, with a 0.5% increase slated for July 2021. 

Some members of the government oppose the superannuation increase, arguing it will place a burden on taxpayers. But the Labor government, unions and the superannuation industry say the increases are needed to ensure secure retirements.

More funding is needed

The Royal Commission into Aged Care Quality and Safety’s final report noted that “the current [aged care] system delivers services that are all too often substandard, and sometimes unsafe. 

“In many instances, the current system fails to deliver services simply because there is not enough funding to meet the assessed need.”

Research conducted by the royal commission found most taxpayers (61%) would be willing to pay more tax to support a “quality aged care system”.

Royal commission: levy

Both royal commissioners proposed a levy to cover the increase in the cost of aged care. 

“To increase the sustainable funding for high-quality aged care, we both support consideration of the introduction of a levy on taxable income to finance aged care,” the commissioners said.

However, they had different views on the design of the levy, particularly in relation to how much of the costs of the aged care system a levy should cover, and whether the levy should be formally hypothecated to aged care.

Levy is “inefficient”

Only last month, chairman of the Retirement Income Review, Mike Callaghan, who was chair of the Aged Care Financing Authority from 2018 to 2020 and former chief of staff to Peter Costello, said directing a portion of superannuation to fund aged care would be “inefficient”, according to a report in The Age.

Many Australians will never need to use residential aged care services, so it was not “efficient” to make all Australian workers effectively insure themselves for services they are never likely to need.

In 2017-18, 1.2 million people used aged care services, but only 7% of those used residential aged care.

Budget will contain more information about government response

Minister for Senior Australians and Aged Care Services Richard Colbeck said the government is considering the recommendations of the royal commission and is “committed to ensuring our care system treats older Australians with care, dignity and respect”.

 “It is clear from the report we need to make fundamental and generational change to the aged care system,” he said.  

The government’s response to the recommendations will be included in the upcoming budget in May. It will include a “clear pathway” for how the proposed reforms will be funded, Colbeck said.

Watch this space.

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  1. Means testing the family home for eligibility for the pension and health services is ludicrous. You work all your life to buy a family home – pay tax and then get white anted at the end of your life when you should be entitled to live in peace without having to sell the one place that you feel safe in. Totally sucks and I will NEVER vote for a government that brings this in. All that will happen is that those who can afford it will put their homes into a trust fund or into their children’s names and live free anyway.

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