Income tax hike needed to get better aged care
Australians would have to be slugged with a 1 per cent income tax hike to cover the cost of providing aged care to the elderly at the high standard families expect.
A report ordered by the Aged Care Royal Commission to explore how the nation could pay for mandatory four-star staffing levels and other improvements in residential care has found either a 1.01 per cent tax increase or a 0.89 per cent rise in the Medicare Levy would be required for the federal government to meet the total cost.
The modelling compiled by Deloitte, to be used in upcoming royal commission hearings on how to better fund aged care, found a person earning $37,000 a year would have to pay either an extra $187 in income tax, or an additional $329 for the Medicare Levy.
A person earning $90,000 a year would be hit with an extra $717 in tax or fork out $801 for the levy.
Federal Health Minister Greg Hunt has previously dismissed hiking the Medicare levy to pay for aged care, saying it was not something the government was "proposing".
But the government has reserved its right to respond to the full recommendations from the royal commission in 2021, and Prime Minister Scott Morrison last week indicated there would be more for the sector in the upcoming budget.
"We're increasing aged care funding every year by more than a billion dollars … so we'll keep putting the resources in," he said.
The star rating system is used to determine if an aged care home has sufficient staffing ratios compared to the health needs and number of elderly residents, with two or fewer stars "not acceptable," three "acceptable," four considered "good" and five as "best practice".
The higher tax or levy rate would boost every home to a "good" level, improve staff training, give the elderly better access to doctors, psychologists and dentists, and also cover the cost of uncapping the number of Home Care Packages available, clearing the current waiting list backlog of more than 103,000 people by 2022.
The Aged Care Royal Commission has pointed to a recent study by Flinders University that found the average Australian was willing to pay the equivalent of 3.1 per cent extra in income tax to improve aged care standards.
Deloitte Access Economics partner and report author Kristian Kolding said staffing was essentially the biggest cost barrier to better aged care.
"The main reason for the price increase is actually the cost of getting enough staff; to attract that staff you need to make sure you have relevant wage increases," he said.
Mr Kolding said the modelling assumed the government would be picking up the full cost of improved aged care, but alternatives could include requiring providers or individuals to make a greater contribution.
"Even a very small increase in income taxes raises a huge amount of money, even a 1 per cent rise has the potential impact," he said. "There are many options."
The Medicare Levy - currently set at 2 per cent of taxable income - was recently increased by 0.5 per cent to cover costs associated with the National Disability Insurance Scheme, with almost twice that again required for aged care.
EXTRA COST FOR FOUR-STAR AGED CARE
With 1% tax increase
$37,000 income = $187 rise to $3,759
$50,000 income = $317 rise to $8,114
$90,000 income = $717 rise to $21,514
$180,000 income = $1,617 rise to $55,714
With 0.89% Medicare Levy increase
$37,000 income = $329 rise to $1,069
$50,000 income = $445 rise to $1,445
$90,000 income = $801 rise to $2,601
$180,000 income = $1,602 rise to $5,202
Originally published as Income tax hike needed to get better aged care