The Australian Government has released the final report of the Royal Commission into Aged Care Quality and Safety, which included a recommendation for a new levy to help fund aged care on a sustainable basis.

In their Report, titled Care, Dignity and Respect, Royal Commissioners Tony Pagone and Lynelle Briggs make 148 wide-ranging recommendations, calling for fundamental reform of the aged care system. They recommend the current legislation that governs aged care should be replaced with a new Act which puts older people first, enshrining their rights and providing a universal entitlement for high quality and safe care based on assessed need.

While both commissioners agreed the need for a new levy to fund the reformed system on a sustainable basis, they differed on the detail.

Commissioner Pagone wants the Productivity Commission to investigate the best model for a hypothecated ‘aged care levy’:

By 1 July 2021, the Australian Government should refer to the Productivity Commission for inquiry and report under the Productivity Commission Act 1998 (Cth) s 11 the potential benefits and risks of adoption of an appropriately designed financing scheme based upon the imposition of a hypothecated levy through the taxation system.

Commissioner Briggs proposes an ‘aged care improvement levy’:

  1. By 1 July 2022, the Australian Government should introduce legislation to Parliament to establish an aged care improvement levy of a flat rate of 1%of taxable personal income. The levy imposed should be levied, and paid, for the financial year commencing on 1 July 2023 and for all subsequent financial years until the Parliament otherwise provides.

  2. The legislation introducing the levy should be based on the Medicare Levy Act 1986 (Cth).

They also call for a simpler and fairer approach to personal contributions and means testing, including removal of co-contributions toward care, reducing the high effective marginal tax rates that apply to many people receiving residential aged care, and phasing out Refundable Accommodation Deposits.

Read the final report

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