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Government backs off from new aged care tax

Treasurer Josh Frydenberg has distanced the government from a new aged care tax as calls to abandon the royal commission’s recommendation widen.

Tax&Compliance Jotham Lian 08 March 2021
— 1 minute read

The aged care royal commission final report released last Monday had called for a new levy to fund an overhaul of the beleaguered sector, with both commissioners presenting cases for a flat Medicare-like levy or a progressive levy based on income tax brackets.

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Chartered Accountants Australia and New Zealand superannuation leader Tony Negline believes that while a new levy carries the right sentiment, it is the wrong solution.

“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,” Mr Negline said.

“Australia’s population is ageing, and already working-age Australians are paying, and will continue to pay, a disproportionate cost to supporting and caring for our elderly.”

Instead, Mr Negline noted that the recently released retirement income review highlights that most retirees, including those on the aged pension, die with more assets than they had when they first retired.

“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,” Mr Negline said.

“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.”

Mr Negline also believes reducing the capital gains tax discount, relooking at the taxation of superannuation payments, and easing accessibility into reverse mortgages could bridge the funding gap to support a higher standard of aged care.

“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,” he said.

Treasurer Josh Frydenberg acknowledged that while more government spending was required, a new tax was not appealing.

“It is patently obvious that there is going to be more spending from our government on aged care,” Mr Frydenberg said.

“We will consider those various ideas and recommendations, and of course, we know the commissioners had different approaches with respect to the levy on tax proposals, but it is fair to say our government’s track record has been about delivering lower taxes.

“That’s been our track record, and that’s what we consistently see from Coalition governments.”

Government backs off from new aged care tax
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

Tax&Compliance