Costello proposes death tax for seniors

The royal commission into aged care has certainly brought out the heavy hitters this week.

Earlier this week we reported on former prime minister Paul Keating’s suggestion of a HECS-style system to provide for home care funding.

Now former treasurer Peter Costello has proposed an expansion of the Pension Loans Scheme, which could result in baby boomers being forced to sell their homes in order to pay for aged care, effectively a death tax on those who need to use aged care services.

Mr Costello explained that his government was behind the push to introduce what is now known as the refundable accommodation deposit into the aged care system after realising that private money would be needed to fund the sector in the future.

He told the commission that the growth in the sector required more people to pay their own way and that the Pension Loans Scheme could be expanded to meet this purpose.

“Those people that (sic) do use residential care and do have assets should be asked to make a contribution and guaranteed a return of (sic) their death,” Mr Costello said.

“I think people should do it knowingly and in advance and there should be products that allow them to do that during their lifetime.

“If you come around and try to take their assets after they’ve died, I think you can expect to run into a lot of opposition there.”

In his appearance before the commission, Mr Costello also slammed the complexity of the forms required before entering aged care, explaining that even he had trouble understanding them.

He said that many people might consider them too hard and just abandon them in the current situation.

“I have attempted to fill in these income and assets tests,” Mr Costello said. “You all ought to do them. The royal commissioners ought to do them. I think there are over 100 questions and 27 pages and, you know, I think I’m reasonably financially literate. I had a lot of trouble filling it in.

“I don’t know how a person going into a nursing home would ever be able to fill it in. Obviously, they’ve got to get someone to do it for them because of the complexity.”

He also said the public servants who assessed the forms also had to deal with the complexity on their end and would undoubtedly have trouble reading and understanding the forms.

“Broad rules that people can understand, and are therefore enforceable, are sometimes much better than high levels of equity which neither the filler in of the form or the reader of the form can actually make an informed decision about,” Mr Costello suggested.

“We’re talking about people who might be 80 or 90 years of age. How do they do this? I mean, my suspicion is a lot of them just don’t.”

Former Treasury secretary Dr Ken Henry echoed Mr Costello’s thoughts in his evidence to the aged care inquiry.

“My principal source of discomfort is that the system overall is horribly complex, and it contains a very high level of uncertainty for people,” Dr Henry explained.

“People who are elderly, people who are vulnerable, people who are suffering emotional and psychological stress, many, of course, unfortunately are mentally impaired to some extent, too many have little or inadequate family support and they confront the aged care system knowing nothing about it, knowing that they have no real option but to throw themselves into the system because it’s quite simply impossible for them to continue to look after themselves. And they’re bewildered.

“This system is unsustainable. It’s underfunded, it’s under-resourced and it will not be tolerated. In particular, it will not be tolerated by the baby boomers themselves when they find themselves in this system.”

What do you think about expanding the Pension Loans Scheme to pay for aged care? Is this too close to a death tax for your liking? What would it mean for older Australians who don’t own their home?

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Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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