The prospect of the Albanese government introducing an aged care levy appears less likely than two months ago.
The idea gained traction back in June when federal aged care minister Anika Wells was interviewed on ABC’s Insiders program.
A tax or levy was first recommended in 2021 by the Royal Commission into Aged Care Quality and Safety. The previous Morrison government, which initiated the commission, opted not to adopt it.
But the idea was brought back before last year’s election when Anthony Albanese suggested Labor had no plans for such a levy either.
In the Insiders ABC interview, Ms Wells said: “We’re still not advocating any particular proposal.”
A task force on the proposal then met in July, broadly coming to a consensus against an aged care levy. Some task force members believe such a levy would further enshrine generational inequality.
Aged care levy or tax – is there a difference?
While levies and taxes are both payments made to governments, the term ‘levy’ generally applies to funds collected for a specific purpose. Taxes collected are used where needed by governments, ostensibly for society’s overall benefit.
A levy implies the collected funds will be used for a specifically earmarked purpose. In this case, any funds collected would be used specifically to fund aged care, not diverted elsewhere.
Writing in the Revenue Law Journal in 2013, Bond University’s Madeline Taylor stated: “A levy is a temporary tax collected by federal, state or local governments and used for a stated public purpose.”
However, Australian history shows that the word ‘temporary’ perhaps doesn’t cut it. The Hawke government introduced the Medicare levy in 1984, and it remains today. It is used for a specific purpose, however.
Some levies truly are intended to be temporary, such as in 1996 when the Howard government added 0.2 per cent to the Medicare levy to fund a government gun buy-back scheme. Introduced in response to the Port Arthur shootings, the additional levy was removed after a year.
Though no decisions have been made, the expectation is that an aged care levy, if introduced, would be permanent.
A levy is one way, but is it the best way?
The task force members are not alone in their concerns about the introduction of an aged care levy. Writing for The Conversation, Nicole Sutton, senior lecturer in accounting at the University of Technology Sydney (UTS), outlined several concerns.
The introduction of an aged care levy would have several drawbacks, she said, adding more pressure to taxpayers already paying “the lion’s share of all aged care funding”.
This would in turn lead to younger generations paying more for services for their parents and grandparents. Australia’s population of over-65s is forecast to increase from 17 per cent to 20 per cent by 2060.
The levy in that scenario undermines intergenerational equity, Ms Sutton argues, leaving the cost to a proportionally shrinking younger generation.
Ms Sutton also suggests a levy would create a false perception that funding problems have been solved.
“It will likely still require further top-ups from other sources or further adjustments down the track,” she said.
So what’s the alternative?
Ms Sutton has not simply highlighted potential drawbacks of an aged care levy. She is a co-author of a UTS discussion paper that incorporates several recommendations:
- reducing the rate of growth of demand for subsidised aged care services
- improving the effectiveness of aged care services
- improving the efficiency of service delivery
- establishing more equitable funding for subsidised services.
Ms Wells says her department will continue working towards a solution, and also promises to incorporate public consultation and community engagement.
Do you have concerns about Australia’s funding of aged care in the future? What approach do you think the government should take? Let us know in the comments section below.
Also read: Aged care providers carrying estimated half a billion dollars in debt