The next steps for aged care: Forging a clear path after the Royal Commission – Grattan Institute

The next steps for aged care: Forging a clear path after the Royal Commission

by Stephen Duckett, Anika Stobart, Hal Swerissen

18.04.2021 report

The Federal Government should boost funding by about $10 billion a year to help fix Australia’s broken aged care system.

The extra spending could be funded by some combination of a new Medicare-style levy on taxable income, changes to the pension assets test and/or the residential aged care means test, and/or reductions in excessively generous tax breaks on superannuation.

Properly administered, the extra money could transform the aged care system: clearing the 100,000-long waiting list for adequate home care, providing higher-level care at home for longer, employing at least 70,000 more aged care workers, and lifting the amount of care per person and ensuring a qualified nurse is on site 24/7 in all residential care homes.



The aged care system is a stain on Australians’ conscience. Fixing aged care is more than a political problem, it is a moral imperative.

Australia needs a streamlined and integrated aged care system under a new, rights-based Aged Care Act that guarantees care and support to all who need it.

Funding of care costs should be universal, just as there is universal funding through Medicare of patients’ costs in public hospitals. This would provide universal insurance for people who have high care needs, and would mean people would not need to worry about how they are going to fund their possible care needs in older age.

The cost of a reformed, universal aged care system will only grow as Australia’s population continues to age and there are fewer working-age people paying taxes to fund the care of retirees.

The Government could consider a 1 per cent aged care levy on taxable income, and it should find more money for aged care by reducing the excessively generous tax breaks for wealthy older Australians.

More of the value of the family home should be included in the Age Pension assets test. And superannuation earnings in retirement – currently untaxed for people with superannuation balances of less than $1.6 million – should be taxed at 15 per cent, the same as superannuation earnings before retirement.

Surveys consistently show that Australians are willing to pay more tax to fix aged care.

The time to act is now. A better funded and designed aged care system could protect the rights, uphold the dignity, and celebrate the contribution of older Australians.

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