$10bn fix needed to reform aged care, report finds

The government will need $10bn a year more to fund royal commission recommendations and should ditch income tax cuts to pay for it, says a new report.

The Morrison government will need to find an extra $10bn a year in the budget to deliver the recommendations of the aged-care royal commission, and should consider abandoning promised personal income tax cuts to pay for it, a new report says.

The report also canvasses changes to negative gearing, capital gains tax, the treatment of franking credits and a 1.7 percentage point hike to the company tax rate as options to fund a better aged-care system.

And it urges the government to fund the most pressing of the commission’s 148 recommended reforms, even if they add to the COVID-19-generated budget deficit.

The report by the Australia Institute’s Centre for Future Work, Funding High Quality Aged Care Services, notes Australia’s public spending on aged care is considerably lower than other industrialised countries, which combined with a lower overall tax take than the OECD average creates an opportunity for a better-funded aged-care system.

“Australia is one of the richest countries in the world. There should be no argument over whether we can afford to provide top-quality, respectful care to the elders who helped build our economy and our society,” ­report co-author Jim Stanford, director of the Centre for Future Work, said.

“The government has access to a whole suite of revenue ­options to support the ambitious and quick implementation of the commission’s recommen­dations. That effort must start with the budget,” he said.

The commission’s final report in February contained a scathing assessment of aged care in Australia, with commissioner Lynelle Briggs describing it as “unacceptable, deeply concerning and known for many years.”

The Morrison government has committed to providing its substantial response to the final report in Tuesday’s budget.

The Centre for Future Work’s report notes that Ms Briggs proposed a 1 per cent Medicare-style flat rate levy on income tax to fund better aged care, while co-commissioner Tony Pagone called for adjustments to personal income tax levels.

It also examined revenue-raising options including cancelling the legislated income tax cuts scheduled for FY2024 and reforming treatment of capital gains, negative gearing and franking credits.