The ageing population is putting an increasing cost on the welfare budget and the big challenge is how to pay for it. It’s been nearly three years since the Royal Commission into aged care,which proposed a simple solution:charge an aged care levy,like a Medicare levy,on all taxpayers.
The commission recommended a minimum levy of 1 per cent,which would rise with age and with taxable income. For example,people in the second tax bracket would pay an extra 3.6 per cent of their income,while people over 40 in the same tax bracket would pay 6.8 per cent of their income.
The proposition was ludicrous and sank like a stone. Most retirees pay no income tax at all. Imagine the outcry if workers,already battling rapidly rising mortgage costs,were slugged with a massive tax on their income while the oldies continued to enjoy a tax-free retirement. It was never going to get traction,and suggesting that the rate of income tax you pay should depend on your age is ridiculous.
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Last week ACCPA (Aged Community Care Providers Association) released an issues paper in which they canvassed the problem in depth and pondered ways it could be rectified. They considered ways to plunder people’s superannuation,but they are on dangerous ground here.
For years,the anti-superannuation lobby has focused on the fact that the majority of retirees die with substantial money in superannuation. They see this as proof that they should never have been allowed to accumulate that much money in the first place. Suddenly,there’s been a change of attitude,and now there are suggestions that superannuation should now be earmarked for their aged care.
If you talk to senior Australians,however,you will find they have good reasons for going easy on drawing down their superannuation. They can all relate stories of friends who had sudden and unexpected health issues,which incurred massive costs. As far as they’re concerned,their super is their safety net,and they are not going to fritter it away.