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  • Writer's pictureEmilie Dye

An aged care levy would do more harm than good

Updated: May 19, 2021

Following the release of the report of the royal commission into aged care, the government has faced calls from various quarters that might easily lead it to become a little trigger happy with new taxes.

Thankfully, Treasurer Josh Frydenberg has all but ruled out a new aged care levy. We won't fix failings in aged care by throwing more money at the problem.

We shouldn't thrust our elderly onto the government and expect the taxpayer to take care of them. Too many Australians abdicate responsibility to the government, and a new levy will only make them more complacent.

A median wage worker expected to dish out over $610 a year under the proposed levy will rely on the government to provide for them in their old age. This is particularly true when the government asks them to give up $610 they can't spare, considering the current economic environment.

According to the Henry Tax Review, we already have 125 separate taxes in Australia. So while the cost of one new tax may seem small, added up enough weeks and months can grey a person's hair, and enough taxes can smother an economy.

The median worker already pays $12,000 in income tax, $1200 on the Medicare levy, and even more on the many consumption taxes, including the GST. Taking less and empowering Australians to save would give many the choices they so desperately need in their old age.

Politicians need to stop taxing us so much while we are young. If a 20-year-old saved $610 every year for the next 45 years at 6 per cent interest, they would have nearly $130,000.

Most resort to government-funded aged care because they don't have other options. Australians don't want to go into aged care. When surveyed, only 1 per cent of those over 60 said they preferred publicly funded homes.

Most Aussies would like to stay at home with their families and friends. But many don't have those resources - and it's no wonder, when taxes are so high and so numerous.

Some are recommending we take the money directly from people's retirement savings. After all, Australia does have a sizeable intergenerational tax disparity. While the youth pay more in taxes while they are working, taxing the elderly more to pay for services cuts into their options.

In reality, superannuation is overtaxed. "Tax-free" contributions are taxed at 15 per cent. When individuals withdraw their savings at retirement, they must pay an additional 15 per cent tax on the interest their funds have earned. This does not include the many fees charged while they save, or the taxes on withdrawals.

The government should want Australians to have independence and choice in their golden years. But the only way to provide that is to leave more money in people's pockets in the first place.

Australians are getting older. If we depend on taxes to fund caring for our elderly, soon fewer Australians will find themselves paying for a growing population of aged Australians. Whatever tax the government considers "enough" today will need to increase to match demand.

Furthermore, we must eliminate government waste and rorts before thinking about any new taxes. That requires the government to take a hard look at itself and its penchant for paying pencil-pushers luxury salaries. Those caring for our most vulnerable citizens should be paid the big bucks, not the people regulating them.

Bureaucracy takes time and costs money, without providing extra benefits for the people in need. More money needs to go to people on the ground and less to those checking government boxes.

The last thing aged care needs is more government intervention. More bureaucracy doesn't make for better care, as shown by the many people who have died waiting for the government to approve funding for their in-home care.

The Australian aged care industry is broken, but we aren't going to fix it with more taxes. Josh Frydenberg is correct. A new aged care levy is a terrible idea.

High taxes in Australia make it hard for Australians to save. So many reach the ends of their lives with few options. They take what they can get, but what they get isn't good.

The government needs to empower Australians, not impoverish them with high and numerous taxes. When Australians have more of their own money, they have more choices at every stage of life.

This article first appeared in the Canberra Times on 11 March 2021.

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