With Aussies living longer, there is growing pressure for an increase in quality aged care options. But how should we be footing the bill?
With the rising costs of aged care services, it’s crucial to explore every avenue to ensure all Australians can live a comfortable and secure retirement. Now, a federal Aged Care Taskforce is reviewing the sector's funding model and considering a range of options.
Options under a New Aged Care Funding Model
Ideas being discussed include separating a portion of people's compulsory superannuation to fund their future aged care, and mandating wealthier older Australians spend more of their super on aged care.
For Australians eagerly awaiting the outcome to assist with their retirement planning – the final report will be presented to the government this December, with changes incorporated into the May 2024 budget.
The 2021 Aged Care Royal Commission revealed some harrowing concerns across the aged care industry, with inadequate funding being a big one. While it is widely agreed the system needs an overhaul, the proposals being considered have proved controversial – particularly with the superannuation industry.
Industry Super Australia chief executive Bernie Dean told the Sydney Morning Herald that, in his opinion, ring-fencing a portion of super was not the answer to solving the aged care crisis. “Commandeering a portion of super guarantee for aged care is unfair to those who won’t need it and diminishes the ability for many Australians to save for other things they need in retirement,” he told the newspaper.
Others feel it’s a no-brainer to make superannuation a part of the solution, particularly when an estimated one-third of super balances will be passed on as inheritances – rather than used for their intended retirement purposes - by 2050.
However, in the latest developments, AFR reports that the Albanese government has all but confirmed that those with greater means will pay more for their aged care, including through the use of tailored superannuation products. The taskforce is also discussing lifting the $193,000 means test threshold.
Superannuation to Pay for Aged Care?
At this stage, it looks unlikely a special tax or levy to fund aged care will be imposed, despite this being a recommendation of the royal commission.
With the independent Parliamentary Budget Office estimating the cost of aged care will increase by over 82 per cent – or almost $29 billion – to $63.6 billion in 2033-34 – the conversation of how this is all going to be funded is important to address.
For those looking to understand the outcome and how it may impact their retirement savings, it’s important to get expert help. At Olive Grove Aged Care, you can talk to a qualified financial adviser experienced in the intricacies of both superannuation and aged care, no matter where you live in Australia. Based offer online consultations as well.
The final Aged Care Taskforce report is expected to be presented to the government in December 2023.
Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 11 June 2023.
Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.