The federal government and opposition have squared off over suggestions that retirement savings could be utilised to take pressure of the ailing aged care system.
The Aged and Community Care Providers Association yesterday called for a portion of super to be “ringfenced” to fund aged care. A report by the peak body, which was established last year in the wake of the damning aged care royal commission, has called for a range of measures to encourage to spend some of their retirement savings on their own aged care needs.
The report argued government must consider a range of mechanisms, including incentives such as preferable tax treatment of lump sum withdrawals to pay residential aged care costs. It also suggested superannuation funds could offer “tax-efficient” aged care savings products.
More controversially, it raised the idea of a “compulsory saving approach” in which members are compelled to escrow a portion of their account balances for aged care. “The use of the superannuation system for funding of aged care costs should be further explored, including a ringfenced scheme,” the report stated. “Older Australians should be encouraged to spend their superannuation on retirement costs, which is the result of their hard work over their lifetimes, to continue living their best lives as they age.”
But Deputy Opposition Leader Sussan Ley said any such change would exacerbate what she said was the public’s “lack of trust” about the certainty of super policy settings. “This isn’t about superannuation. It’s about aged care,” she told Sky News Australia. “It’s about policy settings that actually put aged care on a long-term sustainable footing because… more and more of us are going to need it.”
The comments come ahead of a Conexus Financial Political Series lunch in Melbourne on Monday 28 August, at which Shadow Treasurer Angus Taylor and Shadow Finance Minister Jane Hume will lay out the opposition’s vision for financial services policy, including the purpose of superannuation.
Minister for Financial Services Stephen Jones indicated he considered aged care costs as being more relevant to the purpose of superannuation than large inheritances.
“It strikes me as odd in a system which is about retirement income that a third of the cheques written by superannuation fund, by value, are bequests,” he told the ABC.
“It’s not the purpose of superannuation to have a tax preferred, estate planning mechanism. It’s for providing for people in their retirement. We’ve got a crisis of funding in aged care, at the same time, we have one third of the value of funds being written out in bequests. That doesn’t square. It’s a conversation that we need to have.”
The government will introduce legislation after the next election to curb generous tax concessions in super, announcing it plans to increase the tax payable on earnings for $3 million-plus accounts from 15 per cent to 30 per cent.
Consultation to legislate an objective for the super system is currently underway. The proposed wording is: “The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
The campaign to legislate the purpose was kicked off at the Conexus Financial Political Series breakfast with Treasurer Jim Chalmers in February.
Join the Investment Magazine editorial team for the next instalment of the Political Series with Angus Taylor and Jane Hume on Monday 28 August in Melbourne.