The Queensland, Western Australian and South Australian governments have ruled out granting a payroll tax exemption to aged care providers following the Federal Government’s decision to remove its longstanding supplement from 1 January 2015, which will see providers lose $181 million of revenue in the first year.
The premiers have rejected the request from state aged care peak bodies for tax relief for providers citing state budget constraints and have referred the matter back to the Federal Government.
The rebuff from the states comes as the National Aged Care Alliance has written to all senators this month urging the Federal Government to defer the withdrawal of the payroll tax supplement and to undertake consultations with the sector.
WA Premier Colin Barnett acknowledged the financial implications for affected aged care providers but said any exemption would set a “costly precedent” in the state.
In a letter to LASA WA, Mr Barnett said there was little “financial capacity” to provide a payroll tax exemption to compensate for the Federal Government’s budget decision. “To do so could also set a costly precedent to do the same for other commercial businesses, particularly for those that compete with the not-for-profit sector,” Mr Barnett said.
Queensland Premier Campbell Newman told LASA Q there was “no scope” for the Queensland Government to consider broadening payroll tax exemptions beyond existing organisations. He said as responsibility for aged care funding rested with the Federal Government the matter should be taken up with the Australian Government.
South Australian Treasurer Tom Koutsantonis told Australian Ageing Agenda that while the South Australian Government understood the difficulties faced by aged care providers it could not “accommodate” the Federal Government’s withdrawal of payroll tax assistance for aged care.
Mr Koutsantonis said the state was facing some $5.5 billion in cuts to health and education over the next 10 years as a result of Federal budget cuts. “We recently met with Leading Age Services SA and asked them to keep us informed of correspondence with the Federal Government on its withdrawal of support,” said Mr Koutsantonis.
NSW ‘considering’ the issue
However, other states such as New South Wales have said they are still considering the matter and have called for a national discussion on the issue.
A spokesman for NSW Treasurer Andrew Constance told AAA on Monday the Commonwealth’s removal of the supplement was of particular concern considering the important role of the aged care sector to a sustainable healthcare system.
“The NSW Government will need to consider the implications of this decision for the sector and the impact of addressing the need to provide a similar payroll tax exemption,” he said.
“NSW would welcome a national discussion on this issue with other states and territories.”
Meanwhile, the Tasmanian Treasurer Peter Gutwein said any decision regarding financial support to aged care providers would need to be considered in the context of the broader budget implications for the state.
In a letter to LASA Tasmania, Mr Gutwein said the Tasmanian Government was concerned by the impact of the federal budget on state finances and advised aged care providers to take the issue back the Australian Government.
Elsewhere, in a letter to all senators on 7 September, the National Aged Care Alliance expressed its significant concern over the Federal Government’s decision and said the supplement’s abrupt removal compromised sector viability and investment certainty.
Using data for 2012-2013, NACA estimated the impact of the supplement’s removal would reduce revenue for private providers by approximately $2,650 per occupied bed.
The alliance of 44 member organisations said this fall in revenue would have significant implications for the ongoing viability of many providers and would therefore pose a risk to the ongoing provision of care.
It said a more appropriate response would have been to flag the issue for discussion in the government’s future white paper on the reform of the Australian’s tax system.
LASA state peak bodies have also been urging state premiers to raise the matter at the next COAG meeting in October 2014.
LASA Q chief executive officer Barry Ashcroft said small, regional private operators in Queensland were particularly concerned about the discontinuation of the supplement. He said providers with small profits faced losing more than fifty per cent of their earnings.
Chief executive officer of LASA-SA Paul Carberry said the impact in South Australia would be severe, especially for low performing providers who were already marginally profitable or were operating at a loss.
The withdrawal of the payroll tax supplement, which has already been legislated and is due to come into effect on 1 January 2015, ends a 47-year arrangement between the Commonwealth and the aged care sector.
The Federal Government has said that it was no longer prepared to subsidise a state tax and that it was up to the state and territory governments to determine tax exemptions.
The Coalition government said the decision to discontinue the supplement was also taken in the context of a 2.4 per cent increase in basic care subsidies from 1 July 2014 as a result of the return of the $1.5 billion workforce supplement to the sector.