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Budget: Workforce hit with fund cut, tax change


Providers and unions critical of two measures in last night’s Budget which they say will have negative ramifications for the sector’s already significant workforce challenge.

Aged care stakeholders are counting the cost of significant policy changes announced in last night’s Federal Budget, with a $40.2 million cut to the sector’s workforce fund coupled with tax changes that not-for-profit providers said would negatively impact their ability to attract and retain staff.

Provider peak bodies said they were dismayed by the government’s decision to cut 15 per cent over four years from the industry’s workforce fund.

The Federal Government said the renamed Aged Care Workforce Development Fund would “support more targeted training and skilling opportunities” for the sector’s workers. The fund would provide $220 million over four years – down from $260 million.

Peak bodies quickly criticised the cut and pointed out the numerous dire projections of the sector’s impending workforce shortage.

“For a government committed to workforce initiatives and support, this decision is short sighted,” said CEO of Aged and Community Services Australia, Professor John Kelly. “To wipe $40 million off workforce strategy forward estimates seems like poor policy when 55,770 additional employees are required over the next eight years.”

Similarly, Leading Age Services Australia CEO Patrick Reid noted the sector’s workforce needed to triple in size by 2042, and that almost half of the current aged care workforce would retire in the next 15 years. He said the cut to the workforce fund could put quality and innovation at risk.

Unions representing aged care workers were similarly criticial of the reduction in the workforce fund.

ANMF federal secretary Lee Thomas said that, already suffering funding difficulties and lower wages, the aged care sector was “dealt another blow” in the budget with the “drastic reduction” in the fund.

“It’s hard to understand how the sector will educate, attract and retain a workforce with this reduction. We are aghast at these changes that were unexpected in a sector already struggling to provide quality for older Australians,” Ms Thomas told Australian Ageing Agenda.

Helen Gibbons, assistant national secretary of United Voice, said that the Budget did nothing to improve the worsening workforce shortage in aged care.

“In fact, the Budget will make this workforce crisis worse. Last year the government scrapped the aged care workforce supplement. This Budget will take even more funding from the existing workforce development initiative,” Ms Gibbons told AAA.

“If the government is serious about providing quality aged care for the growing number of older Australians it would immediately act to fix the worsening workforce shortage in the sector,” she said.

Consumer groups were similarly concerned about the measure. Alzheimer’s Australia CEO Carol Bennett said her organisation did not want to see a reduction in the quality of life for people impacted by dementia through poor training of staff.

Catholic Health Australia noted that the reduction to the workforce fund was made in the context of the government’s current stocktake of workforce programs and reflected “the government’s preliminary assessment of the level of duplication in the activities currently supported under the fund.”

The future workforce priorities to be supported under the fund will be determined in consultation with the Aged Care Sector Committee once the current review is completed, CHA said.

HammondCare CEO Stephen Judd said his support for the redesigned workforce fund was conditional on the government recognising that it would need to continue funding this vital area and not put training costs back on to providers, while caps on recurrent income and over-regulation continued.

Tax change could hurt NFP employers

The cut to the sector’s workforce fund wasn’t the only measure in last night’s Budget, as the Federal Government also announced a $5,000 cap on the fringe benefits tax (FBT) exemption on salary sacrificed meal and entertainment expenses.

ACSA said that decision was made without consulting the not-for-profit aged care sector and would have a negative impact on the sector’s ability to attract and retain staff.

While Adjunct Professor Kelly acknowledged concerns over the use of this tax concession by high-income earners, he said the vast majority of those who accessed this benefit in the aged care sector were lower income care staff who utilised the benefit at small amounts.

Adjunct Professor Kelly told AAA he would be discussing the level of the cap with government and also arguing for annual CPI increases to be included so that the benefit is not eroded over time.

“The aged care workforce needs to significantly increase over the next decade and this concession was a significant benefit that enabled providers to attract and retain workers,” he said.

Currently, employees of public benevolent institutions and health promotion charities have a standard $30,000 FBT exemption cap and employees of public and not-for-profit hospitals and public ambulance services have a $17,000 FBT exemption cap. Mortgage repayments, rent and school fees are common expenses currently salary sacrificed from their pre-tax income under the capped limit.

However, allowances for meals and entertainment have not been subject to a cap and have been marketed aggressively by salary packaging providers.

Assistant Treasurer Josh Frydenberg said the government’s introduction of a $5,000 cap per year would reduce the ability of people to exploit the concession.

He said some companies that specialise in salary sacrificing were advertising “tax-free holiday accommodation” and “tax-free dining”, while others encouraged people to venue hire for a special event.

“Such use of these concessions may not be in breach of the letter of the law but it certainly was not the intention for which the ­concession was established,” Mr Frydenberg said.

A 2010 Productivity Commission report on the contribution of NFP sector said the meal entertainment benefit was arbitrary and inequitable, with greater benefits flowing to employees with higher salaries and those who have greater financial freedom to spend their income on eligible items. Employees with large one-off entertainment expenses benefit relatively more in a year, the report said.

David Crosbie, CEO of the Community Council for Australia (CCA), said over 90 per cent of NFP workers do not utilise the meal entertainment benefit and of those that do, most claim back relatively small amounts.

“The reality is that there is a tiny minority within the sector that are very well-paid that can afford to spend and therefore claim tens of thousands in tax free income. Capping the concession is fair, but the savings should be directed towards the original intent – supporting our charities and not-for-profits,” said Mr Crosbie.

CCA, which represents a broad range of charities and not-for-profits, has argued the concessions should be capped at $15,000 per annum, and the money saved should be used to enable all charities and not-for-profit organisations to offer tax deductibility for donations made by their communities.

The budget measure is projected to save $295 million over four years and will commence 1 April 2016.

Under the change, all use of meal entertainment benefits would also become reportable.

Budget: Full AAA coverage



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