Audit commission supports regulation cuts

The Federal Government’s Commission of Audit has backed claims from aged care providers that the sector is over-burdened with regulation and requires cuts to red tape.


By Darragh O’Keeffe and Linda Belardi

The Federal Government’s Commission of Audit has backed claims from aged care providers that the sector is overburdened with regulation and requires cuts to red tape.

In its much-anticipated report, which the government released this afternoon, the commission said the aged care sector was “categorised by a high level of regulation” in areas such as price, quantity and quality.

The commission said there would be benefit in reducing duplication in “many aspects of financial reporting and reducing other regulatory requirements for aged care providers.”

While not specifying which areas of industry regulation might warrant attention, the commission suggested the issue be “pursued further by the Commonwealth Minister” as part of the implementation of the current aged care reforms.

The commission’s finding will be welcomed by aged care providers, which have lobbied consistently for cuts to red tape. As Australian Ageing Agenda has reported, aged care peak bodies such as Aged and Community Services Australia highlighted the regulation issue in their submission to the commission.

Specifically on aged care, the Commission of Audit also recommended:

  • including the full value of the principal residence in the aged care means test;
  • arrangements to allow seniors to access equity in their residence, to pay for part of the cost of their aged care;
  • introducing a fee for aged care providers to cover the costs of the government’s accommodation bond guarantee or requiring providers to take out private insurance to cover the risk of default; and
  • terminating the Payroll Tax Supplement for for-profit providers.

On the aged care means test, the commission noted that the Productivity Commission’s Caring for Older Australians report had recommended that, for both residential and community care, means testing arrangements “should be strengthened”. The commission called for a change to the means test for residential aged care, which currently takes account of the value of the residence up to a cap of $144,000, to take account of the full value of the residence.

On the issue of accessing equity in the home, the commission again noted that the PC had proposed a government-backed aged care equity scheme, and said this could also apply to community aged care. The government would need to implement arrangements to promote reverse mortgages and similar financial products, the commission said, adding that similar schemes had been adopted in other countries and could be used as a template for reforms in Australia.

Bond insurance

In a reform that is less likely to be welcomed by providers, the commission also proposed a new fee for providers covered by the accommodation bond guarantee, which was also a recommendation of the PC’s 2011 inquiry report. Alternatively, providers would be required to secure insurance from the private sector. The report said there was “little rationale” for the current situation where liability for bonds was “borne solely by the Commonwealth”.

In the Living Longer, Living Better reform package announced in 2012, the former Labor government originally proposed aged care providers privately insure new accommodation bonds from July 1, 2014. However the government later backed down arguing neither the sector nor the insurance market were ready for a private insurance model.

Since its introduction by the Howard Government in 2006, the Accommodation Bond Guarantee Scheme has been activated on five occasions at a cost of $24.5 million to the Commonwealth.

Elsewhere, the commission proposed scrapping the current supplement paid to for-profit aged care providers to effectively refund their state payroll tax. While the commission noted this was paid “in the interests of competitive neutrality”, as not-for-profit providers were exempt from the tax, it nonetheless found it to be “effectively shifting the payment of state tax to the Commonwealth.”

Age pension

The Commission of Audit has also recommended formally linking the pension age to increased life expectancy from 2033, which would result in the eligibility age for the pension lifting to 70 by 2053.

The current income and assets test would also be replaced with a single comprehensive means test to apply from 2027-28 and would include the value of a principal residence valued today at $500 000 for a single pensioner and $750 000 for a couple.

The report said exempting the principal residence from the age pension means test was inequitable as it allowed for high levels of wealth to be sheltered from means testing.

The proposed changes would only apply to new recipients of the age pension.

Indexation arrangements would also be changed to a lower benchmark of 28 per cent of average weekly earnings over a 15-year period.

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