Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 379

What the RC, Budget and Keating mean for aged care

Between the Aged Care Royal Commission’s special report on COVID-19 and the Federal Budget, there have been a lot of announcements in relation to aged care recently.

Keating steps into aged care

Last month the Royal Commission turned its attention to financing and funding arrangements. The most-anticipated witness was former Prime Minister Paul Keating. He suggested that aged care could be funded through a similar mechanism to the Higher Education Contribution Scheme (HECS), that is, the government could claim any aged care costs owed against the assets of the estate.

This is a dangerous idea for at least two reasons.

The first is that such a system could be exposed to rorting with people deliberately changing the ownership of assets to avoid paying. After all, not every asset is dealt with by a person’s estate – binding nominations, joint ownership, trusts and companies can all deal with assets outside of an estate.

The second, and in my opinion potentially the greater risk, is that this solution offers an ‘easy win’ for government. It could be adopted without fixing the fundamental issues of the funding and means testing arrangements which are complex and can be grossly unfair.

COVID-19 recommendations and the Budget

At the end of September, the Aged Care Royal Commission released a special report into COVID-19 providing six recommendations, including:

  1. funding to ensure that people living in aged care can receive visits from family and friends
  2. the provision of allied health including mental health services to people living in residential aged care
  3. establishment of a national aged care plan
  4. all aged care homes to have at least one trained infection officer and the provision of infection control experts to assist homes with training
  5. developing an outbreak management plan to assist with outbreaks
  6. that the Government should report to Parliament no later than 1 December on the implementation of the recommendations.

The Morrison Government accepted all six recommendations the next day, announcing an initial $40.6 million of funding. This was followed in the Budget with $746.3 million to further support the industry’s response to COVID-19 and $408.5 million to improve aged care quality (some of which was announced earlier in the year).

Other Budget measures include:

  • $245 million to continue the COVID-19 supplement and a 30% increase in the viability supplement and homeless supplement for a further six months.
  • $92.4 million to cover the costs of single site workforce arrangements in COVID-19 hotspots.
  • $91.6 million to fund the second stage in the implementation of a new funding model for residential aged care which is aimed at delivering more accurate funding to meet the resident’s care needs.
  • $71.4 million to support people who temporarily relocate from residential aged care to live with family due to the pandemic.
  • $35.6 million to provide grants to eligible residential aged care facilities that are experiencing financial difficulty.
  • $29.8 million to have almost 70 people staff a Serious Incident Response Scheme to ensure people in residential aged care will be better protected from abuse and serious incidents are better responded to.
  • $11.3 million for specialist counselling teams will be available to provide expert psychosocial services to address issues raised by the Royal Commission around the use of chemical and physical restraints for people living with dementia.
  • $10.6 million for up to 40 co-ordinators to stop young people going into residential aged care by connecting them with more age appropriate facilities.

Register here to receive the Firstlinks weekly newsletter for free

Budget provisons for Home Care Packages

The Budget provided $1.6 billion for an additional 23,000 Home Care Packages, the additional packages will comprise:

  • 5,000 Level 1 Home Care Packages
  • 8,000 Level 2 Home Care Packages
  • 8,000 Level 3 Home Care Packages
  • 2,000 Level 4 Home Care Packages

The Government’s most recent Home Care Package data (as of 31 March 2020) shows the number of people waiting for a Home Care Package at their approved level as:

  • 3,363 at Level 1
  • 40,350 at Level 2
  • 41,500 at Level 3
  • 18,386 at Level 4

Home Care Package funding provides a Basic Subsidy based on the level of the package. At Level 1 the Basic Subsidy is $24.46 per day while at Level 4 the Basic Subsidy is $141.94 per day. There are additional supplements for people with special care needs of dementia, oxygen and enteral feeding.

As you can see, while $1.6 billion is a significant investment, with around 100,000 people waiting for a Home Care Package at their approved level it is a long way short of what is needed.

Granny flat arrangements

For people looking after an ageing relative, the Budget delivered some good news - a Capital Gains Tax (CGT) exemption for granny flat arrangements when a formal written agreement is in place. The potential CGT consequences of granny flats can be significant and sadly the desire to have children avoid the tax liability leads families to have no formal agreement. This can leave granny and the children exposed when circumstances change in the future.

The CGT exemption announced in the Budget would be limited to family arrangements with a formal agreement where the granny flat arrangement is supporting an ageing or disabled relative. The measure is expected to commence from 1 July 2021 (subject to the passing of legislation).

While the CGT exemption for granny flats is welcome, sadly the additional Home Care Packages (often needed to enable someone to stay in a granny flat) don’t go far enough. The Royal Commission heard that more than 16,000 people died waiting for a Home Care Package in 2017-18, undoubtedly many others were forced to move into residential aged care to get access to the care they needed.

The Government seems to be delaying necessary funding pending the Royal Commission’s final report, which is due no later than 26 February 2021. Maybe the next Budget will provide the funding needed to ensure that older Australian’s receive the aged care they deserve?


Rachel Lane is the Principal of Aged Care Gurus where she oversees a national network of adviser dedicated to providing quality advice on retirement living and aged care. She is also the co-author of a number of books with Noel Whittaker including the best-seller “Aged Care, Who Cares?” and their most recent book “Downsizing Made Simple”. To find an adviser or buy a book visit


October 22, 2020

Hi John ! You say "Surely, equity says that the inheritance that a family receives should not be dependent upon luck (what disease the old person gets)".
Why not ? Everything else in life does ? We are "lucky" to be born , "lucky" to live long enough to grow old , "lucky" to be
able to live in a caring society which is prepared to "share" its wealth , voluntarily , with the needy !
I say : Those who can pay their way , should pay.......and generally do so.
Those who are "unwilling to pay" , should pay to the limit of their resources , BEFORE "taxpayers" are called upon to do so.
Hi C ! You say "I guess it depends if you feel an entitlement to an inheritance and that the government should preserve your entitlement to this inheritance"
Yes.....that word " entitlement " HAS TAKEN ON a new and different meaning these "avaricious and litigious" days hasn't it !?
I think that I preferred THE TIME BEFORE the expression " but I am entitled....." became the standard response to most questions regarding anyone accepting responsibility for their decisions or actions or obligations !
Still......I guess when the time comes for each of us to face that situation , it will probably depend on how we did so in the past and how much providence and provision we made for it ! ................ Not everyone can be so "lucky" !


October 15, 2020

My view on this is that too few of us seem prepared to fund our own aged care. And too many of us think the standard of Aged Care is too low and needs to be be better. So I think the Keating idea is on the right track. I do not support an idea that the Govt (that is us taxpayers) should almost completely pay for a senior's aged care whilst they can leave assets for their family or whoever. The reality is that what the senior pays does not come anywhere close to the costs of the services. If the vast majority of us want to remain in our own homes until the inevitable, then we should be asked to pay more for it than we do now. It has been quite clear for many years now that on average we are living longer and just as for superannuation/retirement we should be putting funds away to pay up.

Rod in Oz
October 15, 2020

Well said John, I agree with your points and Aged Care shouldn't depend on "user pays".
Cheers, R.

October 15, 2020

There is another fundamental flaw in having a HECS type payment system (out of the estate of the deceased aged care recipient). That is equity.

Consider two older Australians,

* one in the old age has a significant health issue such as a heart condition. They require surgery, and because of their failing health, have many visits to hospital, spending a lot of time in high cost intensive care. Each of these hospital stays costs a lot of money for a relatively short period of time. Medicare picks up virtually all of the costs for this patient.

* The second elderly Australian suffers dementia. They have an ongoing care needs that occurs in an Aged Care facility. The daily cost of this person's care is significantly less than the daily cost of the heart patient, but the care is ongoing, possibly several years of care.

In total, the cost of providing care to both patients is exactly the same.

However, whereas for the heart patient, the community bears the cost, but for the dementia patient, the patient is asked to bear the cost.

In other words, the family of one person has no reduction in their inheritance (the heart patient) whereas the other's family (the dementia patient) losses part of their inheritance.

Surely, equity says that the inheritance that a family receives should not be dependent upon luck (what disease the old person gets).

Rather, the equity solution is that EVERY person bears the cost of aged care - that is, we all pay for the assurance that aged care is available for us should we need it, just like (in theory) Medicare is the assurance that medical care is available should we need it.

The way we finance Aged Care needs to be developed, but the Keating solution is flawed in many ways - we need to find an equitable solution which is not dependent upon "user pays"

October 18, 2020

I guess it depends if you feel an entitlement to an inheritance and that the government should preserve your entitlement to this inheritance


Leave a Comment:



Royal Commission must remove aged care anomalies

Family home no longer the sacred cow

Why the poor will pay more for aged care next year


Most viewed in recent weeks

400th Edition Special: 45 of the best investment ideas

Over eight years since February 2013, Firstlinks has become a leading financial newsletter, publishing thousands of articles from hundreds of writers. To mark this milestone, 45 experts have joined the celebration for our 400th edition bringing their best investing ideas for the next few years.

Four bubbly market pockets show heightened risk for investors

At the top of every market, there are signs that investors look back on and say the excesses were obvious. While many parts of the market are fairly valued, here are four bubbles which show irrational exuberance.

Turning point: the 2020s baby boom retirement surge

Every week, 2,500 Australians retire, or at least, reach the age of 65, and 2021-2027 will represent the peak years of the baby boom retirement surge. Longevity of life comes with dangers and opportunities.

How long will my retirement savings last?

Many self-funded retirees will outlive their savings as most men and women now aged 65 will survive at least another 20 years. Compare your spending with how much you earn to see how long your money will last.

The world in 2030: Six investing tips for the next decade

Six portfolio managers look at how life may change by the end of the decade and how shifting trends are influencing their investment decisions. It's an optimistic view of the world in 2030 as a better place.

The equity of government support for retirement income

Claims about the inequity of super tax concessions and the advantages for high income earners miss a fundamental point. It's fairer with more realistic assumptions on the value of future payments.

Latest Updates


In fact, most people have no super when they die

Contrary to the popular belief supported by the 'fact base' of the Retirement Income Review, four in every five Australians aged 60 and over have no super in the period up to four years before their death.

Investment strategies

The risk-return tradeoff: What’s the right asset mix for a 5% return?

Conservative investors are forced to choose between protecting capital and accepting lower income while drawing down capital to maintain living standards or taking additional risk. How can you strike a balance?

Investment strategies

Mind the bond/equity rebalancing gap

The 12 months ending 31 March 2021 saw the largest positive divergence in returns between global equities and bonds in nearly 50 years. To retain a target balance, investors need to sell equities and buy bonds.

Investment strategies

Do bonds still offer a buffer to equity volatility?

Most Australians place their superannuation into a balanced fund, making the relationship between bonds and equities a vital part of performance. Does the traditional correlation between shares and bonds still hold? 


Five trends shaping investments in China: 2021 and beyond

Australia has its tensions with China but with a strong base and a competitive, well-educated workforce, China’s manufacturing champions will advance its technology prowess and gain global market share.

Investment strategies

The fascinating bank hybrid journey of the last year

Bank hybrids produced excellent returns in the last year and the biggest lesson from March 2020 is that many investors don’t understand the structures, and in a crisis, they panic first and think later.


Eight quick lessons on the intricacies of selling shares

When we think about investing, we think about buying. The intricacies of the selling decisions are frequently overlooked, and poor selling is correlated to a lack of conviction. Selling is as important as buying.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.