5AA Radio Adelaide Mornings with Leon Byner
E & OE
BYNER:
Approximately 66,000 elderly and frail Australians were delivered a funding cut by the Abbott Government on the 1st of January according to my next guest who is the CEO of Leading Aged Services of SA, Paul Carberry. Paul, tell us the cut and how it affects people?
CARBERRY:
Good morning Leon how are you?
BYNER:
Good
CARBERRY:
Okay, just by way of quick background, aged care services in Australia are delivered by a range of different organisations. We have private sector organisations, church, charitable and other not-for-profit organisations all operating the aged care sector. And they all operate under the same funding rules and they all have to deliver the same high standards of care to their clients, as they should. And because they all operate under the same funding arrangements and have to deliver the same outcomes, it’s important therefore that there are not large cost inequalities when in different parts of the sector, I think that makes sense. Our private sector providers pay payroll tax to their state governments whereas not-for-profit organisations are exempt from these taxes. So payroll tax does produce a significant cost inequality, and the Commonwealth has recognised this and has always subsidised the cost of payroll tax to the aged care sector, since 1968, so a long time. This Government has dumped that subsidy and in doing so they delivered a funding cut to about 66,000 elderly Australians.
BYNER:
What’s that going to mean? In practical terms, what’s it going to mean?
CARBERRY:
Well in practical terms on average, it varies from provider to provider, but on average it’s around $2,350 per resident per annum, so providers will somehow have to absorb that loss, cope with it, they’ll still deliver the high standards of care that they want to and that they have to. But the Government has just made their task so much harder by cutting these funds.
BYNER:
Alright, I want you to stay on the line because listening to this is the Assistant Minister for Social Services, Mitch Fifield. Mitch, Happy New Year and thanks for joining us.
FIFIELD:
Good to be with you Leon.
BYNER:
Tell us the logic of what you did? Obviously you’re trying to make budget cuts, we know that, but as you can hear it’s going to make much harder the lives I suspect, of many of these people. How are they supposed to cope?
FIFIELD:
Thanks Leon. The Commission of Audit took the view, and it was one that we shared in the budget last year, that the payroll tax supplement that was being paid to private providers is something that should be more appropriately considered by state governments. And the reason for that is, we all know that payroll tax is a state tax base and the level of government that is responsible for administering a tax base should also be responsible for the application and the funding of any exemptions. And as Paul quite rightly pointed out, not-for-profit aged care providers in most jurisdictions do get payroll tax exemptions from the state governments. So our view is that the level of government responsible for administering a tax base, should also be responsible for any exemptions to it.
Now Paul’s right, that does represent a funding reduction and I think in South Australia, the reduction is something of the order of about $12 million because of the elimination of the payroll tax supplement.
But you’ve got to look at the fact that in the budget we did something that aged care providers were asking for which is, we reallocated $1.1 billion that the previous government had taken out of aged care in effect, which they wanted to apply to something called the workforce supplement, which was really a way of paying providers who entered into certain union agreements. That money was really a backdoor way of forcing aged care providers, to do something that would be to the benefit of unions. So we, at the request of aged care providers reallocated that back into the general pool of aged care funding, which represented from the middle of last year, a 2.4 per cent increase in subsidies for aged care providers.
So yes the elimination of the payroll tax supplement was a reduction for providers, but there was an increase in the base subsidy for aged care providers of 2.4%. Now I’m not saying that that completely covers for all providers the reduction in the payroll tax supplement, but it did for a lot of providers constitute a significant offset. So you’ve really got to look at both sides of the equation.
BYNER:
Well Paul what do you say to that?
CARBERRY:
Well Leon we acknowledge that the Government did restore funding that was taken from the sector in 2012. But it’s really beside the point to the issue of competitive neutrality. That increase that the Minister referred to applied to the whole sector. As I said at the beginning the payroll tax supplement for 47 years was paid to private sector organisations to offset the very large cost inequality which payroll tax produces. The 2.47 per cent is clearly quite irrelevant to this discussion, it does nothing to address the cost neutrality issue, and that’s the issue that has been completely damaged and thrown out the window, by this decision.
BYNER:
Mitch Fifield, how will elderly people cope, when really over $2,000 a year is directly or indirectly out of their pocket. What would you expect them to do?
FIFIELD:
Well the important point is that it’s not money out of the pockets of aged care residents. This is money that was going to providers, not direct to residents. And the $2,000 figure is not taking into account the 2.4 per cent increase in the base subsidies to providers. Now Paul can say that that’s irrelevant. It’s not irrelevant because you’ve got a reduction in funding for providers, but you’ve also got an increase in funding for providers. I certainly take Paul’s point in relation to the issue of competitive neutrality…
BYNER:
What does that mean? For those people listening today, what does competitive neutrality mean to an aged person in an environment where they need assistance? What does that mean?
FIFIELD:
Good point, we are using the language of Commonwealth-State relations which doesn’t mean a whole lot to aged care residents. But I guess competitive neutrality is essentially an argument for a level playing field. If you’ve got a not-for-profit provider and a for profit provider, there should be a level playing field in terms of the amount of tax and those sorts of things that they have to pay. Our view and the view of the Commission of Audit was that for the best part of 47 years as Paul said, the Commonwealth has really been doing the job of the state government. Payroll tax is a state tax.
BYNER:
Mitch you will know if I got Tom Koutsantonis on the line, the Treasurer. He would turn around and say you’ve already cut our funding, now you’re doing it more. Are you expecting us to take over something that you federally assumed the responsibility of?
FIFIELD:
Well the Federal Government does have the responsibility to provide subsidies to aged care providers and we provide around $15 billion a year in payments in the aged care sector. The payroll tax, it’s a state tax base, and I don’t think the Commonwealth really should be in the business of providing exemptions for state tax bases. If there’s a serious competitive neutrality issue, then given it’s a state tax base and given the State Government provides exemptions for not-for-profit providers, it’s really for the state governments to provide exemptions if they see those as appropriate for competitive neutrality. But I should also point out, for the benefit of Paul and his association that the Federal Opposition, although they’ve been critical, they have at no stage said that they would overturn or reinstate the payroll tax supplement.
BYNER:
Paul Carberry, what happens from here?
CARBERRY:
Well can I just make a couple of points? The cut to the funding of providers is a cut to the funding of residents. The Commonwealth pays funds to aged care providers, they all have different names, but they add up to the funding that providers have in which to care for their residents. So if you cut $2,430 or whatever the amount happens to be in individual places, of course you’re cutting funding to the residents. It can be interpreted in no other way. Now just to the other point, now we’ve heard that the Government was worries about subsidies a state tax that the Minister has just mentioned that. Apparently this wasn’t a problem for all the previous governments which subsidised payroll tax to the aged care sector, but it’s now a problem for this government. And really, perhaps the previous government had a better understanding of the principle of cost neutrality and they realised it was more important than some piece of fiscal jargon.
BYNER:
Where to now from here?
CARBERRY:
Well where to now? If the decision isn’t overturned we will have to cope, there’s no other choice obviously. I mean we have of course talked to the states about exemptions, they’ve said that under the current tax and funding arrangements that they need payroll tax to help fund their schools and their hospitals and their police. So let’s stick to the basic facts, the Commonwealth is responsible for the aged care system, not the states. The Commonwealth as part of that responsibility has always understood that it was important to provide this payroll tax subsidy for the very reason that the Minister just explained, to achieve a level of cost neutrality.
BYNER:
Alright, well Paul thank you for joining us and thanks also to the Assistant Minister.
ENDS