Income tax rise could fund aged care reforms, royal commission told

A report by consultants Deloitte Access Economics for the Royal Commission into Aged Care Quality and Safety found improvements to aged care would lift the government's costs by at least 0.3 per cent of GDP.

The royal commission's interim report last year found there was a pattern of neglect towards aged care that had left services fragmented, unsupported and underfunded.

Significant reform was needed to improve the quality of aged care, the interim report said.

Modelling from Deloitte released on Monday showed that under demographic, industry, economic and health trends, the cost of government funding for aged care would require a larger share of national income.

Commonwealth spending on aged care would rise from about 1 per cent of GDP in 2020 to nearly 1.4 per cent in 30 years under a "baseline" scenario that assumes stronger demand for care as the nation's population ages.

The Deloitte report found reforms to improve aged care would involve additional costs in 2050 between 0.3 per cent and 0.8 per cent of GDP, or between a fifth and one half of the projected baseline aged care budget, depending on the levels of staffing increases adopted.

Reforms requiring a four-star level of aged care staffing - indicating an above sector average amount of nurse and personal carer time per resident - could be funded with a 1 percentage point increase in income tax rates.

The increase was a third of the amount people said they were willing to pay in a recent Flinders University study.

A survey of 10,000 people found most respondents were willing to pay 3.1 percentage points higher in income tax so all Australians could access high-quality aged care.

A three-star level of staffing would require a 0.58 percentage point rise in income taxes and a five-star level would require a 1.48 percentage point rise.

Research by the University of Wollongong last year found more than half of Australian aged care residents were in facilities with staffing levels that would be rated one or two stars in the five-star rating system, which is used in the United States.

Deloitte's report said the increase to tax rates to fund aged care reforms would be "substantial".

"As a comparison, the Medicare Levy was recently raised by 0.5 per cent to cover part of the cost of the National Disability Insurance Scheme," it said.

The report said the government could also fund the reform package with a new tax, broadening the base of existing taxes or cutting expenditure in other areas.

Reforms would substantially increase the quality of residential care and the highest home care package to support recipients with the highest needs, Deloitte said.

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Among other reforms being considered by the royal commission are registration and mandatory certificate III training for personal care workers, uncapping the number of home care packages, and major improvements to health services.

The royal commission said reforms would create about 30,000 additional full-time equivalent jobs in aged care by the end of the decade.

The figure is in addition to the 50,000 extra aged care workers that will be needed due to population trends.

Deloitte's report found the reform package would put pressure on the aged care workforce, particularly for enrolled nurses, as care requirements rose.

Wages in the sector would rise to attract more workers from other sectors and through additional training, the report said.