The Federal Government has handed down its Budget for the 2021-22 financial year. Compared with last year’s record deficit of $213.7 billion, the underlying cash deficit is projected to decrease to $161 billion as the economy continues on the path to recovery from Coronavirus.

Some of the key Budget announcements that should be of particular interest to you and your clients include:

• the removal of the work test for non-concessional and salary sacrifice contributions 
• a reduction in the minimum age requirement for downsizer contributions 
• an increase in the amount of super savings available to first home buyers 
• additional investment into aged care following a Royal Commission into the quality and safety of the system. 

 It’s important to note that the legislated increases to superannuation guarantee were not amended in the Budget. Therefore, rate of superannuation guarantee will increase to 10% from 1 July 2021, as previously legislated.

In addition, the Government did not announce an extension of the halving of the account based pension minimums. As a result, the standard minimum drawdown requirements will apply from 1 July 2021.

Also, keep in mind that the announcements made in the Budget remain proposals at this stage. All of the proposals mentioned must be passed by Parliament before they become law.

Superannuation

Repealing the work test for non-concessional contributions and salary sacrifice contributions for people aged 67 to 74

Expected to be 1 July 2022

The Government has announced it will allow individuals aged 67 to 74 to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.

However, individuals aged 67 to 74 years wanting to make personal deductible contributions will still have to meet the existing work test.

This measure is proposed to have effect from the start of the first financial year after the enabling legislation receives Royal Assent. The Government stated it expects this to occur prior to 1 July 2022. 4

 

Hyland Financial Planning comment

Removing the work test for people aged 67-74 to make non-concessional contributions will provide more flexibility for retirees under 75 to top up their super without needing to work 40 hours within 30 consecutive days in a year prior to making a contribution. It will also allow advisers to implement strategies, such as the re-contribution strategy, that are not normally available to retired clients in this age group.

The removal of the work test to allow salary sacrifice contributions to be made on behalf of people in this age group also means funds will be able to automatically accept these contributions without needing to first confirm the member has satisfied the work test. It also means that members in this age group can have salary sacrifice contributions made on their behalf in the first week of a financial year.

The bring-forward rule and removal of the work test

It is unclear from this announcement whether the Government also intends to allow clients to use the bring-forward rules to age 74, or whether the current requirement to be under age 65 at some time in the financial year the bring-forward rule is triggered will still apply.

We are awaiting confirmation and will let you know once confirmed.

Reducing the eligibility age for downsizer contributions to 60

Expected to be 1 July 2022

The Government has announced it intends to reduce the eligibility age to make a downsizer contribution from 65 to 60 years of age.

The downsizer contribution rules allow people to make a one-off after-tax contribution to super of up to $300,000 from the proceeds of selling their home they have held for at least 10 years. Under the rules, both members of a couple can make downsizer contributions for the same home and the contributions do not count towards a member’s non-concessional contribution cap.

This measure is proposed to have effect from the start of the first financial year after the enabling legislation receives Royal Assent. The Government has stated that it expects this to occur prior to 1 July 2022.

Hyland Financial Planning comment

Reducing the eligibility age for downsizer contributions to age 60 could allow an eligible couple in their early sixties to sell their home and contribute up to $1.26m to super in a year by each making a $300,000 downsizer contribution and $330,000 non-concessional contribution.

Alternatively, where a client wants to contribute a much smaller amount, it will be important for an adviser to consider what type of contribution they should make in order to maximise their ability to make contributions in future.

For example, if a client in their early sixties has $300,000 from the sale of a home they want to contribute to super, they may be better off making a $300,000 non-concessional contribution under the bring-forward rule rather than a downsizer contribution, as this would then preserve their ability to make a downsizer contribution in future.

First Home Super Saver Scheme – increasing the maximum releasable amount to $50,000

Expected to be 1 July 2022

The Government has announced it will increase the maximum releasable amount for the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000.

Under the existing FHSSS rules, an eligible person can only apply to have up to $30,000 of their eligible (voluntary) contributions, plus a deemed earnings amount, released from super to purchase their first home.

This measure is proposed to have effect from the start of the first financial year after the enabling legislation receives Royal Assent. The Government has stated that it expects this to occur prior to 1 July 2022.

Hyland Financial Planning comment

Under the existing FHSSS rules, an eligible person can only apply to have a maximum of $15,000 of their voluntary contributions from any one financial year included in the amount that may be released. Therefore, a member would need to make voluntary contributions of up to $15,000 over two financial years to take maximum advantage of the scheme.

However, the Government has not announced that it intends to increase the $15,000 annual voluntary contribution limit. Therefore, a member would need to contribute over four plus years to take maximum advantage of the scheme under this proposal.

 

Removing the $450 per month minimum superannuation guarantee threshold

Expected to be 1 July 2022

The Government has announced it intends to remove the $450 per month minimum superannuation guarantee (SG) income threshold.

Under the current rules, an employer is not required to pay superannuation guarantee contributions for an employee who earns less than $450 per month.

This measure is proposed to have effect from the start of the first financial year after the enabling legislation receives Royal Assent. The Government has stated that it expects this to occur prior to 1 July 2022.

*Assumptions: Results are in today’s dollars and calculated using ASIC Moneysmart superannuation calculator with the default assumptions applied. Assumes a 30-year-old with a super balance of $50,000 drops down to part-time employment earning $449 per month for 10 years. Assumed age of retirement is 67 years of age.

Hyland Financial Planning comment

Taking into account that two out of every three part-time workers are female, the SG threshold disproportionately impacts women who do a small amount of paid work, or who work multiple jobs each paying less than $450 per month. Younger workers combining part-time employment with full-time university study are also in the same situation.

Abolishing the $450 per month threshold could therefore help younger workers over age 18 to start accumulating superannuation earlier as well as help address the gap in super savings between women and men.

For example, abolishing the threshold could give a female worker at age 30 who drops down to one part-time employment arrangement due to family caring responsibilities up to an extra $6,924 in super at age 40. This difference will then continue to grow over time due to compounding investment returns, increasing to $11,700 in today’s dollars by retirement at age 67*.

Complying pension and annuity conversions

Effective first financial year following Royal Assent

The Government has announced people with certain complying income stream products will be given a two-year window to commute and transfer the capital supporting their income stream (including any reserves) back into a superannuation account in the accumulation phase. The member can then decide whether to commence a new account based pension, take a lump sum benefit or retain the balance in the accumulation account.

The income streams affected by this measure include:

• market-linked income streams (otherwise known as Term Allocated Pensions), 

• complying life expectancy income streams and 
• complying lifetime income streams,  

that were first commenced prior to 20 September 2007 from any provider, including self-managed superannuation funds (SMSFs).

Under the measure, any commuted reserves will not be counted towards an individual’s concessional contributions cap but they will be taxed as an assessable contribution of the fund.

When commuted, any social security treatment the product carries such as 100% or 50% asset test exemption and/or grandfathering for income test purposes will cease. 7

However, the Government has confirmed there will be no re-assessment of the social security treatment the product received prior to the commutation. Therefore, the member would not be required to pay back any overpaid entitlements.

The Government has also confirmed the existing transfer balance cap rules will continue to apply. Therefore, on commutation the member will receive a debit in their transfer balance account based on the debit value method that applies.

Income streams not included in this measure include flexi-pensions offered by any provider and lifetime products offered by a large APRA-regulated defined benefit scheme (eg some older corporate funds) or public sector defined benefit scheme (eg CSS, PSS).

Hyland Financial Planning comment

The Fact Sheet ‘Superannuation – More Flexibility for Older Australians’ states the products covered as those that first commenced prior to 20 September 2007. This appears to include those products that have since been commuted and rolled over to commence a new complying product.

How the value of the reserves of life expectancy or lifetime products will be calculated for the purposes of determining the assessable contribution to the fund remains to be seen and will be an important consideration for larger balances.

It will be important for members to consider the effect of commutations and commencement of new income streams on their transfer balance account. Often the debit on the commutation of a complying income stream is well below the actual capital that is released. Members and trustees will need advice in this complex area.

This is particularly good news for trustees of SMSFs that hold these products where balances have been depleted to the point of making the expenses to administer the fund unviable.

Relaxing residency requirements for SMSFs and Small APRA Funds (SAFs)

Expected date 1 July 2022

The Government plans to relax the residency requirements for SMSFs by extending the central management and control test from 2 to 5 years and removing the active member test.

Under current rules, SMSF trustees living overseas who intend to return to Australia at some point can be away for a period of up to two years and the fund will still meet the central management and control test. Under the proposal, the trustee will be able to be away for up to five years and still meet the test.

Further, the active member test will be abolished. Under this test, if the fund had members that were ‘active’ by making contributions or rollovers into the fund, the residency status of the fund could be jeopardised. This means that members who are overseas for a period of time often cannot make contributions to their SMSF or SAF. In contrast, a non-resident can contribute to large APRA and industry funds without putting the fund’s residency status at risk.

Abolishing the active member test simplifies the rules and ensures that members and trustees who are temporarily overseas can continue to make contributions to their SMSF or SAF without jeopardising the fund’s complying status.

Hyland Financial Planning comment

Under the central management and control test, SMSFs trustees must only intend to move overseas on a temporary basis. If the trustees move away permanently with no intent to return, the current 2 year period (and the proposed 5 year period) will not apply and the SMSF will become a non-resident (and hence non-complying) fund immediately.

Early release of super for victims of family and domestic violence

Not proceeding

In the 2018 Women’s Economic Security Statement the Minister for Women, the Hon Kelly O’Dwyer MP, announced that the Government planned to extend the ability to access early release of superannuation to victims of family and domestic violence.

The Government confirms that this proposal will not be proceeding.

Individual tax

Personal income tax cuts – retaining the low and middle income tax offset for the 2021-22 income year

Effective 1 July 2021

The Low and Middle Income Tax Offset (LMITO) was due to be removed at the end of the current financial year. However, the Government has announced it will retain LMITO for the 2021-22 income year.

 The LMITO provides a reduction in tax of up to $1,080. The table below shows the amount of offset an individual client is entitled to depending on their taxable income:

If the LMITO was removed as scheduled from 1 July 2021, individuals earning between $48,000 pa and $90,000 pa would have seen an increase of $1,080 in income tax and other individuals with taxable income between the effective tax-free threshold and $126,000 would also have been affected. 

This announcement means that personal income tax will stay the same in 2021-22 income year compared with the current year. 

The table below shows the tax cut at different income levels in 2021-22 if LMITO is retained compared with the scheduled removal of the LMITO: 

Hyland Financial Planning comment 

This announcement means that an individual’s effective tax-free income threshold for 2021-22 financial year remains the same compared with the current financial year. An individual who is not eligible for seniors and pensioners tax offset can effectively have taxable income of up to $23,226 without having to pay income tax. 

It is important to note that the LMITO is a non-refundable tax offset. An individual who is eligible for LMITO is not required to complete a section in their tax return. The ATO will work out the LMITO once the tax return is lodged. 

Modernising the individual tax residency rules 

Effective 1 July following Royal Assent 

The Government will replace the individual tax residency rules with a new, modernised framework based on recommendations made by the Board of Taxation in its 2019 report Reforming Individual Tax Residency Rules – a model for moderations. 

Under the current rules, the definition of a ‘resident’ or ‘resident of Australia’ is defined in subsection 6(1) of the 1936 Act. The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word ‘resides’. If an individual does not reside in Australia according to the ordinary meaning, the other tests listed below must be considered in determining the individual’s residency status: 

• The domicile and permanent place of abode test that applies mainly to individuals who are usually residents of Australia but during the income year are not living in Australia 
• The 183 day test that enables the ATO to consider usual place of abode and intention to take up residence in Australia so that individuals who are enjoying an extended holiday in Australia are not treated as residents 

The Commonwealth superannuation test. 

Following extensive consultation and research, the Board of Taxation concluded that the current individual tax residency rules are no longer appropriate and require modernisation and simplification. Individuals (and their employers) can face large compliance costs, including the need to seek third-party advice despite having otherwise simple tax affairs. The Board also identified a number of integrity concerns that arise due to the ways in which the current rules operate. 

Under the announcement new, modernised framework: 

– The Government will replace the primary test with a simple ‘bright line’ test, that is a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident 

– Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable objective criteria. 

The new framework will be easier to understand and apply in practice. It is designed to deliver greater certainty and lower compliance costs for globally mobile individuals and their employers. 

Hyland Financial comment 

Certain foreign residents for tax purposes are excluded from accessing the main residence CGT exemption on the sale of a property and therefore cannot make a downsizer contribution. The current residency test can result in uncertainty as to whether an individual is a tax resident at the time of a CGT event. 

The proposed simplified residency test can provide greater certainty in terms of whether the individual is a tax resident at the time of disposal when determining the qualification for the downsizer contribution. 

Please note that if an individual has come back to Australia and re-established their Australian tax residency solely for the purposes of getting access to the main residence CGT exemption, the ATO could apply Part IVA in the 1936 Tax Act (ie the general anti-avoidance provisions) to cancel any tax benefit that the tax payer may obtain under a scheme. 

Employee Share Schemes – removing cessation of employment as a deferred taxing point 

Effective 1 July following Royal Assent 

The Government will remove the cessation of employment taxing point for the tax-deferred Employee Share Schemes (ESS) that are available to all companies. 

This change will apply to ESS interests issued on or after 1 July following Royal Assent of the enabling legislation. 

An ESS provides an employee with a financial share in the company where they work and is commonly used by an employer to attract and retain talent. An employee can participate in an ESS if they receive shares in the company they work for at a discounted price or they have the opportunity to buy shares in the company. Tax-deferred ESS is one of the concessional schemes employers may offer to employees. 

A tax-deferred scheme allows an employee to defer paying tax in relation to their ESS interest until the income year in which the deferred taxing point occurs, instead of paying tax in the year the interest is acquired, if the employee and the scheme meet certain conditions. 

Under the current rules, the deferred taxing point1 is the earliest of: 

• cessation of employment 
• in the case of shares, when there is no risk of forfeiture and no restrictions on disposal 
• in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal 
• the maximum period of deferral of 15 years. 

The removal of cessation of employment as a deferred taxing point will result in tax being deferred until the earliest of the remaining taxing points. 

The Government also announced regulatory improvements to reduce red tape for ESS. The regulatory changes will apply three months after Royal Assent of the enabling legislation. 

Example 

ABCDE Technology Limited, an Australian company, provides its employee Tamara shares under an ESS. Tamara is granted the shares on 1 October 2022, which will vest on 31 August 2025 after certain conditions are met. 

On 31 December 2023, Tamara leaves her employment to pursue other opportunities but continues to be entitled to acquire the shares. Under the current law, Tamara would be taxed at the time she ceases employment before she has acquired the shares. 

Under the new arrangements, Tamara would be taxed at the next deferred taxing point when there is no risk of forfeiture and no restrictions on disposal of the shares. 

Hyland Financial Planning comment 

Tax-deferred ESS is one of the concessional schemes employers may offer to employee. There are no proposed changes to other schemes. Please refer to the ATO website for more information about concessional ESSs. 

Increasing the Medicare Levy low-income thresholds 

Effective 1 July 2020 

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2020-21 income year. 

The following table compares the level of taxable income below which no Medicare Levy is payable. 

Freezing Medicare Levy surcharge thresholds for 2 years 

Effective 1 July 2021 

The Government will continue with the current policy settings for the income thresholds for the Medicare Levy Surcharge (MLS) and Private Health Insurance Rebate for a further two years from 1 July 2021. 

The following table outlines the income thresholds for Medicare Levy Surcharge and the respective Private Health Insurance Rebate for each income tier: 

Simplifying self-education tax deductions 

Effective from the income year after Royal Assent 

Currently, tax deductions for Category-A self-education expenses must generally be reduced by $250. 

The Government has proposed removing this $250 reduction amount to effectively allow individuals to claim a tax deduction for all Category-A self-education expenses. 

Category-A expenses include tuition fees, textbooks, stationary, student union fees, student services and amenities fees, public transport fares, car expenses worked out using the ‘logbook’ method (other than the decline in value of a car), running expenses for a room set aside specifically for study. 

Business tax incentives 

The Government will support business to invest, grow and create more jobs through targeted tax incentives. 

Extending temporary full expensing 

Effective 6 October 2020 

Businesses with aggregated annual turnover within the relevant threshold will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2023 (extended from 30 June 2022 previously). 

• Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets for businesses with aggregated annual turnover of less than $5 billion. 
• Full expensing also applies to second-hand assets for small and medium sized businesses with aggregated annual turnover of less than $50 million. 
• Full expensing does not apply to second-hand assets for businesses with aggregated annual turnover of $50 million or more. 

Extending temporary loss carry-back 

Effective from 2019-20 

Ordinarily, companies are required to carry losses forward to offset profits in future years. 

The Government has announced that it will extend the temporary loss carry-back measure a further 12 months to allow companies with aggregated annual turnover of less than $5 billion to carry back tax losses from 2019-20, 2020-21, 2021-22 or 2022-23 income years to offset previously taxed profits in the 2018-19 or later income years. 

Eligible corporate tax entities can elect to apply tax losses against taxed profit in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profit and cannot result in a franking account deficit. 

The tax refund will be available on election by eligible companies when they lodge their 2020-21, 2021-22 and 2022-23 tax returns. 

Companies that do not elect to carry back losses under this measure can still carry losses forward as normal. 

Hyland Financial Planning comment 

The temporary loss carry-back measure allows an eligible business to access their losses earlier and generate a cash refund to provide a cash flow boost for the corporate business. 

International tax 

Updating the list of exchange of information jurisdictions 

Effective 1 July 2022 

The Government will update the list of jurisdictions that have an effective information sharing agreement with Australia. Residents of listed jurisdictions are eligible to access the reduced Managed Investment Trust (MIT) withholding tax rate of 15% on certain distributions, instead of the default rate of 30%. The updated list will be effective from 1 July 2022. 

To be listed, jurisdictions must have established the legal relationship enabling them to share taxpayer information with Australia. This measure will add Armenia, Cabo Verde, Kenya, Mongolia, Montenegro and Oman to the list. These new jurisdictions have entered into information sharing agreements since the previous update in 1 January 2021. 

Social Security 

Increasing the flexibility of the Pension Loans Scheme 

Effective 1 July 2022 

The Pension Loans Scheme (PLS), a voluntary, reverse mortgage type loan available through Services Australia, currently allows a fortnightly loan of up to 150% of the maximum rate of Age Pension. From 1 July 2022, the Government will implement two changes to the scheme – a No Negative Equity Guarantee and lump sum advances. 

No Negative Equity Guarantee 

A No Negative Equity Guarantee will be introduced so borrowers, or their estate, will not have to repay more than the market value of their property, in the rare circumstance where their accrued PLS debt exceeds their property value. 

Lump sum advances 

Eligible people will be able to receive one or two lump sum advance payments totalling up to 50% of the maximum Age Pension each year. Based on current Age Pension rates, this is around $12,385 per year for singles and around $18,670 for couples combined. 

Note, the total amount eligible people are able to receive under the pension loans scheme, including any lump sum advance payments, has not changed. The total amount cannot exceed 150% of the maximum Age Pension which is around $37,155 per year for singles and around $56,011 per year for couples. 

Four-year Newly Arrived Resident’s Waiting Period (NARWP) 

Effective 1 January 2022 

The Government has announced it will apply a consistent four-year Newly Arrived Resident’s Waiting Period across most welfare payments from 1 January 2022. 

This differs from current rules, where clients who have recently arrived as a resident in Australia may have to wait 1, 2 or 4 years before qualifying for a payment or concession card under the Newly Arrived Resident’s Waiting Period. 

Increased support for unemployed Australians 

Effective 1 April 2021 

As already legislated, the government has made a number of changes to working age payments from 1 April 2021: 

• the base rate of working-age payments has been increased by $50 per fortnight. This increase applies to JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Partner Allowance, Widow Allowance, Special Benefit, Farm Household Allowance and for certain Education Allowance recipients under the Department of Veterans’ Affairs Education Scheme 
• the income-free area of certain working-age payments has been increased to $150 per fortnight. This applies to JobSeeker Payment, Youth Allowance (other), Parenting Payment Partnered, Widow Allowance and Partner Allowance 
• the temporary waiver of the Ordinary Waiting Period for certain payments was extended to 30 June 2021 
• the eligibility criteria for JobSeeker Payment and Youth Allowance (other) for those required to self-isolate or care for others as a result of COVID-19 was extended to 30 June 2021 
• face-to-face servicing for job seekers has recommenced, implementing a graduated return in job search requirements from 15 per month from April 2021 to 20 per month from July 2021, and mandating job seekers in online employment services to complete their career profile in the jobactive system, to allow better job matching. 

Social Security Agreements — Republic of Serbia and Bosnia-Herzegovina 

Effective date TBA 

The Government will enter into bilateral social security agreements with the Republic of Serbia and Bosnia-Herzegovina. Social security agreements enable Australia and the agreement countries to share the costs of providing retirement income support to those who have split their working life between countries. 

Child care 

Increase in child care subsidy 

Effective 11 July 2022 

The Government announced it will: 

• increase the Child Care Subsidy (CCS) rate by 30 percentage points for the second child and subsequent children aged five years and under in care, up to a maximum CCS rate of 95% for these children, commencing on 11 July 2022, and 
• remove the CCS annual cap of $10,560 per child per year commencing on 1 July 2022. 

This will provide greater choice to parents who want to work an extra day or two a week. Removing the annual cap helps support the choices of parents to work the hours they want to work and, in particular, reduces barriers that secondary income earners face when seeking to work more. 

The current hourly fee caps will continue to apply. 

Hyland Financial Planning comment 

The increase in Child Care Subsidy will benefit eligible families with two children under five in childcare. 

The removal of the annual cap will also help eligible families with a combined income of more than $189,390, by removing the subsidy cap that restricts them to a maximum of $10,560 child care subsidy per child per financial year. 

Aged care 

In response to the Royal Commission into Aged Care Quality and Safety, the Government is investing $17.7 billion over five years into improving the aged care system. 

Increased funding for Home Care 

Effective 1 July 2021 

To support senior Australians to remain at home, the Government is funding an additional 80,000 Home Care packages: 

• 40,000 released in 2021-22 
• 40,000 released in 2022-23 

Additional respite care services will be provided to assist carers and enhanced support services will be provided to assist senior Australians to navigate the aged care system. 

Increased funding for residential aged care 

Effective over 3 phases: 2021, 2022-23, 2024-25 

To improve and simplify residential aged care services, the Government is implementing a range of measures, including: 

• Increased funding for aged care providers to deliver better care and services, including food through a new Government-funded Basic Daily Fee Supplement of $10 per resident per day 
• Assigning residential aged care places directly to senior Australians and supporting providers to adjust to a more competitive market 
• Expansion of the Independent Hospital Pricing Authority to help ensure aged care costs are directly related to the care provided 
• Implementation of a new funding model – the Australian National Aged Care Classification system 
• Increased funding to drive systemic improvements to residential aged care quality and safety including increased funding for the Aged Care Quality and Safety Commission 
• A new star rating system to highlight the quality of aged care services and funding to expand independent advocacy to support greater choice and quality safeguards 
• Upskilling of the existing aged care workforce, financial support for Registered Nurses and funding to train new aged care workers, including subsidised places through JobTrainer 
• Creation of a single assessment workforce to undertake all assessments to simplify the assessment experience for senior Australians who enter or progress within the aged care system 
• Supporting senior Australians to access information about aged care through the introduction of dedicated face-to-face services 
• An increase in front line care (care minutes) delivered to residents of aged care and respite services, mandated at 200 minutes per day, including 40 minutes with a Registered Nurse, by 2023 
• Funding to improve the governance of the aged care system including the drafting of a new Aged Care Act by mid-2023 

Hyland Financial Planning comment 

The proposed reforms to the aged care system are in response to the 148 recommendations of the Royal Commission into Aged Care Quality and Safety. 

The Government also released their response to the Royal Commission on 11 May 2021. 

A number of recommendations impacting aged care funding were not accepted, such as the proposed 1% increase in Medicare Levy. The Government also did not accept changes to the basic daily care fee and means tested fees. 

The proposal to phase out Refundable Accommodation Deposits is subject to further consideration with the Government considering options to reduce the current dependence on Refundable Accommodation Deposits as a mechanism to raise capital.