Australians are hoarding massive amounts of pensions and investments before they die to pass a large inheritance on to their kids, sparking fresh demands for a death tax to pay for old-age treatment.
Given the possibility of using a reverse mortgage to pay for old-age care expenses, experts warn that there is little motivation to do so under the current system, with the wealthy paying a fraction of the old-age care costs.
On the contrary, wealthy Australians are desperate to simply protect their nesting eggs to pass huge sums on to their kids.
This week, experts at the Royal Commission on Aged Care urged Prime Minister Scott Morison to consider adjusting the benefits to allow more Australians to potentially use their superannuation and savings to pay for their care, including the family home.
An extended loan scheme that would enable the family home to be sold on death to repay the cost of elderly care is one alternative.
Mike Callaghan, former Chair of the Aged Care Finance Authority, told the inquiry that the funding paradigm had been disrupted because it was massively underfunded at a time when rich Australians left large estates when they died.
“We have a situation now where most people don’t spend their money that they have in retirement. When they die they haven’t dipped into them,” he said.
“And there’s very large growth in inheritances. Instead of that growth in inheritance, people should be using the assets, when they have them, they should be using more of those assets to fund the range of goods and services that they need as they age.
“To me, part of it is instead of that growth in inheritances, people should be using the assets, when they have them.”
Asked about this proposal, Mr Callaghan said that death taxes were “considerations to be looked at.”
“Many jurisdictions, in fact most jurisdictions have estate taxes that essentially are a tax on the estate when you die,’’ he said.
“Propositions have come out more recently about having assets tax, death taxes, for example, to be able to be part of the reform of the tax system to try and have a more efficient approach to it. These are all considerations that have had to be looked at.”