Payroll Tax Supplement
This information was distributed on July 24, 2014
Dear Residential Aged Care Provider
The Australian Government announced the cessation of the payroll tax supplement as part of the 2014-15 Budget. This measure has now been legislated and will have effect from 1 January 2015. The relevant legislative instruments are:
- Sections 35 and 36 of the Subsidy Principles 2014, which state that the payroll tax supplement ends on 31 December 2014. Section 112 provides that the payroll tax supplement provisions will expire on 1 April 2015.
- Division 5 of the Aged Care (Subsidy, Fees and Payments) Determination 2014, provides the method for calculating the amount of payroll tax supplement. Section 29 states that a care recipient can only be eligible for a payroll tax supplement for a day in a payment period ending on or before 31 December 2014.
This Division expires on 1 April 2015.
- Similar provisions to those above can be found in sections 30, 31 and 131 of the Aged Care (Transitional Provisions) Principles 2014 and section 43 of the Aged Care (Transitional Provisions) (Subsidy and Other Measures) Determination 2014. These provisions apply in relation to care recipients who are in care prior to the 1 July 2014 aged care reforms being implemented.
The National Commission of Audit report noted that the payroll tax supplement is effectively an indirect transfer of revenue from the Australian Government to the states and territories. In light of the Commission’s recommendations, and in line with the Government’s commitment to run a sustainable national budget, the Commonwealth has chosen to discontinue the payroll tax supplement. State and territory governments are free to exempt aged care providers from payroll tax.
This decision has been taken in the context of a number of other aged care reforms, including:
- The Government has acted to return funding allocated to the former Government’s workforce supplement, $1.5 billion over five years from 2013-14, back into the general pool of aged care funding – primarily through increased care subsidies.
- Facilities that have been newly built or significantly refurbished since 20 April 2012 will receive a higher level of accommodation supplement for residents with low means. The maximum accommodation supplement has risen from approximately $34 per day to $52 per day.
- Modeling conducted for the Aged Care Financing Authority estimates at net $3 billion increase in new refundable accommodation deposits are expected to be available to providers.
Ageing and Aged Care Services
Department of Social Services