Australia: Federal Budget effects on Aged Care
Aged Care Update

In the Federal Budget delivered on 10 May 2011, several announcements were made that will affect the aged care sector particularly those operating as not-for-profit organisations. These include:

• tighter controls on tax concessions for charities operating business activities unrelated to their charitable activities
• 'additional community places'

Tighter controls on tax concessions

Possibly the most important Budget announcement for the aged care sector relates to reforms to tax concessions to ensure that income tax concessions for not-for-profit organisations will only apply to profits generated by commercial activities that are directed back to the not-for-profit entity's charitable works.

This will have an impact on not-for-profit entities who undertake commercial activities, although transitional arrangements are likely. The Budget has indicated that commercial activities that further the entity's altruistic purposes, and small-scale and low-risk unrelated commercial activities will not be affected.

Defining these concepts and limiting their impact will be a difficult legislative task in light of the subjective nature of the reforms.

Gadens Lawyers will be closely monitoring these reforms to determine the precise mechanisms of reform that are proposed.

'Additional Community Places'

The Budget announced an adjustment to the balance between high-level community aged care and high-level residential aged care.

The Government claims that this reflects the current preference of many older people to stay in their own home for as long as possible while accessing care services, and pointed to lower costs associated with delivering care at home.

The announcement tends to pick up elements of the Productivity Commission in April 2011, considering long term funding for community and residential care as part of the reforms to the aged care system.

These reforms coupled with the tighter controls on tax concessions are likely to require aged cared providers, particularly in the not-for-profit sphere, to consider their current activities and future plans. Gadens Lawyers is able to advise and assist aged care providers to plan for the future

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.