Government mulling levy hike for aged care

The Morrison government has left the door open to a tax increase to find billions of dollars needed to fix Australia's besieged aged care system.

But coalition backbenchers are lukewarm on asking taxpayers to pick up the bill, which looms as crucial to repairing the deep problems facing older Australians.

A damning royal commission report has outlined reform options including a Medicare-style levy or an income tax increase.

Aged Care Minister Greg Hunt said cabinet would consider those recommendations before laying out a major overhaul of funding in the May federal budget.

"We'll consider that and we'll respond as part of the overall budget," he told Sky News.

"When we're laying out a five-year plan, we want to do that comprehensively in the context of the budget so we understand all of the investments but then of course the ability to pay for it."

Liberal senator Gerard Rennick said he was "50-50" on a levy or tax increase but acknowledged the sector needed more funding.

"I don't think anyone disputes that we need to improve aged care services and that all senior Australians are entitled to a good retirement," he told Sky.

The outspoken Queenslander would prefer to allow seniors more access to superannuation to pay for aged care and boost incentives for children to care for older parents.

Nationals senator Matt Canavan struck a cautious tone when asked whether he would back a levy to pay for aged care.

"I'm not supportive, generally speaking, of new taxes. Especially as we try to get out of COVID," he told Sky.

"But obviously the needs here are great. We already have a situation here where our budget is in significant deficit and we're going towards $1 trillion of debt."

The commission's report made 148 recommendations and found one in three aged care residents had experienced substandard care.

Commissioners Tony Pagone QC and Lynelle Briggs split over recommended funding models.

Mr Pagone said an aged care levy legally tied to funding the sector would be optimal, while also raising the prospect of an income tax rise.

Ms Briggs is in favour of a one per cent Medicare-style levy which would flow into government coffers without having to be spent on aged care.

Former Labor leader Bill Shorten, who was attacked over tax policy at the last election, said a levy would need bipartisan support to succeed.

"What we've got to do if we say that is not turn it into a left-right tit-for-tat political Punch and Judy show where we say 'oh, it's a new tax, it's a new tax'," he told the Nine Network.

Opposition Leader Anthony Albanese said there needed to be proper funding, real regulation and a fix for workforce issues.

"It's a damning indictment about the treatment of Australians who built this country," he told 2CC radio.

The report also calls for home care packages to be approved within a month of assessment and for staff to receive a minimum amount of training, similar to child care.