SUGGESTIONS that tax concessions for older Australians should be wound back has seniors’ advocacy groups up in arms.
A report by the Grattan Institute describes the situation of fewer people paying income tax as “the rise of the taxed-nots”.
Getting rid of three tax breaks for older Australians – the Seniors and Pensioners Tax Offset, the higher Medicare levy income threshold and higher private health insurance rebates – would save the government $1 billion a year.
“Despite their rising incomes and workforce participation rates, the proportion of over-65s paying tax has halved in the past 20 years,” the report says.
“At the same time, the Commonwealth is running annual budget deficits of about $40 billion and must make tough saving and spending decisions if it is not to hand an unsustainable bill to future generations.”
The report says the country can no longer afford the bill.
Council on the Ageing chief executive Ian Yates was scathing in his assessment.
“These measures proposed by Grattan mostly affect lower and middle income earners, not really well-off people,” he said.
“At the moment we are seeing this group affected by measures such as the tightening of the age pension assets test, increased user charges for aged care services, low interest rates on their savings, higher energy and other utility costs. They feel they are an easy target.
“In the meantime, government has left alone really high income people who get generous tax concessions on superannuation – even after the recent changes – family trusts, and a host of other high income tax loopholes. Let’s have some balance.”
Mr Yates said higher private health insurance rebates for over-65s would encourage older people to retain their insurance even though they are generally now on a lower fixed income.
“If it is reduced there will be a direct negative impact on the number of people who will retain their private health insurance,” he said.
“This will have a flow-on impact to the public hospital system with increased costs or longer waiting lists, especially for hip and knee replacements.
“We can debate the value and efficacy of the private health insurance rebate as a whole, but picking only on older consumers is not a helpful suggestion.”
Mr Yates said the tax offsets were designed to enable retirees to stretch small savings a little further while they continue to contribute to society as volunteers, child carers and in many other ways.
“Current retirees lived through higher personal income taxes, little or no superannuation, high mortgage rates, and few tax and welfare benefits.”
Tale of two very different incomes
THE Association of Independent Retirees believes that rather than take a piecemeal approach to increasing tax revenue from retirees, the government should adopt a holistic approach to budget repair.
Association spokesperson Wayne Strandquist said the government could do this by completing the tax green paper process that should address GST on all online purchases, the cash economy, income tax deductions and the use of international tax havens.
“While aligning the tax rates of senior and younger Australians seems equitable on the surface, income in retirement and while working is very different,” Mr Strandquist said.
“Income for fully or partly self-funded retirees is based on returns from capital invested.
“Investment returns have reduced significantly in recent years and capital has been drawn down faster to make up the difference.
“With reduced income comes reduced income tax.
“In retirement, investment capital cannot be replenished and when investment assets are sold to fund retirement income, capital gains tax is payable.
“For younger workers, income is based on personal exertion, generally increases over time and is not dependent on investment markets.
“In addition, a range variety of work-related tax deductions are available to younger workers that are not available to retirees.”
