There wasn’t much in Federal Budget 2020 for older Australians. Some may say the October Budget worked against them.
It was hoped by many that budget may have softened the blow of the first Age Pension freeze in decades.
Pensioners welcomed the announcement of two $250 coronavirus supplement payments and the changes to high-income tax brackets helped some older workers. But the JobMaker program – since labelled by advocacy groups the JobTaker program – lived up to its nickname, as businesses received subsidies for providing jobs and training to under-35s instead of mature employees.
Needless to say, older Australians have a keen eye on the May Federal Budget.
A report in the Australian Financial Review on the weekend revealed that Treasurer Josh Frydenberg is at least considering measures to support self-funded retirees struggling to live in a time of record low interest rates.
“They will be a focus of the budget. The problem is well defined, but we don’t have the solution yet,” said a government source.
One option on the table could be reassessing the taper rate for part pensioners.
This would help some asset-rich retirees keep a higher pension payment.
Lowering the Age Pension deeming rate and maintaining the temporary reduction in the drawdown rate – the minimum that retirees must withdraw from an account-based pension each financial year – may also be considered.
Currently, the drawdown is 4 per cent for those under 65, up to 6 per cent for those between 75 and 79 and 14 per cent for those aged 95 and over.
At the peak of the pandemic, the government halved the drawdown rates for account-based pensions.
Shadow assistant treasurer Stephen Jones agrees these are good ideas but says the government needs to take action now.
“Low interest rates are here for a long while. The government doesn’t have a strategy. In fact they’ve made it worse – always slow to adjust deeming rates and the Pension Loan Scheme,” he said.
“Their plans to cut super will make things worse for those approaching retirement.”
Reserve Bank of Australia boss, Dr Philip Lowe, was asked to consider older people who were depending on income from term deposits now decimated by record-low interest rates.
“People over 55 years of age earn two-thirds of Australia’s interest income,” he told the Parliamentary committee last week.
“Some of those people are on the pension, some have private wealth.
“For people over 65, 20 per cent earn 20 per cent of their income from interest. That’s why they are finding it hard at the moment.”
Early indications of the government’s intentions to help self-funded retirees in the next budget have been well received by older Australians and seniors groups.
“This budget must restore trust in means testing by lowering the asset test taper rate, setting a clear and transparent formula for deeming rate calculations and increasing the upper threshold for deeming rates,” said National Seniors Australia chief advocate Ian Henschke, who again called on the government to consider a universal pension system accompanied by appropriate tax reform.
“Instead of going through this whole process of worrying about deeming rates, worrying about taper rates and all the incredibly complex and arcane rules for retirement incomes, a universal pension would transform the system.
“If you were getting a certain amount of money, you’d pay back some in tax.”
The Tax Institute has urged Mr Frydenberg to focus on equality in retirement, and to review co-contributions to superannuation for single women and for the Age Pension to be made available to single women who have total superannuation of less than $100,000 from the age of 60.
“In relation to the Age Pension, it would also be worth making the means test for age pension qualification more generous for single women who will invariably have a broader and perhaps longer reliance on the pension,” the Tax Institute said in its pre-budget submission.
There has been no clear indication on the future of the new JobSeeker unemployment benefit rate – or if there will be an increase at all.
There are also concerns as to what will befall older workers once benefits are cut in March.
The Australian Council of Social Service (ACOSS) hopes the government makes “the right and smart decision on JobSeeker”.
“When the COVID-19 pandemic first hit our shores last year, the government did the right thing by doubling the old Newstart rate,” said ACOSS CEO Dr Cassandra Goldie.
“The increased rate meant that people, including families, were able to afford their rent and still have enough left over for fresh fruit and vegetables, to visit the dentist or catch up on bills.
“But since then, the government has cut back the rate multiple times. It’s undoing the good work it did last year. And with only one job for every nine people searching, the insecurity is wreaking havoc on people’s mental health and leaving them to face the heart-breaking decision of whether they’ll be able to afford to continue living in their home.
“As we rebuild from the crisis, we can’t turn our back on those who are at risk of being left behind. That’s why we’re calling for a permanent and adequate increase to the rate of JobSeeker, Youth Allowance and other income support payments, of at least $25 a day more than the old Newstart rate.
“This is not only the right thing to do but the smart thing to do – we know from Deloitte analysis that going back to the old rate would cost the economy $31.3 billion and 145,000 full-time jobs over the next two years.”
Would government changes to the deeming rate and the taper rate make life more comfortable for you? What else would you like to see covered in the Federal Budget?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.