Pensions, asset test inclusion, superannuation contributions and GST all in the firing line.
An independent think tank has weighed in on the discussion surrounding the possibility of lifting the Age Pension qualifying age and has gone one step further.
The Grattan Institute has released a proposal which suggests that as well as lifting the Age Pension and superannuation qualifying age to 70, owner-occupied housing should be included in the asset test. And it doesn’t stop there, suggesting that GST be extended to cover fresh food and private spending on health and education. In the report, Balancing budgets: the tough choices we need, there are 20 recommendations which, if adopted, could net $37 billion to boost federal and state budgets.
Grattan Institute Chief Executive Officer, John Daley, conceded that these were difficult decisions to make, but should be given serious consideration, "It would essentially bring our budgets back into black in a sustainable way for at least the next couple of years," he said.
Mr Daley said that although raising taxes was not an easy decision, widening the net of GST could be a profitable solution and ease the burden on state budgets. “One of the problems that the states have got is that most of the tax bases they have are not great tax bases. If they increase those taxes that will tend to reduce the amount people want to work, and the amount people want to invest.”
While the extension of the range of goods which incur GST may not yet be on the agenda, lowering the threshold of goods bought from overseas most certainly is. The country’s treasurers will meet this week to discuss lowering the $1000 threshold which imported goods currently enjoy, assisting local retailers and increasing revenue.
Read the Grattan Institute report, Balancing budgets: the tough choices we need.
There are few pensioners who would agree that their finances could take any more stress, but it seems they’re fair game if the budgets are to be balanced.
While the Tony Abbott sanctioned Productivity Commission goes about its role of looking at areas where money could be made and saved, the Grattan Institute has apparently already done its work. Extending the GST net to include fresh food and private money spent on health, as well as increasing the Age Pension and superannuation access age to 70 and including the family home in the asset tests were just some of the 20 points raised in the Institute’s report issued on Sunday. While many of these items may not be palatable to those they affect, the $37 billion revenue tag attached may have the Productivity Commission rubbing its hands with glee.
As the Chief Executive Officer of the institute so tritely points out, no one likes raising taxes, but extending the range of goods and services they cover is an easier option.
Raising the Age Pension age and the age at which you can access your superannuation to 70 may seem like a smart thing to do given that it's widely agreed that most people will work past Age Pension age anyway. However, it’s not as simple as that. Ask those who are currently no longer fit to carry on doing their job at 65, or even 60 if they could wait another five or ten years to access their super and Age Pension? I doubt many would be enthusiastic and the chances of them being able to find more suitable employment are also slim.
One of the benefits of working longer is being able to make additional, tax-concessional contributions to superannuation, but the Grattan Institute is also targeting this benefit, with a proposed limit on such concessions.
And for those who perhaps didn’t have the option to pay into superannuation, but instead decided to pay off their mortgage on the family home, it appears this may not have been such a smart move either. If the Institute gets its way then this hard-earned family home may exclude you from receiving any Age Pension if its value is included in the asset test.
So while you’re working longer for less opportunity to secure your financial future in retirement and the safety net of the Age Pension is taken away from you, you’ll also be paying more for the fresh food and health services to keep you fit and able to work. Go figure!
Once again, highly paid analysts have simply looked at the bottom line and how they can improve it. Little thought has been given to the impact on people’s lives. This is why we have a Productivity Commission; a group of qualified people which has been tasked with looking at all aspects of raising revenue and saving money. So while we thank you for your input Grattan Institute, next time, don’t bother.
Do you think any of these suggestions have any merit? Would you be willing to work to 70? Is including the family home in the asset test a wise move?