Government should consider lowering older worker tax rates

Australia’s pension system discourages those who receive a pension from working.

Government should consider lowering older worker tax rates

New OECD data reveals a significant difference between labour force participation rates among 65 to 69 year-olds in New Zealand and Australia. The data shows that 47 per cent of men aged 65 to 69 in New Zealand are currently in the job market, compared to 33 per cent in Australia. There is also a significant difference in the labour participation rate in New Zealand among women with 34 per cent currently in the job market, compared to 20 per cent in Australia.

Professor Miranda Stewart of the ANU Tax and Transfer Policy Institute believes that Australia’s current universal pension system doesn’t provide incentives to work for those who receive an Age Pension or part Age Pension.

Currently, a person who earns over $4264 a year will lose their pension benefits at the rate of 50 cents per dollar. Professor Stewart believes that if the Australian Government was to decrease the effective marginal tax rates on older workers who rely on the pension, Australia could significantly improve labour force participation among older workers.

"The structural incentives in the pension system to withdraw from the workforce in Australia are substantial and it is likely that this affects the mindset of would-be retirees," Professor Stewart said.

What do you think? Should the Federal Government be looking at decreasing the tax rate on older workers who receive a pension to encourage labour force participation?

Read more from afr.com

RELATED ARTICLES





    COMMENTS

    To make a comment, please register or login
    Proud Aussie
    15th Dec 2016
    10:45am
    I would be out there like a shot and increase my hours of work if the tax rate was altered for us pensioners, at present I turn down the extra work as it has too much effect on the pension. I still have a mortgage as well as a small car repayment and can not afford to lose any monies as I am on a very tight budget and do not have any family members who can help me out if unexpected bills arrive. My abilities are still intact and I would enjoy at least another 6 - 8 hours of work. My boss doesn't want to lose me as he cannot rely on the younger staff due to time off with sick kids and school commitments. Not looking for a handout just a hand of help.
    I wish each and every one a happy, healthy and safe Christmas and New Year
    jackie
    16th Dec 2016
    12:09pm
    Proud Aussie...That's fine if you want to work till you drop. Just remember you won't be able to drive the car forever and the boss can replace you with another younger older worker anytime.

    I wish our government closed all tax-dodging loopholes for the rich and corporate world instead of sitting on their backsides devising new ways to bleed the poor. Let commoners breathe a bit before they go to the real world.
    MICK
    15th Dec 2016
    10:46am
    You are wallpapering over the issues Drew. Your fact may be spot on but there is a reason why this happens.
    You may want to examine our generous social security system in Australia, New Zealand's tax system (which does not have a tax free threshold like Australia's $18,000 threshold) and why men in NZ are working longer than their Australian counterparts. There is a lot more to this than meets the eye.
    Rae
    15th Dec 2016
    1:53pm
    Do we have a generous Social Security system? I read it is pretty ordinary compared to other OECD countries all of which have universal old age pensions?
    Anonymous
    15th Dec 2016
    3:12pm
    Our age pension system is certainly not generous. It's a disgrace!
    MICK
    15th Dec 2016
    8:30pm
    And getting worse if the current government has its way.
    particolor
    15th Dec 2016
    8:51pm
    Oh ! Come now !! I'm thoroughly Enjoying my $2.60 I ended up with !!
    I'm think of buying some Christmas Present's with it :-) :-)
    Zen
    15th Dec 2016
    11:25am
    New Zealand has a universal, taxable pension ($384/wk for singles living alone ...$355 for singles sharing and $591/wk for a couple where both parties are not working and $564 if one partner is still working) that everyone gets at 65yrs (no means testing). If a person continues to work after 65yrs while having the pension they do incur more tax: Income (including pension) up to $14,00 is 10.5%. From $14,000 to $48,00 is 17.5% and $48 - $70,000 is 30% and above $70,000 is 33%
    Rae
    15th Dec 2016
    1:55pm
    I get nothing now but would be ahead by $127 a week if I had lived, worked and saved in NZ. Thanks for nothing LNP.
    Loozit55
    15th Dec 2016
    11:38am
    Difference. In Australia the aged pension is means tested. In NZ you are entitled to and receive the full pension at the age of 65. If you are working the you have the pension taxed as a second job but there is no means testing. If your partner is working then there is no penalty against your pension.
    If you get a pension from Australia and are entitled to a part pension from NZ, then Australia treats the NZ payment as income and this reduces the amount you receive.
    If on the other hand you were living in NZ and being payed the NZ pension whilst being eligible to receive a part pension out of Australia, this portion is payed into the NZ Government pension pool and you are payed the Full entitlement without means testing. Great system whereby you can carry on working when you reach retirement age with your same employer and the Government pays essentially an after tax increase in income of in excess of $550 dollars a fortnight.
    Anonymous
    15th Dec 2016
    12:34pm
    Yes, a common sense system, Loozit55. Sad that our government is creating the very problem they complain most bitterly about - a ''welfare mentality'' . And some contributors here complain of the same problem yet support the stupid policies that create it.
    Rae
    15th Dec 2016
    1:58pm
    Other countries have governments that support the work force and encourage saving and investment. We have the IPA.
    Rosret
    15th Dec 2016
    11:58am
    There are so many reasons for this statistic. Perhaps we are a wealthier nation and we can afford to retire at a reasonable age. Perhaps our working conditions are getting so extrapolated that exhaustion kicks in earlier. Perhaps NZ doesn't have commuter traffic like Sydney. Perhaps NZ young adults don't need their parents to look after the grandchildren as housing is more affordable and therefore they can afford childcare. Perhaps NZ doesn't have the number of elderly parents who need care.Perhaps NZ doesn't have the "age" issue when it comes to new employment. Perhaps NZ is haven't the massive factory closures that we having. Tax - its the least of the concerns. It won't make a penny worth of difference to an employer.
    Anonymous
    15th Dec 2016
    12:35pm
    Perhaps all those more favourable economic conditions exist in NZ (if, indeed, they do) because NZ doesn't have idiotic politicians devising dumb policies that are economically destructive - like punishing retirees for working and saving.
    Anonymous
    15th Dec 2016
    2:39pm
    And just maybe in NZ past dishonest politicians did not raid the aged pension fund and use it for other purposes. There was plenty to pay everyone a pension, non-mean-tested. The funds came from workers' contributions over decades, and morally and ethically the contributors should benefit from their contributions, but our government has cheated all retirees.

    15th Dec 2016
    12:39pm
    The tax/pension loss to those earning income is concerning, but not nearly as absurd and destructive as bashing people for saving for their old age. The assets test change rewards non-savers with a 7.8%+++ return, plus benefits, and no management costs or effort, while the poor old strugglers who went without a great deal to accumulate enough to be significantly - but not entirely - self-reliant in old age are harshly punished and left with incomes as low, often, as half the aged pension until they erode the savings that are earning only between 1.5% and 5%, with high management costs and effort required.

    At least those earning income do have a liveable income without eroding all the hard-won savings that were intended to cover health and maintenance costs in later life.
    MICK
    15th Dec 2016
    12:55pm
    Exactly. Well written.
    A few decades ago 'saving' was in fashion. Now this bastard of a government is punishing retirees and demonising demonising them as dishonest rorters. AND THE MEDIA PUBLISHES THIS CRAP.
    Circum
    15th Dec 2016
    3:39pm
    I also agree with your comments Rainey.The living standards of many people will be reduced.Hardly a compliment for how Australia treats its seniors.
    Unfortunately both political parties are equally guilty as Labor refused to reverse the Liberal changes planned for 1st of January 2017 if they won the last election.A case of "we really agree with the changes..but we will blame the Libs for introducing them".
    Yes Labor voted against the changes but that meant nothing as they didn't have the numbers.They all are politicians afterall.
    Old Man
    15th Dec 2016
    1:10pm
    If the tax scales are lowered for pensioners there will be a reduction in tax income for government so I can't see that happening. The assumption, which I believe to be wrong, is that a lowering of tax scales will create jobs when, in fact, a pensioner will be taking the place of another person in that position. Somebody will be paid to do a particular task and if it is a pensioner, less tax will be gathered.
    MICK
    15th Dec 2016
    1:38pm
    What a load of rich man's right wing BS. You can write such tripe AFTER the government forces multinationals to pay their mandated taxes and when the rich have their outs from the tax system removed. Until then any talk of not being able to afford it is nonsense.
    There is a significant difference between unaffordability and national fraud.
    Rae
    15th Dec 2016
    2:05pm
    I believe it is more about losing the pension and that discount card than about the tax. 70c out of each dollar is fine but not if you lose a fair amount of part pension and the discount card. It is worth a heap if you consider regos, health costs, rate, electricity etc rebates.
    Old Man
    15th Dec 2016
    2:27pm
    Thanks MICK, you may have a point but all I was trying to do was answer the question put which is:

    "What do you think? Should the Federal Government be looking at decreasing the tax rate on older workers who receive a pension to encourage labour force participation?"

    If there had been a different question about who pays what taxes then I could have addressed that.
    MICK
    15th Dec 2016
    3:00pm
    Fair enough. But the wider issue is on the big game rather than choosing winners and losers. I have no issue as long as targets are fairly prioritised and gone after. It just irks me that citizens continue to be cannon fodder whilst the money end of town is protected again.
    Australia used to be a fair place where rich and poor coexisted, the cake was reasonably fairly carved up and the national interest was important. I no longer recognise my country.
    Old Geezer
    15th Dec 2016
    2:04pm
    It is great that pensioners lose if they earn too much by working. It needs to be tightened up further so that our young kids can get a job. No one over pension age should be allowed to work as they are taking the jobs of our young kids.
    Anonymous
    15th Dec 2016
    3:01pm
    Well, OG, the government disagrees. They WANT older folk to work. They also CLAIM to want them to save for their retirement. And then they make both difficult and totally unrewarding and wonder why people don't do as they wish. IDIOTS!
    MICK
    15th Dec 2016
    3:02pm
    Our young kids will get a job if those who are allowed to avoid the real tax system are forced to pay up and if governments bring Australian jobs back to Australia. And then there is the flogging off of anything and everything in the country to foreigners...........
    Anonymous
    15th Dec 2016
    3:30pm
    I don't think older people are taking jobs from kids, nor would they. People who hire older folk are usually looking for levels of experience and stability/loyalty that they just don't get from youth.
    Zen
    15th Dec 2016
    2:32pm
    The cost of housing in Auckland is WORSE than Sydney due to immigration and a lack of housing.
    The traffic is Auckland is as horrendous as Sydney because the roads are narrow and only one lane unless you're on motorways. There is little public transport apart from buses causing everyone to travel by car.
    There is more politeness and more social cohesion in New Zealand...people I have heard (from research) feel happier than Australians do.
    I'm currently living in NZ after living 38yrs in Australia .... I prefer the climate here (not too hot) , the people have decent values ...not so materialistic ...they seem to care more about others not so well off ...but the succession of neo-liberal style governments is doing well in enabling the well off to become better of and like in Australia most people mistakenly think lower corporate taxation will create jobs. Less people does make for a nicer society however!
    Anonymous
    15th Dec 2016
    3:11pm
    Thanks for that info Zen. Interesting!

    Housing costs are a worry in Australia, but I think there's a lot of misinformation circulated and the costs are not nearly as significant a barricade to ownership as is implied by the figures. We see constant reference to the price of houses, but no acknowledgement that the cost of everything else is way lower (proportional to wages) than it was four decades ago, and interest rates are very, very low compared to the 7.5% t0 18%+ my generation paid.

    The lifetime cost of a home is likely to be no more than it was for my generation, and there is a lot more money in most household budgets to cover the mortgage because costs for cars, furniture, appliances, household needs, clothing, etc. consume a far smaller percentage of income, and most families now have two incomes to pay the mortgage where many of my generation had only one.

    I wish we could see HONEST data that recognizes other critical facts beside just the house price.
    Charlie
    15th Dec 2016
    4:57pm
    There are plenty of incentives for them to work, there is just nobody who will employ them.

    There is nowhere a pensioner with a university degree can get casual work in half-days.

    Employers are not interested in multi-skilling, it is too hard to process the applications.

    Jobs have been taken over by employment agencies looking for the exact qualification and there are plenty of small qualifications that ring their bell. This ticket, that ticket, this certificate, that certificate. It comes from a school system where people are rewarded for everything.

    A fork lift license is worth more in casual work for an age pensioner, than a university degree and 20 years work experience.

    On top of that, in a high unemployment situation, there is a priority to give youth some work experience to keep them out of trouble and I guess that's a fairly reasonable path to take.
    particolor
    15th Dec 2016
    5:40pm
    That was like reading a Promise Letter from the SHERRIFF OF NOTTINGHAM !! :-( :-(
    Kiwozok
    15th Dec 2016
    6:40pm
    It was only a couple of years back that old workers got an older worker tax concession at the end of the tax year when we put out tax returns. That got scrapped and we weren't even told it was happening!
    particolor
    15th Dec 2016
    7:03pm
    Pensioners also got something Nice for Christmas :-) :-) Not sure what it was ?, but can remember some Oldies telling me about it years back !
    But it beat the Boot in the Britches we get now :-( :-(
    particolor
    15th Dec 2016
    7:06pm
    PS.. My favourite this year is Pay Day:-) The day AFTER the Christmas Day Extra Holiday Tuesday !! :-( :-( :-( :-(

    15th Dec 2016
    7:21pm
    Lower/no pension and lower taxes for the older employed - work wnd pay taxes until you drop dead.
    MD
    16th Dec 2016
    6:48am
    From another perspective, worth a look; https://theconversation.com/why-every-generation-feels-entitled-70405?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20December%2015%202016%20-%206302&utm_content=Latest%20from%20The%20Conversation%20for%20December%2015%202016%20-%206302+CID_ecdb792bd22733c034403e1e5653b3d5&utm_source=campaign_monitor&utm_term=Why%20every%20generation%20feels%20entitled


    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles