Tax laws penalising older workers

Tax laws are costing some older workers thousands.

Older workers being ‘penalised’

Older Australians are being encouraged to work longer, but it’s far from a level playing field with regular reports of age discrimination in the workplace and jobs markets.

YourLifeChoices member Les Bryce drew our attention to the issue of redundancies and how the taxing of redundancy packages is treated differently for those aged 65 and over and younger workers. The difference can cost older Australians thousands of dollars in tax.

Mr Bryce wrote: “If a worker is made redundant after the age pension age, they are not deemed to have a genuine redundancy. Accordingly, they do not receive concessional tax treatment [worth $9360 on a $100,000 redundancy package] for their termination payment…

“If the Government is trying to encourage people to work longer to provide for their own retirement, it seems anomalous that people who choose to work past the age pension age, should be penalised.

“I recommend that Section 83.175.2 (a) of the Income Tax Act be repealed to remove the age discrimination against older workers who may be subjected to redundancy.”

Henry Walachowski, director of Marin Accountants, confirmed Mr Bryce’s statements.

“It’s true that over-65s are treated differently,” he said.

“I believe that the concession may have been [originally] intended to assist redundant workers acknowledging that it may take them time to find new work.

“Whereas for over 65-year-olds, it is presumed they’d be retiring.

“However I do agree that with people fit and able to work much later in life, the age limit should be abolished.”

Federal Treasurer Josh Frydenberg said in a media release in December last year that the Government was reforming genuine redundancy and early retirement scheme payments as part of a commitment to deliver lower taxes.

He said: “Genuine redundancy and early retirement scheme payments have a tax-free component, based on the person’s length of service with their employer. However, currently, an individual can only receive this tax-free component if they are aged below 65 years of age at the time of termination of employment, meaning people aged over 65 years of age pay substantially more tax on these payments.

“Through our reform, genuine redundancy and early retirement scheme payments will be aligned with the age pension qualifying age from 1 July 2019. The age pension qualifying age will be 66 on 1 July 2019, rising to 67 by 1 July 2023.

“This change means that all individuals aged below the Age Pension qualifying age will be able to receive a tax-free component on the payment they receive from their employer in these circumstances.

“For example, a 65-year-old with 10 years of service whose job is abolished receives a $100,000 redundancy payment. Currently, as they are aged over 65 years, they would not receive a tax-free component and would pay $15,000 tax. Under our reform, the individual would pay just $5640 in tax, saving $9360.

“Not only will this ensure older Australians keep more of the money they’ve earned, it will also support workforce participation by removing a barrier that may have prevented some from working longer.”

However, until 2023, the change does not help anyone aged 67 and over who receives a redundancy package.

EveryAGECounts director Marlene Krasovitsky said the treatment of redundancies had to be changed.

“Many of us are living longer, healthier lives. Work is an important part of who we are and how we define ourselves,” she said.

“Many older Australians either want to, or need to, work after they reach 65. The differential treatment of redundancy payments on the basis of age clearly acts as a structural disincentive to working beyond the age pension qualifying age.

“This is out of step with what some older people want and with government policies that encourage people to work longer. The nexus between age and taxation treatment of redundancies must be removed.”

A survey conducted late last year by the Australian Human Rights Commission and the Australian Human Resources Institute found older workers were still facing discrimination.

Institute chief executive Lyn Goodear said in a report on EveryAGECounts that although the survey did show some bright signs, the results indicated employers needed to catch up with the reality of ageing.

“Contemporary advances in medicine and knowledge about healthy lifestyles mean that many workers aged 50 in today’s workforce are relatively young compared with previous generations,” she said. “They could be expected to work productively for a few more decades.”

To find out more about the work being done by EveryAGECounts or to join, go to their website.

Do you have other incidences of discrimination involving older workers? Or about ageism in general?

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    COMMENTS

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    On the Ball
    10th May 2019
    10:40am
    Wow! A whole year! So if I take a package at 65 or below I get the reduced tax, but if I leave it till 66 I dont? Now THAT will encourage the elderly to leave early wont it! Nice one Josh..
    Now what were you trying to achieve?
    Anonymous
    10th May 2019
    11:07am
    It achieves exactly that - people will leave early unless their jobs are their life. Met some of them, totally lost without getting ready for work and out of the house. I could not wait to retire as my job was of a physical nature and I felt I was no longer fast enough.
    I suppose if you have a sit down job and like it you would like to keep going to 70 but most of us getting a bit worn down and do not mind taking it easier.
    TREBOR
    10th May 2019
    12:27pm
    Frydenburg is a classic of the Peter Principle.. promoted way beyond our wildest nighmares.. seen that before..

    Imagine - we actually pay this clown handsomely...
    Anonymous
    10th May 2019
    2:36pm
    As I read the above, it seems you are hanging the wrong man, On the Ball and Bob. Where Frydenberg has been quoted is where he points out that the existing tax law allows this to happen and he is bringing about a change to bring the tax laws in line with Labor's change to extend the retirement age to 67. Should the finger be pointed at labor who didn't allow consider all of the ramifications of changing the retirement age?
    Chris B T
    10th May 2019
    11:05am
    I believe There no 65 OAP left only the 65.5 to 67 now.
    This Tax Concession Hasn't Kept Pace With Reality.
    One Government Area Doesn't Know What The Other Is Doing.
    What Chance We Have!!!!!!!!!!!!!!!
    patti
    10th May 2019
    11:40am
    It's a way of getting rid of older people from the workforce, ageism is rife in this country. After being made redundant at 57 I never had another real job. My savings had gone before I could officially retire.
    maelcolium
    10th May 2019
    11:50am
    All these rules and regulations meant to enforce some form of fairness are just nonsense in the whole scheme of things. They just become politicised points of difference which the politicians of all shades use to make people think they are considerate and fair minded. This is why progressive Governments like New Zealand and the UK ceased pension testing and just paid a universal age pension whether you are working or retired. Australia has messed around with a ridiculous private superannuation system which has been rorted by the financial sector and tried to link it together with the age pension to the point where it has become a farce. The reality is that the rich will get richer because they have the means to plan around the rules and the poor get poorer because they have no means, so rely on Governments to be fair - which they clearly are not!

    It's time Australia became more progressive and politicians removed from playing politics from the age pension.
    Tom Tank
    10th May 2019
    1:07pm
    The UK's pension system was introduced by the Socialist government after the war. A National Insurance scheme was setup and everyone had to pay into that in addition to paying income tax. That scheme covered aged pensions as well as other of those nasty left wing social welfare benefits that we here the LNP decrying.
    A similar pension scheme was started here by a Labor Government but god old Bob Menzies saw the funds being accumulated and took these into Consolidated Revenue with the assurance to the Australian Public that Age Pensions would be funded through tax receipts by the Commonwealth.
    That is why in the UK everyone is entitled to a pension and why in Australia it is means tested as the system is totally different. Our current Superannuation system is roughly the equivalent of the UK's National Insurance but here is used to accumulate wealth by those who are already wealthy.
    Tom Tank
    10th May 2019
    1:07pm
    The UK's pension system was introduced by the Socialist government after the war. A National Insurance scheme was setup and everyone had to pay into that in addition to paying income tax. That scheme covered aged pensions as well as other of those nasty left wing social welfare benefits that we here the LNP decrying.
    A similar pension scheme was started here by a Labor Government but god old Bob Menzies saw the funds being accumulated and took these into Consolidated Revenue with the assurance to the Australian Public that Age Pensions would be funded through tax receipts by the Commonwealth.
    That is why in the UK everyone is entitled to a pension and why in Australia it is means tested as the system is totally different. Our current Superannuation system is roughly the equivalent of the UK's National Insurance but here is used to accumulate wealth by those who are already wealthy.
    Anonymous
    10th May 2019
    6:46pm
    Yeah Tom - I remember having those stamps in my pay envelopes in the UK way back in the 70s, cannot find the booklet with them in it any more or maybe I could claim some dough from them. Most real super schemes in the world die with the person, but as say, here it is used for wealth creation as you leave the money behind for your family. Does not happen many places I know of overseas - maybe that is where the sustainability for older people's finances is in question.
    Aussie
    10th May 2019
    12:08pm
    My son publish this on his Face Book pages and I think still very relevant today ....changing and changing the rules and of course we pensioners and many other people gets penalized .... Incredible what is happening in our country ... have a look at this you may remember the interview ....

    https://www.youtube.com/watch?v=EVIOmU3l0Zo

    .... Watch all clip but specially if you forward to 4:00 to see his comments about changes and changes .... very interesting

    ARE WE REALLY A COUNTRY WITHOUT DIRECTION ????? LOOKS THAT WAY TO ME ONLY PERSONAL DESIRES FOR POWER ..... Where do we go from Here ???? more changes to affect our future and damage the dreams of our joung ????
    TREBOR
    10th May 2019
    12:25pm
    Well... last time I worked at Pension Age, I lost some pension but made some cash and made a lot back in tax... even so - seems silly to me to take with one hand and give with the other. Chances are I'll be going back to work after the move... happy to pay INCOME tax (you have to stress that because people sob and cry about 'taxes' and 'taxpayers') and cop the full retirement cash - I'll still get most or all INCOME tax back at EOFY anyway...
    inextratime
    10th May 2019
    12:36pm
    So much for working until you are 70. It was 'suggested' by my employer that after 18 years in their employ and aged 67 it was time for me to leave. No redundancy package, just long service leave, which is capped at 3 months base salary and taxed. I could stay on if I wanted but it was stressed that new working conditions would make life very uncomfortable. My solicitor said I could go to court but I would prob run out of money defending my position. Just read that another pollie is about to retire and will be on $100,000 a year for life. hohoho.
    inextratime
    10th May 2019
    12:36pm
    So much for working until you are 70. It was 'suggested' by my employer that after 18 years in their employ and aged 67 it was time for me to leave. No redundancy package, just long service leave, which is capped at 3 months base salary and taxed. I could stay on if I wanted but it was stressed that new working conditions would make life very uncomfortable. My solicitor said I could go to court but I would prob run out of money defending my position. Just read that another pollie is about to retire and will be on $100,000 a year for life. hohoho.
    older&wiser
    10th May 2019
    1:37pm
    I think I will throw something at the next politician that brags that Aged Pensioners can earn the huge sum of $300 (for a single) per fortnight, before their pension is reduced!
    What they don't tell you as that you then have to pay tax on BOTH your income, and your pension! Is totally not worth it.
    PLUS there is the added fear of Centrelink coming back in 6/7/8/9/10 years with a Robo Debt..no explanation, no break down, just 'you owe this money'. I WAS doing a casual job, but every fortnight the amount CL paid me made absolutely NO sense. So I chucked it in. As for some people saying 'oh you will get the tax back'. Rubbish! Last year, despite having extra tax taken out by CL - ended up paying extra. Was only $120 - but STILL - absolutely not worth the stress, hassled and worry. Chucked it in.
    Garfield13
    10th May 2019
    2:06pm
    Why are working people over 75 not allowed to contribute to Super and therefore have the advantage of the tax saving on $25,000 contribution before tax?
    The government is VERY HAPPY to take tax from people who work after 75 but will not let them have this deduction advantage....
    I have put this question to Scott Morrison's office as well as my local member but have never got a satisfactory answer ( if any answer at all ....)
    Can anybody tell me what the damage it would do if there was no age limit ??
    KSS
    10th May 2019
    2:48pm
    Work cover also cuts out at pension age. Why would an employer want to keep someone of that age if they can't insure them?

    You can't get life insurance either even if you wanted it to cover any existing mortgage for a surviving spouse.

    None of these things that kept up with changes to employment law. And even the ALP, people here are so fond of have said anything about changing these things.
    floss
    10th May 2019
    2:35pm
    Perhaps we need a change of Government as this one has no idea.
    KSS
    10th May 2019
    2:50pm
    The ALP began this nonsense and there is nothing I've heard that says they are going to fix it.
    Garfield13
    10th May 2019
    3:00pm
    Workcover does not apply to self employed people.
    Elizzy
    10th May 2019
    3:16pm
    KSS - Work Cover does not cut out at age 65. Please read the details on the safeworksustralia.gov.au web site.
    Not a Bludger
    10th May 2019
    4:17pm
    That’s union & ACTU influence for you.
    Never gave a toss for older workers or retirees.
    Only interested in rorting members funds for elections and getting huge personal fees from industry super funds - again rorting the members.
    Charlie
    10th May 2019
    6:16pm
    Its too easy to exclude job applications from older people by the press of a button.

    Computer selection can rule out older candidates, also those who are over qualified for the position. Then the union can protect people who are only capable of menial jobs.

    Reminds me of a British comedy skit called "the broom" and a professional council street sweeper.
    Charlie
    10th May 2019
    6:29pm
    Trigger's Broom...U tube
    Eddy
    10th May 2019
    9:08pm
    There is, or was, a similar situation re workers compensation. When I turned 65 while still working I was advised that if I got injured at work I would not get any payments for lost salary, any medical or rehab costs would be met but I would be considered 'retired'. I heard of, but do not know first hand, a couple of cases where over 65s were injured at work and even though they were back at work within a few weeks they received no compensation for lost wages, they had to rely on accumulated sick leave. It may have changed since I left work but I doubt it.
    Jen
    12th May 2019
    11:33am
    Took a package at 68 and are paying thousands more in tax than others who took package at same time. Great to see this has come to light and is being talked about more openly. When I kicked up to my employer at the time I was made to feel greedy and was quickly disregarded. What an outrageous law when governments tell us they want older workers and their skills. Politicians need to talk to their own parents and older workers and perhaps this might penetrate their brains and also to put themselves in the shoes of others.
    A total disgrace! How do they think people are going to pay their tax bill after being made redundant past pension age and have little income!!
    +
    Farside
    12th May 2019
    7:08pm
    Why can't you pay tax from the assessed income?