Friday, March 29, 2024
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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“I recommend that Section 83.175.2 (a) of the Income Tax Act be repealed to remove the age discrimination against older workers who may be subjected to redundancy.”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?

Related articles:
Older Australians on ageism
Ageism alive and well in jobs market
Meet our tireless advocate on ageing

Janelle Ward
Janelle Wardhttp://www.yourlifechoices.com.au/author/janellewa
Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.
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