Tax changes for older workers?

More age pensioners are being forced to work in order to stave off pension poverty, according to new University of Tasmania research.

Nearly five per cent of people on the pension are now doing paid work, and that number is predicted to increase, as the cost of living rises and increased rents push more people towards the brink of poverty.

The research also found that women and divorcees are among the most affected.

“Aged pensioners who are working were three times more likely to have been divorced than aged pensioners or other self-funded retirees,” cost of living and inequality researcher Paul Blacklow told 7.30.

“The majority of women that were working as pensioners wanted to work less while only about 20 or 30 per cent of males who are working wanted to work less.”

A single full age pensioner receives $926 a fortnight and can earn up to $474 a fortnight – including the Work Bonus – before their pension is affected. Then they lose 50c for every dollar earnt over that amount.

The penalties are as such that many pensioners, like 67-year-old Victorian, Bev Foster, say it is almost not worth working more than what the threshold will allow.

“I would definitely like to earn more,” Ms Foster told 7.30.

“But I’ve been in situations where my pension has been cut so much that my income doesn’t really increase as much as it should.”

And pensioners aren’t the only ones affected by such strict income rules.

“The highest effective marginal tax rates are felt by people receiving family tax benefit and those on unemployment benefits, that’s where the real high effective marginal tax rates are,” said Dr Blacklow.

And retirees who don’t own their own home have it worse.

“It’s a huge advantage to own your own property and not have to pay rent in retirement,” he said.

“It’s often one of the big factors that determines whether you’re going to be living in poverty in retirement or not.”

Seniors advocacy group, National Seniors, has called for changes to tax rules to encourage pensioners to work without being penalised so severely, to help tackle pension poverty.

“One of the things that they should be looking at is pension poverty in Australia,” Ian Henschke from National Seniors Australia told 7.30.

“One in four pensioners is living in poverty.

“And if they do go out and get a job, once they’ve earned one day’s work, they start to lose their pension,” he said.

“So why not encourage people instead of discouraging people.

“If you look at countries like Canada and New Zealand, they’ve got a much lower tax rate, and they allow their pensioners to work.

“And guess what? They’ve got lower pensioner poverty.”

The YourLifeChoices Retirement Income Review Survey 2019 shows that almost eight in 10 retirees feel there should be more incentives for people to work longer. More than one in 10 of those who would work longer say the effect on their Age Pension is a major deterrent to seeking employment.

As to what those incentives might be, one YourLifeChoices member replied: “Less or no income tax for low income retirees. Higher income limit before affecting Age Pension. Incentive to put income into age at home fund and avoid tax or affecting Age Pension.”

Another said: “Reduced concessional taxation, free travel to work, reduced healthcare costs if working past 65”, and another replied “We should be able to receive a normal wage plus the pension, and then we could still be contributing more to the economy”.

Do you think there should be more incentives for working longer? What should they be?

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Related articles:
Older workers being penalised
What older workers want
Older workers vital to nation’s growth

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