Small business may be happy, but Treasurer Joe Hockey’s second budget has stunned older Australians, writes Sarah Saunders.
The government has slashed $2.4 billion from pensions; cut around $50 million from aged care; and pooled its flagship mature age employment subsidy. Even a tiny wound management study for the frail elderly, announced in 2013, has met with foul play. With few corresponding cuts in other areas, the over 50s have every right to feel disappointed.
Age Pension asset test and taper rate changes
At $2.4 billion from 2017, the pension cut is the biggest savings measure across the entire budget. As a result of changes to the assets test and taper rate, around 325,000 retirees will either lose all or part of their Age Pension. From 2017 the assets test threshold for home-owning couples will be lowered from $1.15 million to $823,000. For single home-owners it will drop from $775,000 to $547,000. In addition, the current $1.50 taper rate will change to $3.
"…increasing the taper rate for part-pensioners from $1.50 to $3.00 per $1,000 of assets, while also increasing the threshold at which the asset test starts to apply, would require a couple to save around $120,000 more for a comfortable retirement, requiring a super balance of $630,000. This will have a greater impact on single retirees, who will need to save $180,000 more in superannuation or a total balance of $610,000”
– Pauline Vamos, ASFA
Reducing from 26 weeks to six weeks the time some pensioners can spend overseas
Savings of $168.6 million from 1 January 2017. From January 2017, Age Pension, Wife Pension, Widow B Pension and the Disability Support pensioners who have lived in Australia for less than 35 years will be paid at a reduced rate proportional to their period of Australian Working Life Residence (AWLR) if they are overseas for more than six weeks. The AWLR is the period a person has lived in Australia, as a permanent resident, between the age of 16 years and Age Pension age.
Increase in the PBS safety net threshold extended
Additional savings of $5.1 million The 10 per cent three-year increase in the PBS threshold announced in the 2014 budget has been extended by another year. From 2016, over the next four years, it will take consumers longer to access medicines at concessional rates.
Change to aged care means testing
Savings of $26.2 million over five years. Several big cuts, not noted here, were made in aged care, but this one will be directly felt. From 1 January 2016 aged care means testing for residents who pay their accommodation costs by periodic payment will be aligned with lump sum arrangements. This will remove the rental income exemption under the aged care means test for residents who are renting out their former home and paying their aged care accommodation costs by periodic payments.
Social Security Income Test tightened for defined benefit streams
Savings of $465.5 million over five years. From 1 January 2016 a larger proportion of a superannuant's defined benefit income will be taken into account when applying the relevant social security income test. The proportion of income that can be excluded from any income test (the deductible amount) will be capped at ten per cent.
A defined benefit income stream is a pension paid from a public sector or other corporate defined benefit superannuation fund where the pension paid generally reflects years of service and the final salary of the beneficiary. Currently, some defined benefit superannuants have a large proportion of their superannuation income excluded from the pension income test.
Recipients of Veterans' Affairs pensions and/or defined benefit income streams paid by military superannuation funds are exempt from this measure.
Wound Management Scoping Study announced in 2013, shelved
Indexation of the Age Pension to CPI announced in 2014, abandoned
Shingles vaccine listed on National Immunisation Programme
Funding will be provided for a shingles vaccine for 70-year-olds, including a five year programme to provide 71 to 79-year-olds with a catch‑up vaccination, from 1 November 2016.
Reversal of Banking and Life Insurance unclaimed provisions
The time at which unclaimed money in savings accounts and life insurance policies is transferred to the government will be reversed from three years to seven. Changes take effect 31 December 2015.
Some pensioners with “modest” assets to get payment increase
As a result of shifting thresholds, around 170,000 pensioners will see increased payments. Couples who own their own home with additional assets of less than $451,500 will get a higher payment. Couples who don’t own their own home and have assets up to $699,000 in January 2017 will also be better off. For singles the maximum threshold point below which pensioners will be better off will be $289,500 for home owners and $537,000 for non-homeowners.
Release of superannuation for terminal medical condition
From 1 July 2015, access to superannuation for people with a terminal medical condition will be extended. Currently, patients must have two medical practitioners certify that they are likely to die within one year to gain unrestricted tax-free access to their super. This will change to two years giving terminally ill patients earlier access to their super.
Carers information gateway
From 2015‑16 a national gateway will be created for carers to access information and referral to specific supports and services. The gateway will comprise a website, service finder, and a national 1800 call centre.
“Any changes to the pension must be done within a clearly articulated retirement incomes strategy that considers the interactions of tax, super and social security”
– Michael O’Neill, National Seniors
Keeping an eye on
The $10,000 Restart Wage Subsidy for mature age workers has been pooled with the Long Term Unemployed Wage Subsidy, the Youth Subsidy and the Tasmanian Jobs Programme. This consolidation may weaken the emphasis on older job seekers. A positive is that employers can now access the full subsidy after 12 months, rather than 24.
Worth a mention
Other welcome announcements, both in National Seniors’ budget submission, include:
- Savings of $113.1 million in the health portfolio through the elimination of duplication, streamlining services and reducing government administration costs.
- Combatting multinational tax avoidance throughanew law that will apply to tax benefits obtained from 1 January 2016 (under both new and existing schemes).
Contact Centrelink on 13 23 00 for details
This article by Sarah Saunders originally appeared in the June/July 2015 edition of 50 something magazine.