Despite predictions of doom and gloom, the federal budget turned out to be pretty mild, particularly for the over 50s. National Seniors policy adviser, Dr Sarah Macneil, has the run down.
Treasurer Wayne Swan handed down his fifth federal budget on 8 May. Overall, there has been little structural economic reform, with some commentators characterising it as an election budget rather than an economic budget. With most of the major ‘good news’ items announced in the weeks leading up to Budget night, there was an expectation there would be significant ‘bad news’ delivered on the night. These fears turned out to be largely unfounded.
The Budget provisions, together with measures announced in the lead up to the Budget, have given some solid responses to issues we have continued to raise through our lobbying. The Government has taken welcome and long overdue action on the long term problems of the aged care sector, on dental care and has put in place the foundations of a disability insurance scheme.
There were some disappointments for seniors as well. Older Australians have missed out on cost-of-living ‘benefits of the boom’ payments given to families and welfare recipients and age pensioners and Commonwealth Seniors Health Card holders who travel overseas will lose their Seniors and Pension Supplements after 6 weeks overseas, rather than the current 13 weeks. Described by CEO Michael O’Neill as ‘mean-spirited’, this reduction hits those who can afford it least. This payment of up to $60.20 a fortnight for singles and $90.80 for couples helps cover costs, such as telephone rental, which continue when people are away from home.
The major impacts on seniors from this Budget are in the areas of aged care, mature age employment, superannuation, the tax system, income support and health care.
Aged Care Reform
The Government has provided a comprehensive response to the Productivity Commission’s Report into the aged care system in Australia and paved the way for a sustainable system to meet the care needs of a rapidly expanding cohort of senior Australians. The funding mechanisms proposed will involve greater contributions from aged care consumers, for both care in the home and for residential care. In quarantining the family home from the income test, however, The government has heard clearly the wishes of Australian consumers as expressed in our Aged Care Survey. In our Federal Budget submission we also raised the need for significant additional funding for home care packages and towards staffing. Long term strategies to address both these issues have been included in the aged care reform package.
Mature Age Employment
A package designed to remove barriers to employment facing older workers was announced before the Budget. It included the introduction of a $1,000 bonus payment for businesses hiring mature age workers, as well as initiatives aimed at removing legal barriers and addressing discrimination and skills problems. On Budget night a further $25.7 million over 4 years was announced to provide a ‘silver service’ employment service for around 6,700 mature age job seekers in particular regions or industries. These measures tackle issues we have been highlighting for some time.
There was more bad news on Budget night to add to the pre-Budget announcement that individuals earning more than $300,000 pa will now receive a 15 % concession on their marginal tax rate for superannuation contributions, rather than 30% currently. This brings the tax on their concessional superannuation contributions to 30%.
While this affects a relatively small number of people, the deferral of the rise in the concessional contributions rate for over 50s from $25,000 to $50,000 for people with low superannuation balances will have a much wider impact. Instead of coming into effect on 1 July 2012, as anticipated, this measure has been deferred to 1 July 2014. This means that people in their 50s, who may at last be free of financial responsibility for children and in a position to maximise their superannuation contributions, will be limited in the amount they can put aside.
The anticipated savings to the Budget of nearly $1.5 billion over 4 years were no doubt very attractive to the Government but it seems a short-sighted measure if it means that in 10 – 15 years, more people will have less money in superannuation and consequently be more dependent on the aged pension. On the plus side there was some funding to go towards the implementation of the SuperStream reforms, designed to remove inefficiencies in the administration of superannuation payments.
The Tax System
The Mature Age Worker Tax Offset will be phased out. Those born after 1 July 1957 will not receive the Offset. It will, however, continue for those born before 1 July 1957. The Government has moved to triple the income tax free threshold but has pulled the plug on two proposed income tax measures: a standard deduction for work resalted expenses and tax agent fees, and a 50% tax discount for interest income up to $1,000. The ‘golden handshake’ will become subject to tax once it takes a person’s annual taxable income above $180,000. However, there is protection for those whose employment termination packages relate to genuine redundancy (including to those aged 65 and over), invalidity, compensation due to an employment-related dispute and death.
Aged Pensioners who are overseas for more than 26 weeks may also be affected by an increase in the Australian Working Life Residency requirement. Currently, pensioners who are overseas for more than 26 weeks only retain their maximum pension if they fulfil a 25 year Australian Working Life Residency requirement. This will increase to 35 years from 1 July 2014.
We have been advocating for more money for dental care for some time. The pre-budget announcement of $0.5 billion to reduce public dental waiting lists and encourage more dentists to work in regional and remote Australia is a great step forward. There was some good news too with the announcement that the National Bowel Cancer Screening Program will be expanded under the 2012-13 Budget to provide additional screenings to people aged 60 and 70. The program will be further extended in 2017-18, when a phased implementation of biennial screening will commence, beginning with 72 year olds. Invitations to undergo screening every two years will then be progressively extended to all Australians between 50 and 74 years of age. Bowel cancer is the second most common cause of cancer-related deaths in Australia - eighty people die of bowel cancer each week, the majority aged over 50 years.
Budget night announcements included some extra funding in 2012-13 for rural and regional health through the General Practice Rural Incentives Program, a small increase in funding for the Private Health Insurance Ombudsman and the establishment of a Private Health Insurance Premiums and Competition Unit, designed to encourage competition and provide advice to Government on pricing and insurance premiums.
Budget night announcements included a further tightening of the Extended Medicare Safety Net, increasing the range of procedures with caps and introducing an upper limit on the amount of benefits payable for all consultation items. Billed as a measure to stop rorting of the system, particularly in areas of discretionary procedures, it could, however, lead to punitive out-of-pocket essential medical expenses for consumers. Not enough detail is available at the time of going to press for us to be able to assess the impact of this measure but it is one we will be watching closely.
In another piece of bad news for wealthier Australians, the Net Medical Expenses Tax Offset, which helps those with excess medical costs, will be means tested from 1 July 2012. Those with taxable incomes above $84,000 for singles and $168,000 for couples and families, will only be reimbursed 10c in the dollar (down from 20c) for expenses above a threshold of $5,000.
Details are available from The Treasury website.
This article was written by Dr Sarah MacNeil and originallypublished in the June/July 2012 edition of 50 something magazine.