14 October 1996 - 25 November 2001
Government Initiatives for Independent Retirees
Speech to the Association Of Independent Retirees, Inc.
18 July 2001
Ardmillian House, Moonee Ponds
Thank you for the invitation to be with you again at the Annual General Meeting. I have been asked to speak to you on the Government's policy for retirees.
I think the Association of Independent Retirees can be congratulated for their work on behalf of their members.
Any fair assessment of the record over the last five years shows that your organisation has been very effective at bringing concerns to the attention of Government AND HAVING THOSE CONCERNS ADDRESSED.
On looking through my files I came across notes for a speech I made to you some seven years ago on April 29, 1994.
In 1994 the major issue was the inequitable treatment between pensioners and self funded retirees who may well have similar levels of income but because of the effective tax thresholds were taxed differently.
There were also concerns about lack of access to fringe benefits.
In more recent years the Association has been strongly supporting issues such as refundable imputation credits, health insurance rebates and extension of the eligibility for the Commonwealth Seniors card.
I have had regular meetings over the years with your former President, Maureen Kingston. In more recent times, Joan Heard has been very active in putting the views of your Association to Government and has been a regular visitor in my office.
At the outset let me say that the Government strongly supports self-funded retirees.
The proof of this is evident in the numerous Government initiatives that have been introduced since 1996 to benefit self-funded retirees.
In the most recent Budget in May of this year, the Government delivered significant benefits to self-funded retirees.
We will continue to work hard to ensure the continuous improvement of retirement income policies. In this regard, the Government will continue its efforts to improve the welfare of self-funded retirees.
At the same time, the Government will continue with its policies to encourage individuals to save for their latter years, while maintaining the Age Pension as a safety net.
Good superannuation policy not only benefits individuals, but also the nation as a whole.
- In relation to individuals, it enables people to save in an efficient and secure manner, to ensure that they enjoy high living standards in retirement.
- On the benefits to the nation, strong private savings through the superannuation system, or in any other savings vehicle, will contribute positively towards national savings, and will result in a lesser call on the Age Pension in the future.
Government Values Self-Funded Retirees
All of you here would now be aware of the significant benefits that the Government delivered to self-funded retirees at the last Budget.
The Acknowledging Older Australians package in this year's Budget builds on many of the benefits provided to self-funded retirees under the New Tax System.
This package, which will provide benefits totalling around $3 billion over 5 years, acknowledges the important contribution, which Senior Australians have made to building this country.
In particular, the Budget contained higher tax rebates for self-funded retirees and an extension of eligibility for the Commonwealth Seniors Health Card.
The Association of Independent Retirees supported tax reform. However, your Association has been concerned about the level of compensation. One of the most important initiatives proposed in the Association's pre-Budget submission was to increase the Low Income Aged Persons Rebate.
The Budget not only delivered higher tax rebates but also increased the Medicare levy thresholds for senior Australians.
The Association of Independent Retirees submission proposed that the Low Income Aged Persons Rebate be increased to allow single senior Australians to earn up to $17,385 per year without paying tax. The Government's announced changes will ensure that single senior Australians can have income up to $20,000 without paying income tax or the Medicare levy.
Importantly, the increased rebates and Medicare levy thresholds will apply to the 2000-2001 year, so that senior Australians will receive the benefit of these changes in their tax returns after 1 July 2001.
In 1995-96, before the Coalition came into Government, a self-funded retiree of Age Pension age with income of $20,000 would have had a tax liability of $3,070. In 2000-01, a self-funded retiree on the same income would have a zero tax liability.
While the rebates phase-out over the income range $20,000 to $37,840 for singles, taxpayers in this range will still pay significantly less tax.
For example, a single senior Australian with income of $30,000 will now receive a reduction in tax liability of around $980 as a result of the increased rebates. Including the New Tax System's reduction in tax rates, the total tax cut will be over $1,800.
Similarly, depending on their income split, senior couples can have combined incomes up to $32,612 without paying tax.
Depending on a couple's income split, the rebates phase out at combined incomes up to $58,244. In addition, the rebates are transferable between partners.
An estimated 375,000 senior Australians will benefit from the increase in rebates, including 175,000 fully self-funded retirees and 200,000 part-rate age pensioners.
Extension of Eligibility for Seniors Health Cards
One of the most significant steps that we took early in our first term was to meet the justifiable concern that self funded retirees had about lack of access to the Commonwealth Seniors Health Card.
In a major break through, the Coalition extended the eligibility for the Commonwealth Seniors Health Card to many more self-funded retirees in 1999.
The Pensioner Concession Card is only available to people receiving a pension, and to some older allowees. The Commonwealth Seniors Health Card is for people of age pension age who are not pensioners but who meet the income test (that is, people with incomes up to $50,000 if single and $80,000 if a couple). Pre budget, the card used to provide pharmaceutical benefits. Now Seniors get a telephone allowance and the Government has put aside money for further concessions.
In January 1999 the qualifying income limits for the Commonwealth Seniors Health Card were almost doubled and the application process greatly simplified, extending access to Pharmaceutical Benefits Scheme pharmaceutical medicines at a concessional rate to a greater number of self-funded retirees of age pension age.
In this budget, the Government considerably widened eligibility for the Commonwealth Seniors Health Card. It is expected that approximately 50,000 self-funded retirees will benefit from this measure.
The income limit on eligibility for the Card will be extended from $41,000 to $50,000 for singles, and for couples from $68,676 to $80,000. As a result, eligible self-funded retirees will face lower prescription charges, generally $3.50 per script as opposed to $21.90.
Furthermore, senior Australians who hold the Commonwealth Seniors Health Card will be extended the same benefits as pensioners on telephone costs. That is, eligible cardholders will be entitled to a Telephone Allowance of $17.20 per quarter (shared between eligible members of a couple) from September 2001.
My colleague, Senator Vanstone has written to her State and Territory counterparts about extending fringe benefits for Commonwealth Seniors Health card holders.
In this letter Senator Vanstone has asked for the States and Territories to nominate a person with whom the Commonwealth can negotiate to extend benefits for Commonwealth Seniors Health card holders.
Discussions have since commenced with all States with a view to developing a partnership arrangement to progress this issue.
Most of these State governments are Labor Governments and I would hope that the Shadow Assistant Treasurer, Kelvin Thompson will be strongly putting to his colleagues that they should respond positively to Senator Vanstone's request.
I remind you all that all GST revenue flows to State Governments and these governments now have a secure revenue source to respond positively to ensure that many of the fringe benefits which are given to pensioners are also provided to Commonwealth seniors.
Commonwealth Civilian Superannuation Pensioners
In the 2001-02 Budget, the Government also announced new arrangements in relation to Commonwealth civilian superannuation pensioners. For the first time these pensions will now be indexed twice a year.
From January 2002 these pensions will be adjusted in January and July by the upward movement in the CPI for the six month period ending in the preceding September and March quarters respectively.
This initiative will increase the purchasing power of some 100,000 Commonwealth civilian superannuation pensioners, by reducing the delay between price increases and compensatory adjustments to their superannuation pensions.
One-off Payment to the Aged
A key measure in the 2001-2002 Budget is the One-off Payment to the Aged to eligible senior Australians. The $300 non-taxable payment has been automatically paid to retirees receiving the Age Pension, Veterans Pensions and other income support recipients of age pension age.
This payment, costing around $670 million, is a response by the Government to some of the concerns raised by Seniors. It is designed to provide a one-off boost to living standards of Senior Australians on lower incomes.
Means Test and Superannuation
Another initiative in this year's budget, that is further evidence of the Government listening to the people, is the decision to relax the rules for the assessment of superannuation assets under the social security means test.
Under this decision, from 1 July 2001 superannuation assets have been fully exempted from the social security means test for people aged between 55 and Age Pension age.
This measure increased the income support payments of customers whose payments were affected by the previous rules. Other customers have lodged a claim with Centrelink and are being paid income support for the first time.
This measure is estimated to benefit around 55,000 people, and to cost around $400 million over 4 years.
Benefits under new tax system
All of the above benefits are in addition to the significant compensatory measures that the Government provided just over a year ago when the New Tax System was introduced. Some of these measures included:
- The reduction in personal income tax rates and the increase in the income tax threshold.
- The 2 bonuses, ie. the Aged Persons Savings Bonus and the Self-funded Retirees Supplementary Bonus.
- It is my understanding that the Government has spent over $2 billion on these bonuses.
- The reduction in capital gains tax;
- The refunding of excess imputation credits, which is expected to cost around $580 million in 2001-02 alone;
- The private health insurance rebate/benefit; and
- Increased access to the age pension by way of reducing the pension withdrawal rate from 50 per cent to 40 per cent.
The above measures are an indication of this Government's commitment to self-funded retirees. It also shows that the Government takes this group seriously. Indeed it would be short sighted of any Government to ignore the importance of this group.
I say short sighted because there is an increasing number of Australians that are falling into the 55 plus age group. This group, which currently numbers around 4.2 million, is forecast to be 5.5 million in 2010, and reach 7.0 million by 2020.
Once a Government recognises this ageing pattern of the population, it would be remiss and negligent to ignore it.
Therefore, the Government will continue to encourage individuals to save for their retirement, will work to ensure there is a strong and secure prudential regulation system to protect retirement savings, and a strongly performing economy to enable retirement savings to benefit from strong yields.
Labor Party Contradictions
As indicated in my earlier remarks, the Labor Party when in Government ignored the concerns of self-funded retirees. They did nothing in 13 years about the inequitable treatment between the taxation arrangements of those on pensions and self-funded retirees.
The Howard Government, with its action on such matters as tax thresholds, imputation credits, private health insurance and the Seniors Health card, has addressed many of the concerns of self-funded retirees.
You will note that the Labor Party when it criticises our actions on increased rebates, pensioner bonuses, never makes any additional financial commitments. Criticism but never any action.
You may recall that Labor relentlessly attacked the health rebate which has been so valuable to many self-funded retirees. Mr Beazley now claims they will keep the rebate. Can they be believed?
The Labor Party attacks the GST but proposes to keep this reform. Of course, if Labor didn't really approve of the GST, any self respecting Opposition would propose to replace it. The ALP have reached new levels of hypocrisy in relation to the GST.
Oh yes, Labor says it will roll-back the GST. The fact of the matter is that Labor will inevitably have to increase income taxes if it proposes to roll-back indirect taxes.
Self-funded retirees have never been a priority of the Labor Party. Roll-back may well affect the gains self-funded retirees have made in recent years.
It is almost three years since the Government launched its new tax package. Mr Beazley cannot tell us what his roll-back means, how much it will cost and how it will be funded.
Today, I have outlined the importance the Government places on its relationship with self-funded retirees.
The Government will continue to value this relationship and will continue to encourage individuals to fund their own retirement as most of you here have done.
Self-funded retirees along with all Australians have a great interest in the sound management of our economy. A prosperous economy, with profitable companies ensures that investments continue to increase in value and dividends are paid at higher levels.
This Government can point with considerable pride to its record of economic management, our growth rates in recent years are the envy of many countries. We have been very critical of the attempts by the Labor Party to talk down the economy.
The latest strong growth statistics give the lie to the Labor Party claims that the GST has adversely affected our economic performance. Indeed, tax reform is assisting in making the Australian economy more competitive.
The Howard Government can point to a strong record in assisting self-funded retirees and managing the economy in a way that all Australians can benefit.