During the recent election campaign both major parties said they would expand access to the Seniors Health Care Card to more retirees. The new Government’s budget confirmed that single retirees with incomes up to $90,000 per annum and couples with incomes to $144,000 will qualify for the Card.
Retirees with super and pension accounts have those deemed to be earning just 2.25 per cent or less, well below their usual earning rates or pension payment rates. So the retirees’ actual cash inflow could be well above those figures.
This seems generous. Retirees with those incomes are not needy. Obviously both political parties were keenly chasing grey votes. The Card gives access to low-cost medicines as well as discounts on council rates, public transport and state government charges.
This adds to the perception of inequality between the generations in Australia in relation to finances. Retirees can have up to $1.7 million in a super pension. That will earn tax-free returns and pay an income exempt from tax assessment.
At say five per cent that would be $85,000 per annum. A younger working person earning $85,000 income would pay $19,792 of tax and Medicare Levy. It is reasonable that older Australians get some concessions due to their past hard work, but is that excessive?
The children of those retirees are likely to be the people earning the $85,000 salary, so even some of the retirees may agree that they are being unfairly favoured over younger Australians. They may agree to pay a bit of tax so their children can pay less.
Retirees’ pension accounts earn returns entirely tax free. They can move lump sums from long service leave, inheritances and asset sales into the tax-free environment up until age 75.
If retirees earn taxable income they can receive up to $32,279 tax free for singles, and $28,974 each, or $57,948 total for couples. Younger taxpayers can only earn $21,884 before they start paying tax.
While the age pension assets test is fairly tough, the income test allows singles to earn $56,295 before they lose their pensions entirely. Couples can earn up to $86,154 per annum before their pensions are cut off.
Once again these income assessments may be based on the deeming rules on super balances which, at 0.25 per cent and 2.25 per cent, appear low. Retirees, as investors, are also the major beneficiaries of franking credit refunds from the Tax Office. Government spending must be paid for by someone, and it is easy to say, “Let it not be me”. A fairer solution is for everyone to contribute. Do the financial rules favour older people too much?