Treasurer Scott Morrison has followed through on reported promises to allow retirees to earn more cash while still claiming the Age Pension.
Announcing the 2018-19 Budget, Morrison announced a series of changes designed to increase retirement incomes, although they fell short of increasing the pension itself.
Instead, the treasurer said that pensioners would be able to earn up to $300 a fortnight – $50 more than the current earnings cap on the Pension Work Bonus – without seeing their pension payments cut. And the work bonus scheme will be extended for the first time to self-employed people, in the hope of encouraging older Australians to start their own businesses.
That means a potential $1,300 annual income boost to pensioners who take full advantage of the work allowance.
The government will also relax the Superannuation Work Test, to allow more people to increase their super balance even if they don’t fulfil the requirements of the current test.
Under the current rules, people aged between 65 and 74 can continue to make super contributions as long as they work for at least 40 hours in a period of 30 consecutive days in the financial year. But the relaxed test will allow people whose super balance is under $300,000 to make contributions in a single year even if they don’t meet the work test requirements in that year.
Meanwhile, the Pension Loan Scheme, which allows pensioners to borrow against the equity in their home, will be expanded to allow full pensioners and self-funded retirees to access it, allowing a full pensioner couple to increase their income by almost $18,000 a year without impacting their pension. It was previously open only to part-pensioners.
Access to the Restart wage subsidy for Australians aged 50 and over, which provides wage subsidies of up to $10,000 for employers who take on an over-50 worker, will also be expanded, although Morrison didn’t spell out in detail the nature of the changes.
And in welcome news for all people planning for an imminent retirement, Morrison said the government would clarifying the Age Pension means test treatment, in the hope of encouraging super providers to come up with a wider range of retirement income products.
But providers will have the fees they can charge on super balances of less than $6,000 capped at 3 per cent. “High fees can make it impossible for many Australians with low balance accounts to grow or even maintain their balances,” the treasurer said. Providers will also be prevented from charging exit fees when savers wish to transfer their super balances to another company.
Alan Kirkland, CEO of Choice, the consumer champion group, welcomed the scrapping of exit fees, which he said currently cost Australians $37 million a year. “Exit fees penalise people who take action to consolidate their super or switch to a better performing fund,” Kirkland said. “We’ll be glad to see the end of them.”
Overall, Morrison described the budget as one designed to deliver a stronger economy and more jobs and guarantee essential services, while ensuring the government lived within its means.
He said the budget deficit had halved over the past two years to $18.2 billion in 2018-19, and he forecast to return to a surplus of $2.2 billion in 2020.
But Labor leader Bill Shorten said the budget failed the “fairness test”, although it wasn’t immediately clear which cuts to pensioners he was referring to.