Think tank says over-60s have tax breaks that are too generous

You might not realise it, but the tax system in Australia is skewed in the favour of older adults… Well

You might not realise it, but the tax system in Australia is skewed in the favour of older adults… Well that’s according to a recent Grattan Institute report.

According to the report, entitled Age of Retirement, the Government could save about $1 billion a year just by winding back three tax breaks that apply to you that it feels are “unduly generous and have no sensible policy rationale”.

Specifically the report address the Low Income Aged Persons Rebate, the Senior Australians Tax Offset and the tax-free status of your superannuation.

According to the report’s author, John Daley, “It used to be that between one-quarter and one-third of seniors paid tax. Now it’s half that.”

There is probably little use crying about how unfair the report is as it is likely Daley isn’t interested.

The report compared two couples — James and Linda who are over 65, and Michael and Jenny who are aged about 40. Both earn a combined taxable income of around $70,000, but with James and Linda their funds are coming from super and investments, while Michael and Jenny are still employed full-time. Of course, James and Linda will be enjoying the Seniors’ Health Cards and they are paying around $4,049 in tax. On the other hand Michael and Jenny are paying $6,894 in tax and this includes the Medicare levy, which is much higher.

“Of course, the other couple will say: I’ve paid my taxes so it’s fair,” Daley tells the Sydney Morning Herald. “The answer is: No, they haven’t paid particularly much tax, and that’s the problem.”

According to the Sydney Morning Herald, it’s great if you happen to like eating smashed avocado on toast in a cafe every weekend, because the amount you are saving equates to around 129 serves of the stuff each year for every Australian couple aged 65 years and older.

Daley says you are paying less tax than the generation before you and you’re also paying less tax than the generation that will come after you.

“Each senior household used to take out of the order of $22,000 and now it’s $32,000… Part of it is super, part of it is a jump in health spending, part of it is a jump in aged pensions, and part of it is a jump in things like the Senior Australians Tax Offset,” Daley says.

According to the report, the solution is simple.You pay less tax and get a higher rebate on private health insurance than do younger workers on the same income. You do so through the Seniors and Pensioners Tax Offset (SAPTO), a higher Medicare levy income threshold, and higher private health insurance rebates that are available only to older Australians. If SAPTO and the Medicare levy income threshold are wound back it would save the Government $700 million a year. Then it suggests reducing your private health insurance rebate so that you only get the same rebate as younger Australians, which would save around $250 million.

It would mean only pensioners would qualify for the Seniors and Pensioners Tax Offset, because if you earn enough for private income then you don’t quality for a full Age Pension.

How do you feel about this proposal? Should such a proposal be supported and implemented, would you be affected? Share your thoughts with us.

  1. Duncan  

    People who’ve worked, & paid Taxes for 40 or more years’, don’t need ANY funds taken from them!

    Obviously these idiots’ who make these so-called ‘recommendations’ don’t have to live off the Pension!

    What needs to happen is that Pensioners’ get more money, every way possible!

    • Joy Anne Bourke  

      I totally agree. Pensioners cannot afford to live especially renters. I pay 2/3rds in rent out of my pension. I worked for 48 yrs and paid taxes but did not have much super as it started too late, also no super gets paid if you work under a certain amount for each company. I at times worked 4 jobs a week to pay my taxes and live.
      I the age of entitlement is finished this should also apply to politians.

      • Guy  

        Joy Anne, I totally understand the awful stress of having to find your rent payment
        out of the old age pension. Many times I was forced to seek food parcels from
        St.Vinnies and the Salvation Army rather than not pay my rent.
        However, there may just be a great solution for you if you are currently registered
        for public housing. I rang an organisation called HAAG and explained my dire situation.
        They then appointed a case officer to try and help me. Within 3 months I had a simply
        lovely one bedroom public housing unit in a lovely block of six. And, my rent dropped from $240 pw to $100 pw which has made a huge difference to my financial situation.
        Just type in HAAG on Google Search and give them a ring … fingers crossed they may well be able to help you ?

  2. Judy  

    I think it is a ploy to deflect attention away from the hotly debated topic of paid parental leave…oh wait we didn’t get that did we!

  3. Heather  

    Some people fritter away their money and wait for the pension, others prepare themselves for when they are older, then there are others again who don’t have the opportunity to save for anything, plagued by medical bills etc personally I don’t think anyone should expect someone else to foot their lifestyle. I am past age pension age, but I don’t get a pension or anything because my husband is younger & still working so he is expected to support me as I don’t work. They govt is saving on not paying me & others that are in the same situation. At the same time trying to pay off a mortgage, saving for retirement, many medical bills & private health care just a few things.

    • Barbiej  

      So true heather, I am in the same boat. I was also widowed when I was 37 so I worked three jobs to raise and educate my two young children. Should have sat back & applied for widows pension.
      Wonder when they will work out how much could be saved, by a cut in their wages and the perks that retired politicians get.

  4. Rosemary Lynch  

    51 years in the workforce. No first home buyers, no particular tax concessions. Did what the federal govt. said, saved for my retirement. Centrelink wants my deeming rate to double from 1st January 2017, and also to pry into my bank a/cs and everything else, and demands my accountability. Enough! How dare they? Modest income, part-pension. Leave me alone!

  5. Greg Hills  

    Think tanks! Sometimes think tanks are just hand picked committees who are given an outcome objective to achieve, and then have to justify how they achieved it.
    In this case, the Government tells them they have to find that the best place to cut welfare and tax concession expenditure is to target the over 60’s (Baby Boomers).
    Why? Because they are an easy target, and it will deflect attention away from the real causes of why there is a taxation revenue shortfall. The main one being that the Big End of town get away with paying little or no tax, including Companies.
    On the expenditure side, the biggest area of waste is the government sector – in particular, our “untouchable” politicians. How about they cut all unnecessary expenditure there before looking at Senior Australians. 1 billion dollars a year is but a trickle in the bucket when compared to Corporate tax evasion and Politicians unnecessary expenditure.
    As for my take on what the Think Tank thinks about the 3 areas to cut, then;
    1. Yes, the Senior Australian Low Income Rebate can go. Most people who qualify for that will be below the tax free threshold anyway. So it is irrelevant.
    2. The SAPTO can go too. It too should be irrelevant for the same reasons as the SALIR.
    3. As for superannuation. That needs to be tax free for Income Streams and all withdrawals for over 60’s. The tax has already been paid on their contributions, so taxing it again on exit, is double dipping. Why tax a retirement income stream? The whole idea of being a self funded retiree is so you are not drawing a pension. If you start taxing it, then you are creating two classes of pensioner – self funded who pays tax, and Aged Pension recipients who don’t.
    No, this Think Tank is obviously made up of working age people who are just jealous of the Baby Boomer age group.

  6. Your highly slanted “ageist bashing” article very conveniently covers over the fact that the self funded retiree is saving the government having to pay them a pension, as they got off their back side and did some hard work planning for their old age.The older person also has higher medical bills most of which is not covered by “Medicare which is a joke”.The older self funded retiree is also having to help out their younger family members (e.g. deposit for a house as the invasion of Foreign buyers is pushing them out of the market).The older self funded retiree is then still paying TAX, and what do they get for it – nothing except a lot of political “spin”When the time comes finally for a nursing home the RAD (deposit starts at about $350,000 for a not very fancy room PLUS a daily accommodation fee.So finally when the Gov does listen to this highly biased tirade on the old (who are not allowed by the way to be politically incorrect) will the Gov give the money to the young or the ones on the dole? Ohhhh NoThey will use it to cover the gap created by the non tax paying multinationals. The the likes of Apple, Google etc will be pleased

  7. Genazzano  

    Why did Donald Trump win in America – one reason is that people a over these “THINK TANKS “like the Grattan Institute who are not elected and influence Government.

    What they don’t say is the retirees have worked for years and gone without a lot to get to where they are today.

    The Grattan Institute gets a lot of exposure on the Fake News ie the ABC and guess what Geraldine Doogue is a board member of the Grattan Institute.

    These self righteous communists can go live in China and see how they like living under their ideologies

  8. Guy Flavell  

    I think that this report by the Grattan Institute is quite right in some ways. Especially the
    apparent inequality of the generous $58,000 threshold for retirees/pensioners to NOT have to pay any taxation on their incomes … and still be receiving the benefits of the Health Care card.
    To qualify this ( undoubtedly unpopular) comment, I’d like to point out that my own 31 yo
    single, non-home owning son actually earns $58,000 pa and pays $10,397 pa in taxation.
    I find it difficult to comprehend why a home-owning single pensioner, earning exactly the same $58,000 pa, pays NO tax whatsoever ?
    Why should the taxation payments of my hardworking son have to support the very comfortable lifestyle of these retirees? It just seems to be highly inequitable and should be seriously addressed by Government.

  9. Eliza Cooke  

    The taxation system in general gives too many breaks to those who are well off whether or not they are retirees. I believe that people who have income should pay tax according to a fair regimen. There is urgent need for reform in this area. I think it needs to start with an examination of all entitlements and tax exemptions. Decide which are fair and universal and which are unfair and sectional. It is unjust to target a particular group because priorities change. Most retirees for example did not benefit from the levels of family payments, child care and paid parental leave available today. Everyone needs to contribute to the welfare of all according to their means. We need to decide on our vision of Australian society and tailor our tax and welfare systems accordingly. I think we already know some of the essentials – medicare, aged pensions, NDIS. The taxation system is how we support these. It must be progressive.

  10. I won’t be happy about paying any extra tax until our MPs STOP spending MILLIONS on themselves in a short period like 18 months (many of them guilty of that) in expenses. I won’t be happy about paying extra tax until Gina Rhinehart et al pays the same for her fuel as I do. I won’t be happy about paying extra tax until this scummy government STOPS paying BILLIONS to Wilson Security et al to cruelly treat vulnerable people out of sight of Australian eyes and out of reach by the laws that bind other Australians. I could go on but you get the gist.

    • Guy Flavell  

      Good on you Jennifer, spouting the loathsome Greens’ mantra again … mindless hatred of the successful and wealthy, a one class society led by the 1% elitist left-wingers, everyone wearing Maoist drab-green clothes and caps and moronically chanting the idiotic Greens’ nonsense of climate change scaremongering, ridiculous and unfounded ‘refugee’ lies … and
      with absolutely NO sensible or cost effective solutions to this country’s shambolic budgetary situation. “I could go on but you get the gist”.

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