“Middle-class” welfare goes to seniors, too.

March 17, 2014
deck chairs

How rich is too rich to get a government welfare payment? Would you say a couple who owns their home, has an investment property or shares worth over $1 million, has no children to support, doesn’t work but still has a taxable income of $80,000 a year (or more in untaxed income from super)….would you say this couple needs a welfare payment? Well, retirees who fit this description receive the Seniors Supplement, a payment worth $858 a year or $1294 for couples. It’s one of the extras that can pop into your bank account just because you’ve reached the distinguished age of 65.

Some people I know are hitting the magic number and discovering the government keeps giving them money even though they’re comfortably off. It’s very nice. The Seniors Supplement is meant to help non-pensioners with regular bills such as electricity or car registration. But for some it will go towards the Pacific cruise or skiing in New Zealand – and frankly they’re a little embarrassed. If the country is in some “budgetary crisis” as the government insists, they wonder should middle-class retirees like themselves receive these payments. As relatives of mine said recently when they discovered to their surprise they’d qualified for a part Age Pension and the attendant concessions, “We don’t really need it.”

With a tough budget expected, the concessions and payments to older people are in the spotlight. From increasing the pension age to 70 to tightening the pension asset test, there’s no shortage of suggestions. Some people argue seniors should be immune because, well, they’re seniors, and most of them live modestly. The Council on the Ageing (COTA), a respected voice for Australian seniors, has expressed alarm that older Australians are being picked on: “There is a concerning trend…that seniors should cough up for the good of the nation….that slugging older Australians is an easy answer for budget shortfalls.”

At times like this everyone says, “Don’t hit us, hit the rich.”  But in Australia there aren’t enough rich to make a difference to revenue. The middle-class may have to give a little, and that includes seniors. Australia is a low-taxing nation that spends less than the average developed country on benefits. If we want to fund the Gonski education reforms and the National Disability Insurance Scheme and rising health and age care costs we can take the road to higher taxes. Or we can slash public services and go further down the user-pay route. The third way is to re-distribute the money we already raise from taxes, reducing welfare paid to the comfortably off, regardless of age, and targeting spending on the needier and on projects that benefit us all.

So I come back to my question. Should a retired couple who owns their own home, and also a $1 million second property or parcel of shares of that value, and earns $80,000 taxable income (or more if it’s untaxed) to spend just on themselves be counted among the needy? It’s a no brainer. I don’t think they need a Seniors Supplement, not compared to a woman I met last week through the Older Women’s Network in Sydney. Let’s call her Sophie. She’s also in her 60s but still shy of pension age. She’s single, she owns a small flat and last year she lost her job. Before she could even qualify for the unemployment benefit – the Newstart Allowance – that pays a below-poverty sum of $250 a week, she was required to run her savings down below $5,500 and wait 13 weeks for the payment.

It’s likely in the May budget that unemployed people like Sophie (a quarter of the people on Newstart  are over 50) will be hit with further obligations, and required to make more sacrifices. But the Seniors Supplement will be paid as usual to retirees who don’t really need it, some of whom admit as much. That’s just the start for seniors. Relatively high income older people with the million dollar holiday home or shares also qualify for heavily discounted $6 medicines that cost families on a low wage $36. As well there’s a seniors’ tax rebate. Are some of you getting angry with me? Do you think of yourselves as “self-funded” retirees who deserve a little something from the government? It’s too little understood that the tax concessions that enabled you (and me) to build our super nest egg are highly inequitable, giving big breaks to the well-off and little or nothing to the rest. COTA itself has pointed out the inequity of some current super tax concessions. There are also issues with the Age Pension. In 2006 as Australia was riding high on the mining boom, the government eased the pension asset test allowing a further 300,000 people to qualify. Couples can have an income up to $72,009 and a million dollars in assets in addition to their home and still get some Age Pension.

The Australian Council of Social Service points out in its budget submission that less than 20 per cent of people over 65 pay tax. That’s partly because many are on the full pension, scraping by on $20,000, or on very modest incomes. But an increasing number have rising incomes from employment, superannuation and investments. Is ACOSS picking on these seniors when it says: “Some of the most inequitable and wasteful programs and tax breaks particularly benefit relatively well-off older people…..”? It’s calling for many measures to make Australia fairer but included are abolition of the Seniors Supplement and a modest change to the pension asset test.

It’s a triumph Australia has dramatically reduced poverty among the elderly – no-one wants a return to the 1970s. But before seniors start the hue and cry that scares the pants off Labor and Coalition politicians, we should ask ourselves, “Is it fair?”

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