The wait is over with the details of Treasurer, Jim Chalmers’, fourth Federal Budget now revealed. Before sharing the highlights, let’s recap the Retirement Essentials team’s wishlist to see how many measures actually came to pass.
| Retirement Essentials proposed initiative: | Was the Treasurer listening? |
| Changes to Medicare, with more support for bulk billing | ✓ |
| An increase to Commonwealth Rent Assistance (CRA) | X |
| More affordable housing for retired renters | Not directly, but the expanded ‘Help to Buy’ program is a start. |
| Continued freeze on deeming rates (this is reported by reliable sources, but we are double checking with the Department of Social Services) | ✓ |
| A simpler Work Bonus rule (to replace the complex $4000 bonus credit rule) | X |
| An ongoing commitment to energy bill relief | ✓ |
| Tax relief for financial advice | X |
| Financial advice standards with planners required to meet certain educational requirements | X |
| Redrafting stalled legislation for additional 15% tax on super fund earnings for balances higher than $3 million | X |
| Better funding of basic retirement literacy | X |
| More protection for those who are scammed | X |
The score:
Just three items on our wishlist have been confirmed, seven didn’t get a guernsey and one can best be classed as a ‘possible’ at best. Maybe our preferred reforms were a little idealistic, maybe not. But then again, it is an election year and it’s possible some items (particularly an increase to Commonwealth Rent Assistance) may be being held back for the election campaign.
What’s the detail?
How will the Federal Government spend tax payers’ money in the coming year?
What are the specific benefits for retirees and older Australians? Not many!
Some previously announced ‘big ticket’ items will help every generation. These include:
Health: A boost to Medicare of $8.5 billion to expand bulk billing with a claim that 9 out of 10 GP visits will be bulk billed by 2030. Nearly $700 million will be invested in the Pharmaceutical Benefits Scheme (PBS), meaning a reduction in the price of many scripts from $31.60 to $25, with senior concession card holders still benefitting from concessional prices on scripts at the current level of $7.70 until 2030.
Energy discounts: All households will benefit from a $150 discount to be delivered in quarterly increments by the end of the 2025 financial year. Energy bills will automatically be reduced by this amount by the supplier.
Specific assistance for retirees:
Continued freeze on deeming rates
The most important item (which is reported, awaiting confirmation) is the continuation of the freeze to deeming rates, now due to expire on 1 July 2026. We’ve explained how deeming works in previous articles and this extension is expected to benefit around 460,000 Age Pension recipients whose payments are affected by deeming rates. But the main concern is whether the way income is assessed using deeming rates in the Income Test is fair. Next week we will share the story of Jane, a single renter who seems clearly disadvantaged by the way her assets are deemed.
The biggest miss
Renters continue to pay a high proportion of their income to secure a home. There was a widespread expectation that Commonwealth Rent Assistance (CRA) would be increased, as it was last year. This did not happen but keep an eye on election promises before we head to the polls in late May.
How do you view these measures? To kick off the discussion, we’re pleased to share the following response from Retirement Essentials joint founder and director, Jeremy Duffield.
Two eyes on the budget
I’m definitely a one-eyed footy supporter. But when it comes to the Budget announcements, I take a two-eyed approach.
One eye is focused on the “goodies.” What’s the government promising for our Retirement Essentials clients? The other eye is focused on whether the Budget is well structured to help create a successful economy – one that can pay for the goodies well into the future.
This year’s goodies for older Australians include: on the health side, the multibillion dollar boost to Medicare to expand bulk billing and the promise to seek to limit prescription costs on the Pharmaceutical Benefit Scheme (PBS) to a reduced cap of $25. On the cost of living side, everyone benefits from the promise of additional energy rebates.
In addition, there was a surprise announcement to lower income tax rates by 1% for the tax bracket covering incomes between $18,201 and $45,000 . The proposal wouldn’t take effect until July 1 next year. On top of that the Medicare Levy thresholds will be increased so that more seniors are either exempt or pay a reduced rate.
Most important, perhaps, for Age Pensioners is the reported decision to hold deeming rates at their current level. You’ll recall these rates determine the amount Age Pension applicants are “deemed” to have earned on their financial assets for purposes of the Income Test. The rates were reduced substantially during the Covid epidemic and have been maintained at these much lower levels since then. Assuming the Government has indeed kept the freeze, many people who may have lost access to the Age Pension or found their part Age Pension reduced will now feel more secure.
So, the budget offers some good news for older Australians. Of course, we always have the wishlist of other items we might have hoped for. Our fondest wish is to see taper rates on the Assets and Income Tests be less onerous. For part-Age Pensioners to lose $78 per year for each $1000 of additional assets or to lose 50% of Pension income per dollar of extra income just seems too severe a decline.
How’s this Budget doing on promoting long term economic success? It’s still not clear that we’ve given up banking on our good fortune as the ‘Lucky Country.’ It was commodity prices for our major exports staying much higher than anticipated which softened the impact of very significant increases in government spending. The income tax cuts promised, by themselves, will add $17 billion to the deficit over the next five years.
I’d prefer a more disciplined approach that is focused on bringing long term Government debt down, to ensure sustainability for the future – whatever it might hold. And I’d also prefer to see more emphasis on policies that promote business and economic growth. After all, it’s economic growth and personal income and the resulting tax that fund a sustainable wealth for our population – young and old.
Well, this is a pre-election Budget and it’s going to be up to the voters to decide. We’re likely to see more goodies unveiled by the politicians over the course of the election campaign. Let’s hope some semblance of fiscal discipline can be maintained. Politicians could learn a few things from retirees; we need to live within our means.
We trust you will find today’s Budget summary useful, but if any aspect is unclear, please don’t hesitate to share your questions in the comments section below.
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