Federal Budgets can seem a long way removed from our day-to-day lives. Telephone book number expenditure is often quoted on some very abstract projects (infrastructure? cyber safety? border security?) which are hard to relate to. But the money that is allocated in the annual budget will eventually have a major tangible impact on your quality of life; your health, wellbeing and retirement affordability.
That’s why the team at Retirement Essentials has strong views on the things we think could be done to make a huge difference for older Australians. Yes, budget spending is current account (spending money raised from taxes from those currently working). So there is always some discussion around the ‘fairness’ of using revenue from younger taxpayers to fund more services for older Australians. This can be a false argument, though, as nearly every older Australian has paid more than their fair share of investment, across the decades, in roads, airports, childcare and the environment to ensure a better future for younger generations.
Our team also isn’t advocating massively expensive projects (no AUKUS here!). Instead we are looking at the ways the current retirement income system could be improved – for very little outlay. Ways to ensure that retirees are able to remain active and productive for much longer. This includes allowing them to work more – which would significantly benefit the nation’s productivity if it came to pass.
So read on for our thoughts on what Treasurer Jim Chalmers should announce on Tuesday 14 May – and we encourage you to share your thoughts on anything we may have missed. It’s helpful to remember that the Retirement Essentials’ team is in touch with every day retirees, every working day. This means that we are fully exposed to your concerns, needs and annoyances when it comes to managing your retirement income. As always, we’re on your side when it comes to making Australia’s retirement income system work better, sooner.
Centrelink wait times
As I contacted the team to get this article underway, I’m happy to offer my suggested policy initiative first. I can’t unsee Service Australia’s awful unanswered call numbers and wait times that were published in March. This amounted to seven million unanswered calls and a wait time for older Australians which blew out from 21.30 minutes to 46.41 minutes over a two year period. My strong suggestion to the Treasurer is that more funding is freed up immediately to hire staff, train them and radically increase the phone support services. As Centrelink is the single channel for the 700 Australians retiring daily who may expect to receive the Age Pension or a Commonwealth Seniors Health Card, then ensuring that it functions properly is a must.
(You can shortcut many of your own Centrelink questions by using this free Age Pension Eligibility Calculator)
Income and assets tests and Work Bonus
James wants to make it easier for older Australians to earn a part time income by simplifying the Work Bonus rules. Essentially just exclude the first $11,800 of a person’s employment income from the income test so that a limited amount of employment income continues to be treated slightly differently from other income. He believes that there is also merit in a higher income threshold across the board, but in the first instance he would focus efforts to encourage older workers to stay in the workforce to share their experience. Those workers might also benefit from an enhanced social connectedness and sense of purpose.
James’ other initiatives are to change the taper rates which unfairly affect renters who hold financial assets – they don’t get the benefit of higher thresholds meant to benefit renters
And he would exempt assets within the lower income threshold from deeming which would mean renters would get the full advantage of their higher threshold, even when they hold financial assets.
Supporting renters
James would also like to ensure rental support is indexed in line with rent rises so that renters don’t continue to be left behind.
Kaye agrees that renters have been unfairly left behind with many rounds of indexation that aren’t really fair. She’d like to see a one-off increase to the base rate of Commonwealth Rent Assistance (CRA) which would allow renters to catch up. As rents have increased by about 10% over the past year, compared with the current quoted CPI of 4.5%, Kaye is suggesting a 15% one off increase for all eligible renters.
Home Equity
James wants the Treasurer to make the HEAS more flexible so it’s easier for people to access more of the equity in their home when they need it. For example, to not limit it to 1.5 times the full Age Pension as this may not allow for a major renovation to the home to make it suitable in later retirement plus any additional expenses. A renovation of bathrooms, kitchen, ramps etc. could easily cost $50,000+ but 1.5 time the single Age Pension falls short at $43.5k
Deeming rates
As you may remember, deeming rates are frozen until 1 July. Nicole believes that they need to stay where they are. She would like to see them continue at the current lower levels. Many Age Pension recipients will have no change of circumstances but could potentially see substantial reductions in their entitlements after 1 July. This will hit renters and single people the hardest, as they have had to contend with not only significant increases in the cost of living, but also a rental crisis driving up rent, and rent assistance (CRA) is not keeping pace. She predicts that any increases to deeming rates will come as a big shock to a lot of retirees.
Supporting singles
Megan believes that the Work Bonus tends to favour couples and would like to see this adjusted.
She suggests that the income test for single pensioners should be raised, or perhaps they could be awarded a higher Work Bonus threshold. Couples effectively have $600 per fortnight between them, so what if singles had $450 per fortnight, instead of the current $300 per fortnight allowance? Says Megan, ‘ I see a lot of single pensioners who are working with minimal assets and their employment income affects their pension eligibility quite harshly. This can only be compounded by Nicole’s observation of scheduled deeming rate changes.
More consistency in the means test
Alison added another thought on the income test assessment. She would make income test assessments different for single homeowners and non-homeowners from income test assessments for couple homeowners and non-homeowners. This treatment would be in line with the current assets tests assessments.
Are you seeking help to understand how the rules work? Here’s some ways Retirement Essentials can assist:
- Understanding more about super (Assess the options to help make your super work better for you).
- Maximising your entitlements (Assess any changes you might be able to make to maximise your Centrelink entitlements)
What do you think?
Have we covered the main problems with retirement income? Or are there some we have missed?
The working bonus is generally a good idea but the way it is at present really doesn’t work.
The bonus is difficult to use and you should be able to use it more freely.
The $11,000 can be used over a period of say 3 months or 6 months and not on a fortnightly basis.
Still over a yearly period,once the said amount is used you can leave or go on at a casual basis.
Employers will not want people for just a few hours per week.
They would be more likely want you for a few months straight away.
I am fortunate that when I retire in 6 months I can probably just work 8 or 10 hours a week but my employer will be begging me to do more in the disability care industry….it will be difficult not to do this because of staff shortages ….then my pension will reduce significantly
Hi Vicki, thanks for sharing this point of view – you reveal a fundamental challenge with work and the Age Pension – so many people would love to contribute by working more – but they put Age Pension entitlements at risk by doing so. I would love to see much more generous limits as it would mean so many more people could continue to work more as they wish, and the whole country would benefit. Note – this is my private opinion, not a statement on behalf of Retirement Essentials – warmest, Kaye
releasing home equity earlier would be a positive move. It would give retirees the opportunity to contribute earlier to home ownership for their children who currently can’t make the deposit required to get into the market.
Downsizing – need to do more to assist older people once they no longer need a larger home. We live in a large 4 bedroom home and would like to go to a smaller home but it isn’t currently worth it. This home could be used by a family (with children), thus helping to reduce the current housing crisis. Our government should concentrate more on the carrot and less on the stick.
We find it hard to understand that the government says on one hand you are deemed at a certain rate but are not penalised if you make more than the deeming rate on your investments. Yet we are judged on the rental income we receive from our investment in a medical centre as income and yet if we had it in an interest bearing account we are not judged on the amount of income earned. Seems like double standards to us.