A leading social services body is seeking a tax on retirees’ superannuation investment income to fund aged care.
In an 80-page submission in the lead-up to the May Federal Budget, the Australian Council of Social Services (ACOSS) also outlines proposals for a universal dental scheme, an increase in JobSeeker and the retention of JobKeeper for industries still heavily affected by the pandemic.
It also wants to see a fairer superannuation and tax system that eases the burden on low-income earners.
ACOSS says that in light of the Retirement Income Review, the government should focus on reducing the most severe poverty among older people – those renting privately and yet to qualify for the Age Pension.
ACOSS proposes a $370-a-fortnight increase in the base rate of JobSeeker to help protect those most vulnerable to severe poverty.
ACOSS chief executive Cassandra Goldie told The Age: “Currently, we have double the amount of people trying to get by on unemployment payments than we did before this crisis. They are looking to the Morrison government to ensure they can cover the basics.”
To pay for improved services, ACOSS is looking at retirees’ incomes.
Ms Goldie said most Australians were unaware that a superannuation fund’s investment income was not taxed once a fund member reached preservation age.
“Only 16 per cent of those over 64 are contributing through the income tax system,” she said. “Super [tax breaks] are for those with significant wealth … disproportionately benefiting those on high incomes.”
Current tax concessions cost the nation $42 billion a year, or almost the cost of the Age Pension, and ACOSS estimates that if retirees’ superannuation earnings were taxed at 15 per cent, it could deliver $2.5 billion to aged care services over 2022-2023.
With an ageing population and rising welfare costs, funding of health and aged care services will be under pressure. ACOSS says superannuation fund earnings post-retirement should be taxed at the same 15 per cent rate as in the accumulation phase.
The report also recommended a 15 per cent rebate, minus imputation credits, for retirees whose income is lower than the tax-free threshold.
“It’s a modest proposal … the support [for the tax] should come from the fact this is an important way to finance the aged care system,” Ms Goldie said.
ACOSS’ submission asks for a transition to a federally funded universal dental treatment scheme at a cost of $1.1 billion. “We should be alarmed by how rapidly people drew down on their often very modest super funds to cover these kinds of essential costs, which weren’t associated with the pandemic at all,” she said.
ACOSS wants the Superannuation Guarantee to be capped at 10 per cent – it is legislated to rise to 10 per cent in July and to 12 per cent by 2025 – to ease the burden on low-income earners over their working lives. Also, tax breaks for contributions should be reformed so they receive at least the same subsidy, per dollar contributed, as people on higher incomes. It said this could be achieved at no extra fiscal cost by replacing existing tax breaks for contributions with a uniform annual rebate.
Key points of the proposal to strengthen the public revenue base to meet current and future needs:
- Do not proceed with $17 billion per annum in tax cuts for people with high incomes.
- Extend the 15 per cent tax rate on super fund investment income to post retirement accounts to fund a guarantee of high-quality aged care services for all ($2500 million).
- Reduce tax breaks for capital gains and remove the tax advantages of negative gearing strategies – this would also help prevent another surge in house prices ($2100 million in 2022-23).
- Curb personal income tax avoidance through private trusts and companies ($2900 million in 2022-23).
- Curb tax avoidance by multinational companies ($500 million in 2022-23).
- Phase out diesel fuel subsidies for off-road use (except agriculture) and divert expenditure into climate change transition and resilience strengthening measures.
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Related articles:
https://www.yourlifechoices.com.au/retirement/retirement-income/review-slams-big-jump-in-super-bequests
https://www.yourlifechoices.com.au/retirement/retirement-income/review-exposes-divide-between-retirees
https://www.yourlifechoices.com.au/government/federal-budget-government/retirees-welcome-governments-federal-budget-plans
