Wednesday, 13 February 2019
Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018; Second Reading
I rise to support this bill and move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House:
(1) notes that:
(a) this Liberal and National Government has spent the last five years trying to cut the pension and increase the pension age to 70;
(b) in every Budget, this Government has tried to cut the pension—including a plan to change indexation, which would have left pensioners $80 a week worse off; and
(c) the Government did a deal with the Greens political party to change the pension assets test and cut the pension for 370,000 pensioners; and
(2) condemns the Government for spending years trying to cut the energy supplement to new pensioners"
The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 changes the way pooled lifetime income stream products are means tested. It increases the amount of money pensioners can earn from employment, under the pension work bonus, an initiative from the Rudd Labor government. This bill increases the rate at which pensioners can draw down their assets under the Commonwealth's reverse mortgage program, the Pension Loans Scheme—a legacy of the Hawke Labor government—and opens up the Pension Loans Scheme to full-rate pensioners. This bill seeks to expand on important Labor legacies which expanded income streams for our pensioners.
To that end, Labor supports the changes to the work bonus. The work bonus provides an incentive for pensioners who are over pension age to participate in the workforce by allowing them to keep more of their pension when they have earnings from working. The work bonus functions by exempting a certain amount of income from the pension income test, above the pension income test free area. Currently the work bonus exempts the first $250 of fortnightly employment income. This bill will increase the income exemption to $300 per fortnight, with a commensurate increase to the work bonus income bank from a minimum of $6,500 to a maximum of $7,800.
The bill also expands eligible employment income to include self-employment. In 2009, as part of the Harmer pension review, the Rudd Labor government introduced the pension work bonus to replace the cumbersome Pension Bonus Scheme. Labor introduced the work bonus to encourage older Australians who are able to do so to stay in the workforce longer. This brings with it social and economic benefits, not just for individuals but also for our nation. Older Australians have incredible skills and experience. It is important that those who can and want to remain in the workforce on a part-time basis can do so without losing as much of their pension. This will also help Australians save for the future—something that is incredibly important to our ageing population.
Labor also supports changes to the Pension Loans Scheme, which is the government's voluntary reverse-mortgage scheme. The Pension Loans Scheme is a legacy of the Hawke Labor government to allow older Australians who own their own house to access additional income. In 1996 the Keating Labor government expanded eligibility to those who were previously ineligible by reason of the income test. So today, to be eligible for the Pension Loans Scheme, a person must (1) be of pension age, (2) own real estate in Australia and (3) receive a payment at less than the maximum rate of the age pension because of either the income or the assets test, but not both.
Currently only part-pensioners and self-funded retirees can access the Pension Loans Scheme. This locks many full-rate pensioners who own their own home out of the benefits of this scheme, and this is unfair. Labor welcomes the improvements to this scheme to open it up to full-rate pensioners. We also support the increase in the maximum fortnightly payment rate under the Pension Loans Scheme from 100 per cent to 150 per cent of the full pension rate. This will allow pensioners to enjoy a better standard of living by accessing the equity in their homes if that is what they want. Full-rate pensioners will be able to increase their income by up to $11,912 for singles and $17,958 for couples per year based on the current rates of the pension. While the take-up rates of the Pension Loans Scheme are currently low, it is an important option for older Australians, and this increase in the allowable rate of payment might just make it more attractive for more older Australians.
The changes proposed in relation to the pooled lifetime income stream products are very important to those considering putting their savings into this kind of product, which pays an annual sum for a person's life. It is a difficult decision to make a trade-off between keeping savings and securing an ongoing income, and people need certainty. Importantly, anyone who has purchased a pooled lifetime income stream product under the current means test will be grandfathered—an important point—and there will be no changes for them. It is important not just that the proposed means-testing arrangements are fair but also that the products themselves are sound and that people will be protected from rip-offs and shonks.
Labor supports the smoothing of the means test, which is also supported by COTA Australia and other seniors groups. And we will be holding a blowtorch to the government to make sure that the right financial regulations and protections are in place to protect pensioners who are considering purchasing a lifetime income stream. We will be very closely monitoring the kinds of products that are offered and the protections that are in place to make sure that people understand all the consequences of the long-term trade-off that comes with purchasing a lifetime income product.
As the banking royal commission has exposed, too many financial products have been crafted in the interests of brokers and banks, not ordinary Australians, and Australians know that this government will do anything it can to protect the big banks. The Prime Minister and the Liberal Party cannot be trusted to implement the recommendations of the banking royal commission—and, as has been mentioned and will continue to be mentioned, they did vote against the banking royal commission 26 times and they want to give the banks a tax cut. We should be changing the laws straightaway to clean up banks, but the Morrison part-time parliament is sitting only 10 days in eight months. The Leader of the Opposition has written to the Prime Minister urging him to hold two extra sitting weeks so that the Prime Minister can start cleaning up the banks now. The Liberals tried to stop the royal commission from happening. They will now try to go soft on the banks and will go slow on implementing the reforms. They cannot be trusted.
The Senate inquiry into this bill identified particular concerns related to the government's go-slow on the comprehensive income products for retirement framework, including a need to finalise the disclosure regime related to legislation and ensure that people get proper advice that is in their interests before purchasing a lifetime income stream. We will ensure that adequate financial regulations and protections are in place to protect older Australians. We will monitor very closely the types of financial products that are offered, and ensure that protections are available, so that consumers are fully aware of the financial and broader implications of those products.
Labor welcomes these positive changes and improvements to Labor initiatives which were enacted to make life easier for older Australians. But, make no mistake, pensioners will not be fooled: cutting the pension is in the Liberals' DNA. The age pension will always be stronger and safer under a Labor government. For five years the Abbott-Turnbull-Morrison Liberal government has spent every budget attacking the age pension. The current Prime Minister has spent five budgets, including three as Treasurer, trying to cut the pension. He has spent five budgets, including one as the Minister for Social Services, trying to raise the pension age to 70.
In the 2014 budget, the government tried to cut pension indexation—a cut that would have forced pensioners to live on $80 a week less within 10 years. This unfair cut would have ripped $23 billion from the pockets of every single pensioner in Australia. In the 2014 budget, they cut $1 billion from pensioner concessions—support designed to help pensioners with the cost of living. In the 2014 budget, they axed the $900 seniors supplement to self-funded retirees receiving the Commonwealth Seniors Health Card. In the 2014 budget, the Liberals tried to reset deeming rates thresholds—a cut that would have seen 500,000 part-pensioners made worse off. In the 2015 budget, the Liberals did a deal with the Greens to cut the pension for around 370,000 pensioners by as much as $12,000 a year by changing the pension assets test. In the 2016 budget, they tried to cut the pension for around 190,000 pensioners as part of a plan to limit overseas travel by pensioners to six weeks. In the 2016 budget, they also tried to cut the pension for over 1.5 million Australians by scrapping the energy supplement for new pensioners. The government's own figures show that this would have left over 563,000 Australians currently receiving a pension or allowance worse off. And over 10 years, in excess of 1.5 million pensioners would have been worse off. On top of this, the government spent five years trying to increase the pension age to 70. And they still refuse to adjust deeming rates for pensioners.
The Liberals still have cuts to the pension before the parliament. They want to completely take away the pension supplement from pensioners who go overseas for more than six weeks, which will see around $120 million ripped from the pockets of pensioners. They still want to make pensioners born overseas wait longer before qualifying for the age pension by increasing the residency requirement from 10 to 15 years. Labor has fought these cuts tooth and nail; this is the only reason the Abbott-Turnbull-Morrison government has flip-flopped and given in. The truth is: no-one spends five years—including three as Treasurer and one as social services minister—trying to cut the pension and increase the pension age to 70 unless it is what they really believe in. This is why pensioners know they cannot trust Scott Morrison. There is one simple fact: no matter who leads the Liberal Party, cutting the pension is in the party's DNA.
Over the past five years, we've seen older Australians wait longer and longer and longer to receive their pensions under the Abbott-Turnbull-Morrison Liberal government. We have read, heard and seen that pensioners wait months for their pensions, pushed to the edge of their bank accounts and pushed to desperation, uncertainty and fear. We have heard of pensioners waiting for hours on the phone to Centrelink, desperate to speak to someone about the fate of their pension payments. All the while, the Abbott-Turnbull-Morrison Liberal government has cut Centrelink jobs and outsourced them to labour hire firms.
Australians will not be fooled, and they will not forget the Liberals' atrocious record and attitude towards pensioners and older Australians. The Abbott-Turnbull-Morrison Liberal government has made it very clear that big banks, big business and the top end of town are its priority, not pensioners. The age pension will always be safer, stronger and more accessible under Labor.
This Liberal-National government takes the needs of older Australians very seriously. In the term of this 45th Parliament, as a government, we have delivered on a significant body of legislation that comprehensively improves both the financial security and independence of retirees and will ensure the highest-quality aged care for older Australians who can no longer manage on their own. And, while the previous Labor government legislated the pension age to 67, the Morrison Liberal-National government has announced that the pension age will go no higher. It will remain at 67 years of age. Not only should this come as welcome news for hardworking Australians approaching retirement, but it should be noted that the government's ability to clip the pension age at 67 while ensuring a sustainable social security system is due only to the strong economy that a Liberal-National government delivers.
Beyond simply maintaining the pension age, the government's record of delivery for older Australians is unprecedented. We retained the energy supplement, and, notably, since the coalition was elected, pensions have increased by a touch under $100 per fortnight for singles and almost $150 per fortnight for couples. The Liberal-National government is also supporting older Australians to voluntarily stay in the workforce, thanks to a variety of measures—some of which are the subject of this bill—that also include the provision of wage subsidies of up to $10,000 for employers who welcome older Australians onto their payroll.
While making the case that only a Liberal-National government will fully protect the security, independence and welfare of older Australians, I can't move to the substance of this bill without first touching on the flip side—that is, what this government won't do. We won't steal the income of more than 900,000 Australians who will lose an average of $2,200 every year under Labor's retiree tax. We won't kick the floor under the property market and threaten the value of people's homes while simultaneously driving up rents by adopting Labor's disastrous policy of ending negative gearing and jacking up capital gains tax. We won't adopt Labor's plan to rip over $200 billion in extra taxes from the pockets of everyday Australians and small businesses. We won't legislate an economy-destroying 45 per cent emissions reduction target by 2030 that, if imposed, would mean a new dark age not only for Australian jobs and industry but, quite literally, for millions of Australians, including many older Australians who would face the devastating twin impacts of skyrocketing electricity prices and rolling blackouts under Labor's policy. Nor will we tempt a recession or threaten Australia's AAA credit rating or risk the jobs of everyday, hardworking Australians by deviating from our plan for a strong economy that ultimately protects Medicare, puts more drugs on the PBS, secures the age pension, builds schools, builds hospitals and pays teachers and nurses. These are the responsibilities that concern our government, and we won't be swayed and we won't be distracted by the false constructs or voodoo economics of those opposite.
Second only to the primary aim of keeping Australians safe, it is a key objective of this Liberal-National government to help Australians live longer, healthier and more active lives. In last year's budget, the government announced a comprehensive package of measures to help achieve just that, especially for older Australians. Some of these measures are the object of this bill. The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 will give retirees more options and a better deal in their retirement. The bill aims to enhance the standard of living for older Australians by giving them more flexibility and choice when it comes to managing their finances in retirement, and there are three specific changes proposed by the bill to help achieve this.
Firstly, schedule 1 establishes new means test rules that better accommodate the development of new and innovative income streams for retirees that have resulted, and will continue to result, from changes to superannuation first announced in the 2016-17 budget. These changes allow innovative pooled lifetime income stream products to qualify for tax concessions, provided they comply with requirements. Pooled lifetime income products, such as annuities, are financial products that effectively pool the contributions of multiple people to provide consistent income to surviving members for life. The existing means test rules were designed for simple income stream products, such as lifetime annuities, and would not be suitable for the wide range of more complex products that are expected to emerge in the near future, and, in the event of no action being taken, would leave the system open to exploitation and distort people's financial decisions. The new means test rules will apply to all pooled lifetime income products purchased on or after commencement, being 1 July 2019, and held by social security or Department of Veterans' Affairs income support recipients. Products acquired before commencement will not be affected by the new rules.
The new means test will only assess 60 per cent of payments from any pooled lifetime income stream and, by doing so, accepts that part of the payments from the income stream simply represent a return of the individual's initial investment and therefore should not be counted as income. The 60 per cent assessment will continue for a minimum of five years or until the person reaches their threshold day—which currently is when they reach 84 years—whichever is longer. Beyond this point, just 30 per cent of the purchase amount will be assessed. Schedule 1 also amends the rules for investment-type life insurance products to make sure they are consistent with the new rules for the pooled income products.
Secondly, schedule 2 of the bill increases the work bonus, being an income test concession for age pensioners and DVA pensioners over a qualifying age to encourage them to undertake work to supplement their pension. The proposed increase is from $250 to $300 per fortnight and represents the only increase since 2011. There is also a mechanism for pensioners that take advantage of the work bonus to accrue any unused portion of the current $250 fortnightly exemption, up to a total of $6,500, and use it to exempt future earnings from the income test. Schedule 2 will increase the maximum unused concession from $6,500 to $7,800, in line with the proposed increase in the work bonus amount. The work bonus will also be extended under the schedule 2 provisions to include all income from gainful work that involves personal exertion and, for the first time, will also include self-employed income, together with income from work as a contractor or as a consultant. As the work bonus currently applies only to employment income, this extended application improves both consistency and equity and, together with all schedule 2 reforms, will increase payments for more than 88,000 social security pensioners and extend eligibility to another 1,150 retirees.
Thirdly, schedule 3 of the bill extends the existing Pension Loans Scheme, otherwise referred to as the PLS, available through Centrelink to all older Australians with securable real estate, while also providing substantially improved access to the scheme. The PLS operates as a type of reverse mortgage where amounts borrowed are a debt payable to the Commonwealth, which is secured against real property owned by the retiree in Australia. The loan is subject to a compound interest rate set by the minister, which is currently at 4.25 per cent. The loan may be repaid at any time, with the debt usually recovered either following the sale of the secured property or from the person's estate after their death.
Schedule 3 amends all relevant legislation to allow any Australian, subject only to reaching age pension age or other relevant qualifying age, to participate in the PLS irrespective of their income or asset test assessment, including pensioners assessed at a maximum pension rate. Those participating in the PLS can draw on the equity in their homes and effectively borrow to a new threshold of 150 per cent of the maximum fortnightly pension rate, inclusive of any special assistance or other supplements that may apply in their case. This measure will better and more comprehensively target the PLS to meet the needs of a diverse range of retirement situations, giving older Australians greater flexibility and more choice via an affordable government regulated scheme to support their standard of living in retirement while allowing them to remain in their own homes.
In summary, this bill provides for three technical reforms to better support Australians in their retirement. New means test rules will ensure a fair and sustainable assessment of newly developed income stream products. The increase and extension of the work bonus will mean that less income from work will be assessed for income testing purposes, allowing higher income support payments to be maintained for eligible veterans and pensioners. And the expansion of the Pension Loan Scheme, the PLS, will allow retirees, including for the first time maximum rate pensioners, to improve their standard of living by accessing the equity in their home as a government loan while still living there.
The reforms outlined in this bill will give older Australians more choice and greater flexibility in managing their finances, allow them to keep more of their pension when they work and allow retirees who own their home to receive more income. By leveraging these successful social security programs to better support the needs of retirees, this bill further delivers on the Liberal-National government's strong, ongoing commitment to older Australians and, thus, I commend the bill to the House.
I rise to support the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018. It should come as no surprise that, as the representative of the oldest electorate in South Australia, I am more aware than most of the needs and concerns of older Australians.
There are two parts of this legislation that I would briefly like to touch upon: the increase in the work bonus and the expansion of access to the Pension Loans Scheme. The proposed increase to the work bonus from $250 to $350 is an imminently sensible step that recognises the value of not penalising pensioners for remaining active and undertaking small amounts of employment. For example, there are pensioners in my electorate who deliver local newspapers in order to keep active and healthy. There are retired teachers who do a bit of tutoring after school, helping children and earning a little extra money on the side for their efforts. We know that those pensioners have such a wealth of knowledge and experience, and I think it's critical that we encourage older Australians to keep their hand in, if they feel that they would like to do so, to teach and share with the next generation. The current level of the work bonus has been eroded by inflation to the point that it is now starting to penalise this type of piecemeal work. The pensioners in my electorate will be very pleased that this legislation is being progressed.
I also welcome the extension of the work bonus to apply to income and to work from personal exertion, such as through self-employment and contracting or consulting work. However, I would encourage the government to consider indexing the work bonus such that the balance of the bonus does not continue to erode over time. Otherwise, the parliament must periodically be required to raise the bonus every couple of years by slow legislative means.
Secondly, I welcome, albeit cautiously, the expansion of the Pension Loans Scheme so it becomes available to all Australians of age pension age. The Pension Loans Scheme is a voluntary, reverse equity mortgage that offers older Australians an income stream to supplement their retirement income. It is only fair that access to this scheme is universal to all Australians of age pension age and provides everyone with the same financial support and opportunity. However, I will keep a watching brief over the scheme to ensure that there are no unexpected adverse outcomes of its expansion.
I think it's also timely to talk about the inadequacy of the pension, particularly if you are single and renting. Half-a-million older Australians rely solely on the age pension for income. Almost a third of them are living in poverty. They suffer substantial deprivation—going without food and heating, ignoring the need to see medical specialists and skipping medications—to make ends meet. Some are missing food in order to ensure that they can manage a visit to medical professionals. The average fortnightly expenditure on housing for renters was over $300, whereas homeowners spent less than $40 on repairs and remaining mortgage payments. The difference is vast. Owning your own home if you are a retired and older Australian makes you $240 a fortnight better off. These figures are from 2015, and we know that rents have increased and the pension has not kept in line with that.
So what gives? Last Friday, at the opening of my Victor Harbour permanent satellite office, I chatted with a gentleman who needs new dentures but can't afford them. Yes, he's on the state government list for public dental health, but it has been years. He's using a form of glue in his mouth to keep in the broken dentures that he has, and it is making him sick. It's causing him ulcers in his mouth. He was so distressed when I talked to him. No older Australian in our community should have to experience this. Older Australians on the pension are going without meals so they can have their medications and are going without heating so they can cover other bills, particularly those who are renting. It is important that in this place we do all we can to support every older Australian.
I believe that we need to increase the pension and provide those on the pension with a dental voucher, similar to the one the government provides to families who are recipients of family tax A. I believe that this is a policy that is needed—and needed so much that I've asked the Parliamentary Budget Office to provide a costing for the implementation of a dental voucher system for pensioners. I intend to share those Parliamentary Budget Office costings with the parliament in the hope that one of the major parties takes this up as an election promise. We know there is a strong correlation between poor oral health, and poor nutrition and poorer primary health outcomes. Helping pensioners to visit the dentist would improve health outcomes overall.
I would like to acknowledge the Benevolent Society for their work in the Fix Pension Poverty campaign. It is not something that makes front-page news, but it should be. We should be treating our older Australians better. Returning to this bill, and in closing, I welcome and support the speedy passage of this bill, which I believe will be of great benefit to older Australians, but I think we can do much, much more.
Forty-six per cent of the people who live in my electorate of Fisher are over the age of 55. Twenty-nine per cent are already retired. For most of my constituents, the issue of how they are to support a healthy, long and active retirement is a live and critical question. In living on the Sunshine Coast, they have chosen to make Australia's most beautiful and welcoming lifestyle destination their home. However, they have chosen also to make their home in a location where the cost of living can be a challenge for many. According to the well-known cost-of-living comparison website numbeo.com, consumer prices in Sydney are 21 per cent higher than those on the coast, but the average purchasing power in Sydney is 46 per cent higher. Relatively speaking, for many it is as difficult—if not more difficult—to get by in my community as it is in our nation's most expensive city.
Many of my constituents, especially many of those who are older and retired, are finding it hard to make ends meet. They are not alone. According to a December 2017 OECD report, 26 per cent of Australian retirees are living below the relative income poverty line, which the OECD defines as half of the national average wage. The coalition has listened to the concerns of older Australians, and this bill is part of our suite of measures to help.
In my own electorate, I have convened the Fisher Seniors Council. This group of older residents living in my community gathers three or four times each year to discuss the issues that they face on the Sunshine Coast and to give me feedback on our government's policy ideas. When it comes to the cost of living, one of the messages that this group have given me loud and clear is that older people in Fisher want more flexibility in retirement. One of the members of the Fisher Seniors Council, Mr Frank Gower, continues to press me to ensure that we have an age pension that keeps up with the rising cost of living. This government has delivered that with an increase of more than $100 a fortnight since the coalition's election in 2013.
Most of all, seniors in my electorate don't want more handouts. They have worked to support their families all of their lives, and they want to continue to live independently. Seniors on the Sunshine Coast want the flexibility from government that they need to help support themselves. That flexibility to use their skills and their assets to support themselves is exactly what this bill delivers in two key areas.
Firstly, schedule 2 of this bill increases the work bonus to allow retirees to work more hours and earn more money without impacting their other entitlements. As people live longer and healthier, many are finding that they do not want to give up work entirely. I'm sure many of us in this place employ retired members of our community in our offices on a part-time basis, just as I do. They bring a wealth of experience and an unrivalled knowledge of our local areas that can be invaluable in any parliamentarian's team. In a great many sectors of our economy, from retail to agriculture, the experience of decades, the old-fashioned work ethic and the calm wisdom that many of our retirees can contribute would be welcomed by employers. My Fisher Seniors Council consistently tell me that they want the choice to work more to supplement their income but that the resulting reduction in their other entitlements is a substantial disincentive. This bill reduces that disincentive by increasing the work bonus to $300 earned per fortnight.
Further, this bill provides flexibility in responding to the changing nature of work. For retired people, self-employment or contract work can be particularly appropriate, allowing them to fit their employment around their other family and often, as is the case, their volunteer commitments. However, until now none of that work was covered by the work bonus. This does not reflect the nature of the modern workforce nor of the particular needs of working seniors, and this bill rectifies that situation.
This bill also addresses one of the issues that my older constituents most often bring to my attention. Many older residents of Fisher are relatively asset rich but income poor. The government has already taken steps to provide more flexibility for these constituents by allowing them to make a non-concessional contribution of $300,000 into their superannuation from the proceeds from downsizing their homes. But this bill goes further, giving more seniors another option of releasing equity from their homes and increasing their income in retirement.
The Pension Loans Scheme allows older Australians who own their own home to, in effect, take out a type of reverse mortgage with the Commonwealth government. Existing part-rate pensioners and self-funded retirees who are currently precluded from the pension by the asset test have the option to receive additional payments, up to the maximum rate of the full fortnightly age pension, by progressively borrowing against the value of their home from the Commonwealth at a competitive rate of interest, which is currently set at 4.25 per cent. This debt can be repaid at any time, and is usually repaid from the individual's estate.
However, there are many retirees who are not currently able to benefit from this scheme. Schedule 3 expands the Pension Loans Scheme to include those who are already receiving the maximum rate of pension and self-funded retirees who do not have sufficient assets to preclude them from the age pension. The bill also increases the total amount which can be borrowed under the scheme to 150 per cent of the maximum fortnightly pension. This will give flexibility to those who need a higher income to support their active retirement. Just a few days ago I spoke with a constituent in my electorate, Mrs Margaret Little, about how she would dearly love to have taken advantage of just this sort of a scheme but previously hadn't been able to access it. Now, as a result of these amendments, she will be able to. So that is, indeed, very good news for Mrs Little and people like her.
With this bill, the coalition is listening to senior Australians and providing them with more options for increasing their income and security in retirement. It is only the latest in a series of decisions made by this coalition government to support older people to live longer, healthier and more active lives. Since the coalition government was elected in 2013, pensions have increased by $107.90 a fortnight for individuals and $162.60 a fortnight for couples. We've used the proceeds of the strong economy that this government has helped to build to avoid the need to increase the qualification age for the pension to the age of 70. That same strong economy has allowed us to avoid repealing the energy supplement, thereby ensuring that individual pensioners have another $366.60 more in their pockets every year.
All of this could not stand in more stark contrast to the policies of the Labor Party. I met a man in my electorate office recently—his name is Adrian—who, like me, was a builder. He came to Australia from his native Italy with very little, and he has worked extremely hard ever since he came here. Adrian is a perfect exemplar of the benefits that Australia can derive from ambitious people born overseas who want to come to our country to get ahead and to help build our community. Adrian worked hard, and he invested the money that he earned to create a secure retirement for himself and a future for his family. Some of his investments were successful; some were not. But, when times were tough, Adrian got back on the tools, and he's worked his way back like many migrants and small-business people in this country. Throughout his life, everything that Adrian had he had earned for himself. He's rightly proud of that achievement and he rightly expects to enjoy the modest fruits of that labour in his retirement. He, like so many Australians, has saved enough to give him a comfortable but by no means extravagant income in retirement. But when Adrian came to my office, he was furious about what the future may hold for him and his family under a Shorten Labor government.
Adrian had looked into the Labor Party's retiree tax. He'd explored what their proposal to end retirees' dividend imputation credits, pulling the rug out from under millions of hardworking Australians, would mean for him. For Adrian, the ill-judged, punitive policy of members opposite would result in the loss of 60 per cent of his income. It would take him from a secure retirement to a life filled with doubt and uncertainty about the future. Adrian knows what all Australian seniors know—that this huge, new retiree tax proposed by Labor is fundamentally unfair. It constitutes a massive cash grab by a Labor Party so desperate to fund its unsupportable, fantastical spending promises that it is willing to take the livelihoods of some of society's most vulnerable people to do it, because it's not simply Adrian who would be affected by Labor's retiree tax. Nationwide, around 900,000 Australians stand to lose an average of $2,200 every year. Australians with self-managed super funds are set to lose an average of $12,000 every year. Labor's tax will affect Australian shareholders who are on incomes of less than $65,000, self-funded retirees, self-managed super fund trustees, small APRA-regulated funds, large retail APRA-regulated funds and retired small-business owners alike. Interestingly, yet unsurprisingly, it will not affect the industry super funds.
Labor's tax will cost retirees and small businesses almost $5 billion per year and, in total, will rip $45 billion out of our nation's hard-earned savings. In my electorate alone, 7,200 older Australians will be directly and immediately affected by Labor's tax. Thousands more of my constituents who have not yet reached retirement age will have their potential income in retirement slashed by this extra taxation. Contrary to the misleading statements of the Leader of the Opposition, the hardest hit will be those on the lowest taxable incomes. Eighty-four per cent of the hundreds of thousands of people who will be hurt by Labor's policy have a taxable income of less than $37,000. This tax will hurt hundreds of thousands of ordinary people who have done the right thing and saved just enough for their retirement.
Like many others in my electorate, Adrian is passionate about trying to do something about this unfair and ruinous new tax. He's determined to do what he can to stop the Leader of the Opposition and the Labor Party from bringing about this disastrous new reality for Australian seniors. Members opposite should take note: if they continue to insist on this damaging tax, they will find themselves facing passionate opposition from some of our society's most experienced, engaged and active citizens. For their own good, let alone for the good of the people of Australia, I would counsel them to beat a path to the Leader of the Opposition's door and convince him to abandon this unjust assault on our older Australians.
This legislation demonstrates once again that it is the Liberal and National parties who respect the contribution of Australia's older people and who will put forward the measures they need to support an active and fulfilling retirement. It will make a difference to thousands of senior Australians. I commend the bill to the House.
The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 makes some positive changes for our pensioners. It was less than a year ago that I met with a Townsville pensioner named Tom. Tom, although retired, was still very active and was still able to work part time. Tom would rebuild broken bicycles and do paid handyman jobs here and there. Clearly, Tom's work schedule and pay would fluctuate. The difference would often be minuscule, but it would be enough to affect Tom's pension. This is where the system was very difficult for him. Tom still wanted to be able to work and earn a bit of cash, but he certainly required his pension. A few dollars here or there, when the limits were already so incredibly small, would affect Tom's pension. It did. This bill seeks to make changes to help pensioners like Tom.
This bill changes the way pooled lifetime income stream products are means tested; increases the amount of money pensioners can earn from employment under the work bonus before their pension is reduced; increases the rate at which pensioners can draw down their asset under the Commonwealth's reverse mortgage program, the Pension Loans Scheme; and opens the Pension Loans Scheme to full-rate pensioners.
The changes to the work bonus in particular will assist people like Tom. The bill will increase the income exemption under the work bonus from $250 per fortnight to $300 per fortnight, with a commensurate increase in the work bonus income bank from a maximum of $6,500 to a maximum of $7,800. Also, the bill will expand eligible employment income to include self-employment. These are positive changes that will encourage older Australians to stay in the workforce longer, with all the social and economic benefits that brings not just for individuals themselves but for the nation as a whole. Older Australians have incredible skills and experience, and it is therefore important that those who can and want to remain in the workforce on a part-time basis can do so without the losing as much of their pension.
The changes to the Pension Loans Scheme will also provide great assistance to our pensioners. The purpose of the Pension Loans Scheme is to allow older people who are asset rich but cash poor to access an income. Currently, to be eligible for the Pension Loans Scheme a person must be of pension age; own real estate in Australia that can be used as security; receive a payment less than the minimum rate of the income or assets test but not both—this test can apply to a partner; and meet age-pension residency requirements. Currently, only part-pensioners and self-funded retirees can access the Pension Loans Scheme. This locks out many full-rate pensioners who own their own home from the benefits of the scheme. This is unfair, and Labor welcomes the government's changes to open the scheme to full-rate pensioners.
I also support the increase in the maximum fortnightly payment rate under the Pension Loans Scheme from 100 per cent to 150 per cent of the full pension. This will allow pensioners to enjoy a better standard of living by accessing the equity they may have in their homes. Full-rate pensioners will be able to increase their income by up to $11,912 for singles or $17,958 for couples combined, per year, based on the current rates of the pension. While the current take-up rates of the Pension Loans Scheme are very low, it is an important option for Australian pensioners. The increase in the allowable rate of payment might make it more attractive to many more older Australians.
Then there are the changes proposed in relation to the pooled lifetime income stream products, which are complex. It is important not just that the proposed means-testing arrangements are fair but also that the products themselves are sound and that people will be protected from rip-offs and dishonest operators. That is why Labor supports the smoothing of the means test, which is also supported by COTA Australia. But we will be holding to account the Morrison government to make sure that the right financial regulations and protections are in place to protect pensioners who are considering purchasing a lifetime income stream. I want assurances around the kinds of products that are offered and the protections in place to make sure people understand all of the consequences of the long-term trade-off that comes with purchasing a lifetime income product.
As the banking royal commission has exposed, far too many financial products have been crafted in the interests of brokers and banks and not ordinary Australian citizens. Australians know this government will do anything it can to protect the big banks. The Prime Minister and the Liberal Party cannot be trusted to implement the recommendations of the banking royal commission, because they voted against that banking royal commission 26 times and they wanted to give big banks a tax cut. We should be changing the laws straight away to clean up the banks, but the Prime Minister's part-time parliament is sitting only 10 days in eight months and that makes it a bit difficult. Given these facts and the fact that the Prime Minister, Scott Morrison, is a good friend of the banks and not the Australian people, I am sceptical and will be holding them to account if they allow financial institutions to run riot under the changes in this bill.
The Senate inquiry into this bill identified particular concerns related to the government's go-slow on the Comprehensive Income Products for Retirement Framework, including the need to finalise the disclosure regime and related legislation and ensure that people get proper advice that is in their interests before purchasing a lifetime income stream. Clearly, the LNP government's go-slow approach on this framework, as well as the recommendations from the banking royal commission, potentially allow for unscrupulous behaviour. Enough damage has already been done by the Morrison government delaying the banking royal commission that I call on them to not use the same approach for this framework.
Although there are positive changes in this bill, pensioners won't be fooled by this LNP government. Cutting the pension is in the Morrison government's DNA. They have tried in every single budget—including in three budgets where the current Prime Minister had the job of Treasurer—to cut the pension and to increase the pension age to 70. In the 2014 budget they tried to cut pension indexation—a cut that would have forced pensioners to live on $80 a week less within 10 years. This is unfair and unjust. It would have ripped $23 billion from the pockets of every single pensioner in Australia. In the 2014 budget they cut $1 billion from pensioner concessions—support designed to help pensioners with the cost of living. In the 2014 budget they axed the $900 seniors supplement to self-funded retirees receiving the Commonwealth Seniors Health Card. In the 2014 budget the Liberals tried to reset the deeming rates thresholds—a cut that would have seen 500,000 part-pensioners worse off.
In 2015 the Liberals did a deal with the Greens to cut the pension of around 370,000 pensioners by as much as $12,000 a year by changing the pension asset test. In the 2016 budget they tried to cut the pension of around 190,000 pensioners as part of a plan to limit overseas travel for pensioners to six weeks. In the 2016 budget they also tried to cut the pension of over 1.5 million Australians by scrapping the energy supplement for new pensioners. The Morrison government's own figures show that this would have left over 563,000 Australians currently receiving a pension or allowance much worse off. Over 10 years, in excess of 1.5 million pensioners would have been worse off. On top of this, they spent five years trying to increase the pension age to 70. They still refuse to adjust the deeming rates for pensioners.
I feel as though I need to take a breath after going through that long list of LNP cuts to pensioners, but the sad fact is the cuts don't stop there. The Liberals still have cuts to the pension before the parliament. They want to completely take away the pension supplement from pensioners who go overseas for more than six weeks. This will see around $120 million ripped from the pockets of pensioners. They still want to make pensioners born overseas wait longer before qualifying for the age pension, by increasing the residency requirements from 10 years to 15 years.
Labor has fought these cuts tooth and nail. No-one spends five years, including three as Treasurer, trying to cut the pension and increase the pension age to 70 unless it is what they truly believe in. This is why pensioners know that they cannot trust Prime Minister Scott Morrison or his government. There is one simple fact: Prime Minister Scott Morrison was the architect, the designer, the engineer, the craftsman and the builder behind every cut and every attack on Australian pensioners. Pensioners know that with another term of a Morrison government, there would be more cuts on the way which will impact on them. It is only Labor that has fought against every single cut to pensioners, and it is only Labor that will look after Australian pensioners.
I want to make three points about the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018: firstly, to talk about the things in this bill that we are quite open to supporting; secondly, to talk about the context in which this bill is being considered and some of the history behind some of the things that led us to this point; and, thirdly, to raise my concerns about the way in which pensioners today are being treated or, I might say, mistreated by this government through the failure to deal with pensioner concerns and the way in which pensioners are being treated when they interact with the government.
At the outset, we have said that we certainly are open to some of the measures that are being put forward in the bill itself. The bill changes the way pooled lifetime income stream products are means tested and increases the amount of money pensioners can earn from employment under the pension work bonus. This was an initiative introduced by the Rudd Labor government. The bill itself increases the rate at which pensioners can draw down their assets under the Commonwealth's reverse mortgage program, the Pension Loans Scheme. I think it is important to point out that that this scheme is a legacy of the Hawke Labor government. The bill also opens up the Pension Loans Scheme to full-rate pensioners and seeks to expand on important Labor legacies which expanded income streams for pensions.
On the work bonus, I must say, I am particularly supportive of this element, which is allowing, in particular, for pensioners over the pension age to keep in contact with the workforce. That allows them to keep more of their pension while they're having earnings from working. It functions by exempting a certain amount of income from the pension income test, above the pension income test-free area. Currently, the work bonus exempts the first $250 of fortnightly employment income. This bill will increase that to $300 a fortnight. There is also an increase in the work bonus income bank from a maximum of $6,500 to a maximum of $7,800. These things are important in an environment where many industries are experiencing skills shortages and where skills shortages may be an increasing concern.
Given some of the changes that we are seeing in the labour market, finding a way to keep people who have built up expertise and experience through their work life and keeping them engaged in some way in the workforce is good for the individual. It is also good for the country to have that expertise put into place. If we can also quite strongly deal, as a nation, with some of the perverse age discrimination that occurs in our workplaces—at a time when those same workplaces are crying out for more workers—I think that is an important thing.
We do know that the nature of work in this country is changing and that there are some people who will find, through the process of firms applying new technology in their workplaces, that automation may have an impact on jobs. We need to find new ways to retrain people and to get them new roles as well. There will be older people who still want to maintain contact with the workforce. We also need to ensure that their skills are up to date and that we provide adequate, strong and practical training platforms that allow for older Australians to maintain contact with the workforce.
We have to make sure that we don't have disincentives in place that mean that people who are accepting a pension feel that they can't work in the workforce, they can't contribute to the workforce or they can't, in some way, reduce the skills shortages that exist. The rules that we've set around their pension might mean that they feel that if they work too much then they are going to lose some of their pension. These types of changes that we're talking about in here are really important. We are certainly happy to support some of the changes that have been put forward. My colleague the member for Barton, the shadow minister for social services, has spoken at length about some of the other elements to this bill that we're quite open to—in terms of the Pension Loans Scheme and the pooled lifetime income streams—and has canvassed those at length.
I did say that there were two other elements to my contribution today that I wanted to make. The next one is about the context in which this occurs. As much as I and my other colleagues have expressed support for some of these initiatives, this has not been developed by a government that has been friendly to pensioners. We suddenly hear, as the member for Gorton and I have been subjected to in this place and elsewhere, this found devotion for post-retirement incomes by those opposite. We heard all the campaigning, the quite disgraceful campaigning, that was waged by the member for Goldstein in his role as the chair of a parliamentary committee that should not be so blatant in its politicking and its fundraising—using a parliamentary committee to do all these things. At no point have we seen these people stand up for pensioners in the same way that they want to stand up for people who are getting franking credits in excess of what they need; those people are given large amounts of government money. Those opposite have suddenly said, 'This is an unfair thing to even think, taking away these excess credits.' But, when you consider all the things that were being proposed by this government to impact people on some of the lowest incomes in the community—older Australians who are pensioners—you've never seen them stand up for pensioners in the same way.
Look at the way in which the coalition has sought to attack pensioners. For the five years of this government, the current Prime Minister spent five budgets, including three as Treasurer, trying to cut the pension and one as the Minister for Social Services trying to raise the pension age to 70. In the 2014 budget, they tried to cut pension indexation, which would have meant pensioners would be forced to live on $80 a week less within 10 years. It was an unfair cut that would have ripped $23 billion from the pockets of every single pensioner in Australia. We never hear them talk about that. They all signed up to it; they were all happy to see this happen to pensioners.
In 2014 they cut $1 billion from pensioner concessions—$1 billion in support designed to help pensioners with the cost of living, and they cut it. Again, none of them turned up to parliamentary committees and none of them set up those dodgy websites where they think they can score a political point. They're never there to back in pensioners. In 2014 they axed the $900 seniors supplement to self-funded retirees receiving the Commonwealth seniors card. In 2014 they tried to reset deeming rate thresholds, which would have seen 500,000 part-pensioners made worse off. Where were these people in standing up for people? They were nowhere to be seen. They all filed, one after the other, to back in these impacts on older Australians.
In 2015 they went at it again. They did a deal with the Greens to cut the pension of around 370,000 pensioners. Mind you, the Greens in the Batman by-election suddenly thought that they were going to stand up for older Australians and said they wouldn't support Labor's campaign to reform franking credits. This is the same party who sidled up to that party over there to rip off older Australians. As I said, 370,000 pensioners would be affected by as much as $12,000 a year by changing the pension assets.
Mr Brendan O'Connor interjecting—
If they don't have a good memory—my friend the member for Gorton points out the need for memory—we will remind them every single day. We remember absolutely what they tried to do to older Australians.
In the 2016 budget, not content with all those other changes, they then tried to cut the pension of around 190,000 pensioners as part of a plan to limit overseas travel for pensioners to six weeks. How dare they want to stay in contact with family members overseas and leave the country! So they decided they would go in there and rip off the pension even more. In the 2016 budget they also tried to cut the pension for over 1.5 million Australians by scrapping the energy supplement for new pensioners. Now they are getting up and saying, 'We saved the energy supplement.' They wanted to get rid of that energy supplement time and again. It was only through a sustained campaign led by the member for Jagajaga to maintain the energy supplement that they buckled and, at the last moment, relented and refused to cut out the supplement that in their heart of hearts they have tried to rip off for ages.
Scrapping the energy supplement would've left over 583,000 Australians who are currently receiving a pension or allowance worse off and, over 10 years, that would have been in excess of 1.5 million pensioners. Where were you when this was being done—through the chair, if you don't mind me saying in general terms, where were those opposite when this was being proposed?
On top of this, they spent five years trying to increase the pension age to 70, which would have been the highest in the OECD, and still refused to adjust deeming rates. They want to completely take away the pension supplement from pensioners who go overseas for more than six weeks, and they still want to make pensioners born overseas wait longer before qualifying for the age pension. That is what those opposite do.
If that's not bad enough, they make older Australians wait longer to access the age pension. They've changed the goalposts on when they'll deliver a decision for older Australians. It used to be, roughly, 36 days. Now it's up to 49 days. When they delay the decision to grant older Australians the age pension due to them, they say, 'It's not our fault; it's the fault of the average Australian making the claim. They should have done it earlier.' What a joke, a government that can't get its act together to determine whether or not a person eligible for the age pension should get it. It's not that they can't do it; it's that they won't. They are holding back money to older Australians because they refuse to pay out the age pension. They put up every type of excuse possible, but they will not pay out the age pension to those who deserve it.
They have cut jobs from the Department of Human Services. They make you wait for ages when you're on the phone trying to get help. They make it near impossible to turn up to a Centrelink or Medicare office to get service. They're always trying to take you to a website or, failing that, a phone call, but they don't provide support to make sure those things operate efficiently. The government continually blames the average older Australian for things that they should be accountable for or, as the member for Gorton said, that they should accept responsibility for. They refuse to do it. When you look at the number of jobs they've cut, when you look at the number of contractors they've put on and when you look at the way complaints have soared it is no surprise you are getting this outcome.
For what they are putting forward we have said:' Enough's enough.' Our side of politics has said we will invest in better service and we will invest in a new workforce and we will put 1,200 people into DHS to make sure people get the help they need and at the time they need it most. I am very proud that we announced 50 new jobs in the seat of Longman over the course of last year. We announced 50 jobs in Braddon. I'm particularly proud that in our decentralisation push we announced, for the seat of Herbert, 200 DHS jobs in Townsville, and we announced 100 jobs for the seat of Leichhardt. This is to make sure that people get help when they need it most. It's to see good jobs go out to the regions instead of being stuck in one place. It delivers on a decentralisation agenda. Those opposite talk about it but fail to deliver. It's up to us to make sure that it happens.
You don't hear the Minister for Human Services commit to these jobs or stop the job cuts. Instead, he's out there defending the contractors and saying he'll do more contracting out. It's a continued recipe for failure, given the way complaints have soared under this government. Instead of backing in better service, backing in full-time jobs, recognising that people want that work, recognising that the public want better service, he says to us, 'What are you going to do about the contractors?' It's like he's a member of a government that's cut jobs but has discovered a commitment to job security, all of a sudden! That is patently false. What they are committed to is an ideological obsession with contracting out, with reduced employment standards and reduced commitment to service—at a time when older Australians depend on that service.
While there's a lot to be said in favour of this bill, it is done against a backdrop of declining service, under this government's watch, a failure to deliver the service Australians expect. I expect the next member who gets up can defend all the rip-offs of pensioners that he has been an accomplice to! (Time expired)
I very much enjoy following a contribution from the member for Chifley. It's always full of euphemisms, and it certainly gives me the opportunity to compare and contrast our policies with those of the opposition. I must say to the member for Chifley: welcome aboard the decentralisation bus. I think you should take a bit of time to speak to your colleagues about it, because I'm fairly confident that they haven't supported it for some years, in fact decades. I'm pleased to see that, finally, someone over there supports the decentralisation of the Public Service into the regions, and I'm very supportive of what the member for Chifley had to say in regard to decentralisation.
But, of course, I rise to speak on the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018. This bill implements measures announced as part of the 2018 budget to give retirees greater choice and flexibility when it comes to managing their finances in retirement. Why should that happen? Well, because they deserve it. Over a lifetime they garner experience that matters, that is invaluable, that can be passed on, that can be utilised, that can be transferred to those in need. So I think this is a great opportunity not only for them, not only for those others who are in the workplace, but also for us, because it is incredibly important that we can transfer the skills of those older Australians to others in need. I thank them all for their contribution. Certainly without that age bracket working as volunteers right around our country we would not be able to support as many things as we do. The time that they give freely is, I think, invaluable.
There are three main changes in the bill to support Australians in retirement. There's an expansion of the Pension Loans Scheme, an increase and expansion of the pension work bonus and a new means test rule to encourage the development and take-up of lifetime retirement income products. The member for Chifley said that we have found a sudden devotion to those on the pension, those who are older and more senior Australians, and those who are more experienced. That is absolutely not the case, especially in my electorate. At the 2016 census, the median age of people in the electorate of Hinkler was 46 years, which is about 10 years above the state average, and 25.4 per cent of them were aged 65 years and over—36,346 people. Approximately 20,500 of them, about 14 per cent, were aged between 55 and 64. As at June 2018, a total of 27,860 people were receiving the age pension in Hinkler. So for me, as a local member, they are an incredibly important sector of our community. We must stand up for what they need, and this bill makes changes that are good for them. They are good opportunities.
Let's compare and contrast what we are doing in the bill before us with the proposals from the opposition. I'll quote from the front page of NewsMail, my local newspaper: 'Hip-pocket hit for 5500 retirees'. There will be a hip-pocket hit for 5½ thousand retirees. That is an enormous number of people. But this is the proposal from those opposite. They want to go to them and take away some of their meagre returns at tax time. In fact, on average, it's just $2,200 a year. Those opposite put forward that they haven't paid tax. I'm not sure how they worked that out. People own a share in a company. It's their part of the company. It has paid tax. It's on their behalf. If they are a low-income earner, they're entitled to a tax refund like every other Australian. Every other Australian is entitled to that tax refund, but not according to those opposite. In fact, the local candidate for the Labor Party dug a pretty big hole for himself when he said:
Make no mistake, this is an unfair loophole that over-whelming benefits the wealthy.
Most people in Bundaberg have never heard of franking credits or know how to access them …
It's just outrageous. How can you suggest to these people who make their claim every year that they don't understand it, that it doesn't apply to them and that they are rich? They absolutely are not rich. The refund on average is $2,200. That might not make a lot of difference to a Labor Party organiser who is the candidate in Hinkler—I'm sure the union has plenty of money to pay his wages—but $2,000 for people on low incomes helps them with their rates bills and electricity bills. It helps them pay bills that they would otherwise not be able to pay.
As the member for Dawson says, it helps them with their medical costs. It helps them with their day-to-day living. This is a source of income for them. They are entitled—they are entitled—to get that refund like every other Australian. What are they suggesting? That people should give up all the things they've worked hard for and invest in something else, which they're then entitled to get a tax return on because those opposite want to take a massive $200 billion tax grab from the Australian economy and take a hammer to the Australian economy. I think this is just outrageous.
The candidate for the Labor Party in Hinkler has doubled down. He has gone out on social media and said that Labor will end this tax loophole. It isn't a tax loophole; these people are entitled to a rebate. It is the same for every single Australian. The comebacks on Facebook have been pretty solid. I looked at what's been put forward by Mr Jesse Zielke. I know Jesse. Jesse is a local builder and he's told me outright that he supports a different side of politics. And he's entitled to: this is a democratic system and you can vote for whoever you like. But I think what he says is important as a response to what the Labor candidate has put forward. He says:
To put it even more simple, it's the same as an employer paying an employees tax on their behalf. I'm no where near retired and think this is just plain wrong, the shareholder is paying tax and the same shareholder is a retiree who's managed to make some good decisions in life and reduce the burden on claiming a pension which actually saves a lot of money. Happy to support good policy, but this is just wrong.
And it goes on. There are endless letters to the editor, including one from Brian Reynolds. He's pretty straight up and down. He says:
Labor's tax on the vulnerable is ridiculous, unfair, infantile, stupid and unsustainable.
In fact, he suggests:
… Labor shows a complete lack of understanding of financial matters.
He goes on:
If Labor will steal from the elderly and most vulnerable Australians, they will have no problem keeping tax returns from others in the future.
I've got to say that I continue to be surprised that Labor haven't changed their minds and backed off, because this is taking money from the people who desperately need it, who are entitled to it, who get the return and have set up the structures for their retirement many years in advance, and Labor simply want to rob it from people's pockets. That's it—$2,200. What does the Labor candidate think? He thinks they're rich and they've come from capital cities—and I say shame on him. That is very, very ordinary.
Getting back to the bill, the Pension Loans Scheme provides fortnightly income payments at a reasonable rate of interest to people who have receive a reduced rate of income support pension or do not receive any income support pension because of the income or assets test. Payments are made for a short period of time while the person's income and assets are being rearranged or may be made for an indefinite period. A loan under the Pension Loans Scheme can be repaid in full or in part at any time. The full amount of the loan plus interest owed at the time of the death of the person will be recovered from the person's estate. There is quite a lot of detail in the bill, of course. I don't intend to stand here and regurgitate all of that.
The legislation increases the work bonus threshold from $250 to $300 per fortnight for those individuals who choose to do some more work. I look at my own family. My father is 74. They still run an extensive harvesting contract business. They've reduced their farming operations, but he goes to work because he enjoys it. I think that the opportunity for those individuals to put a little bit more in the tin is very helpful for them, and I think it's in the best interests of all. This also means that the first $250 of fortnightly employment income is not counted under the pension income test. The legislation amends the current rules for lifetime income stream to create fairer, more equitable means test outcomes. Once again, this is well supported across the parliament and makes a very, very reasonable contribution to those older Australians who have certainly done a lot for us. They have been stoic. They have dealt with incredibly difficult times throughout their lifetime, whether those are world wars, local wars or difficult times through floods and droughts. They have contributed to Australia. They have made Australia a better place, and we should look after them and provide them with opportunities.
I note that the member for Dawson is in the House and is very keen to make a contribution. I say again to the Labor candidate for Hinkler: 'You should change your mind on this. You have a dug a hole for yourself. You have not only called those people in my electorate rich but said they are trying to dodge taxes through a tax loophole without getting a small and meagre return that helps them to pay their bills.' I think it is an outrage and he should be called out for it. I thank you, Deputy Speaker Hastie, for the opportunity to make a contribution. I support the legislation.
I rise to speak on the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018. This bill makes a number of changes announced in the budget last year. These changes are to help support incomes for Australians in retirement.
The first change outlines how pooled lifetime income streams will be assessed for social security means testing. The new rules taking effect from 1 July from next year will mean that 60 per cent of payments for a pooled lifetime income stream will be treated as income and 60 per cent of the initial purchases amount will be assessed under the assets test. After five years, or when the person reaches the life expectancy of a 65-year-old male, currently 84—whichever is longer—the assets test will assess only 30 per cent of the initial purchase amount.
A second change this amendment will make refers to the work bonus. Currently pensioners can supplement their pension by up to $250 a fortnight without affecting their pension. This amendment raises that threshold by $50 to $300.
The third change extends the Pension Loans Scheme to all older Australians with securable real estate. The current scheme, which is effectively a type of reverse mortgage, is only available to part-rate pensioners and their partners and some self-funded retirees.
But while these are positive changes, pensioners, especially self-funded retirees, have a very uncertain future ahead of them if the government changes. That's because they would face the threat of Labor's retirement tax if Labor were to form government next year. Earlier this year, some genius in the Labor Party dreamt up a new way to steal people's money. They figured out that pensioners and self-funded retirees had it too easy, apparently. The party thought they weren't being taxed enough, so they created this special tax for older people, a retiree tax. What they've designed is blatant theft. Labor promised to raid $59 billion on imputation credits that retirees earn on their savings.
Most people are not across how imputation credits work, so Labor is trying to pull the wool over their eyes by dressing it up as something that it is not. Labor claims that the government is handing out money to retirees. They are saying we are handing out money to retirees. The truth is the government is simply returning money that it has already taken off retirees that it should not have taken off them. The truth is the government accepts that they have taken too much money off those retirees. They have taken more tax than those retirees have to pay and are liable to pay. Imputation credits are a means of avoiding double taxation. They are an acknowledgement that tax has already been paid and if too much tax has been paid, more than required by the law, then the excess amount is returned to the individual. That is what we do for all individuals who lodge a tax return and are found to have paid more tax than what they were required to. But Labor wants to put a stop to those returns going to retirees.
When you see Labor going after money like that, it should be a concern to any voter who earns a wage and pays taxes, because if your employer deducts more tax than they should, or if you claim deductions in your tax return, Labor has flagged that they don't want to give you your money back. Once they've got your money in their grubby little hands they will never give it back. It doesn't matter if are you a worker or if you are retired, Labor will find a way to steal your money. Australians will need to ask themselves a question at the next election. Retirees will need to ask themselves, 'Will my vote enable Labor to steal money from me?' Workers should ask if their vote will help Labor steal money from mum and dad's retirement incomes. Young Australians should ask themselves if their vote will help Labor steal from nanna or pop.
I hear laughter over there. The Tasmanian member laughing should know that 20,000 Tasmanians are going to be robbed of money. Twenty thousand Tasmanian retirees will be robbed from this tax. He shouldn't be laughing. He should be hanging his head in shame for trying to rob 20,000 Tasmanian retirees. If an individual robbed nanna or pop they would go to jail and they would be reviled by the community for such a disgusting, low act.
With the bill that we are debating today the government is working to support the income of retirees. We're trying to ensure that retirees have enough income to pay for the necessities of life. The Liberal-National government understands that many retirees are often on low incomes and those incomes are fixed incomes, because of retirement plans they've put themselves in. Despite presenting themselves as a party that helps people on low incomes, and they are anything but, the Labor Party is actually promising to rob low-income retirees with this retiree tax that they are proposing. They want to force our seniors below the poverty line. The Labor Party wants to see the 20,000 retirees and pensioners in the electorates in Tasmania making tough decisions like whether to pay the power bill or whether to eat every night. They are the kinds of decisions they want. They want seniors to give away their pets, because they can't afford the pet food and they can't afford the vet.
I met with a constituent in my electorate, Mr Arnold Fanning, who is very worried about how he and his wife are going to survive under a Shorten Labor government. The Fannings have worked hard all their life. They've saved for their retirement, with fixed plans. As a result of the sacrifices that they've made their entire life, they've funded their own retirement; they do not rely on government support. In fact, they pay private health insurance to avoid being a burden on the taxpayer. However, if Labor's retiree tax came into play then the only way the Fannings could make ends meet would be to dump their private health insurance. The consequences of that decision for the government and for taxpayers would be another elderly couple accessing the taxpayer-funded public health system. There would not be a net benefit to the government under that scenario—quite possibly the opposite. With their retiree and pensioner tax, Labor would rob seniors of their dignity and of their freedom to choose their health providers.
I refer to this unfair policy of Labor's as a retiree and pensioner tax because it will affect both. The initial backlash to this ill-thought-out plan caused Labor to exempt pensioners, apparently. But what they've actually done is exempt only the people who were pensioners at that moment in time, because they wanted to take away the sting. But others who began or will begin accessing the age pension after that announcement will be subject to the same robbery and theft as self-funded retirees are going to go through. So, pensioners, make no mistake, Labor will tax pensioners under this retiree tax. After exempting some pensioners from this unfair tax, Labor now tries to paint the victims, as the member for Hinkler just said, as 'typically wealthy retirees', but almost all, 97 per cent, of the elderly victims of this retiree tax will be individuals who have taxable incomes below $87,000; 84 per cent of the potential victims of this retiree tax are on taxable incomes below $37,000; and more than half of them have taxable incomes of less than $18,200.
Taxable incomes. He says 'taxable incomes'. What does he want to be on—the Labor Party's imaginary income thresholds? The member who is interjecting needs to think long and hard about the 20,000 Tasmanians that are going to be affected, and he should be talking to them. The victims of this retiree tax proposed by Labor will be pensioners, part-pensioners and self-funded retirees. They have done the right thing their whole life. They've worked hard, scrimped and saved to support themselves in retirement. They've done this nation a great service by removing some of the burden on the government and on the taxpayer. They've worked hard—they've built this country—and Labor wants to reward them by stealing their hard-earned money.
I met with one of the potential victims of Labor's retiree tax in my electorate earlier this year. Jolien is 88 years old. He and his wife, Enid, are self-funded retirees. They've worked hard their entire lives and paid all their taxes—a lot of tax. They've never relied on any support from the government. In the process, they saved for their own retirement. Saving means sacrificing. Instead of spending money having a good time, going on holidays or going out every night, Jolien and Enid chose to save money so they could support themselves in their later years. That hard work and saving enabled them to do just that. They're self-funded retirees who do not receive any pension from the government.
If you believe Labor's spin about 'typically wealthy retirees', you probably think that they're living the high life, dining on caviar and champagne every night. But Jolien told me, 'Our gross income, between the two of us, is less than the current average weekly wage'—less than the current average weekly wage. He said that, under the planned retiree tax by the Labor Party, their income would be reduced by more than $10,000 a year. He said, 'On part of my personal income, it will be 64½c in the dollar on the excess imputation credits.' Corporate fat cats and bank CEOs—banks themselves don't pay 64½c in the dollar on any part of their tax. Jolien is just one of the many retirees in my electorate who have voiced their concerns about their financial future under a Shorten Labor government. They can't believe that the lifestyle for which they have worked and saved, scrimped, for decades will be pulled out from under them with the stroke of a pen.
If we really want to support retiree incomes in Australia the most important thing we can do is to stop the shifty Leader of the Opposition from ever becoming Prime Minister. We can legislate measures like we're doing in this bill today, but all that and more will be undermined if Labor's retiree tax, their attack on seniors in this country, means that investment dividends are no longer protected from double taxation. It is hard to believe that in September 2017 the Leader of the Opposition stood up in Townsville and said:
I think Australians pay enough tax at the moment. I don't believe that another tax is going to be what Australians need or want at this stage.
It is very hard to believe that. It's very hard to believe that he said it with a straight face, because Labor is now promising to tax everything that moves and impose levies on anything that doesn't.
As well as stealing money off more than one million individuals with their retiree tax, they will also hit around 40 per cent of self-managed super funds and retirement savings that are held in about 3½ million super fund accounts. They did, however, very conveniently allow hundreds of millions of dollars in franking credits to be refunded to tax-exempt organisations, also known as trade unions, that donate to the Labor Party.
The truth is that no amount of support for retirement incomes will make up for what would lie ahead in the unfortunate circumstances of having a Shorten Labor government. They would not only impose a retiree tax; they would hit them with a housing tax, with a carbon tax, with higher electricity bills and even, as the unions want, with a death tax. They are proposing to raise more money from new taxes—more money than the actual GDP of New Zealand—because they would have to pay for their waste, for their profligate spending and for their inability to run a budget. It's like the Labor Party has employed two innovation professionals: one to dream up ways of how to throw around money and win votes, and the other as some kind of grim reaper tax officer dreaming up ways to hurt people and searching for new ways to hurt them even more. This time around it's going to be older Australians. How disgusting. How disgusting to attack people in our society who have worked hard to build up this country and some of the most vulnerable in our society.
It is no wonder there was white-hot anger in Townsville recently at the House economics committee, which was conducting a public hearing for their inquiry into the implication of removing refundable franking credits. There was quite a turnout for that meeting. Many of them drove in the rain as the floods started. They drove through the rain to get to that meeting. They wanted to have their voices heard. And didn't Labor hate it that self-funded retirees and pensioners actually had their voices heard through that platform? They tried to discredit that inquiry to sweep the problems under the carpet.
They have the audacity to come in here and tell those self-funded retirees and pensioners to just not vote for them. Actually, that's the best thing I've heard. I concur with that advice from the Labor Party. The best advice for seniors right now is to not vote for the Labor Party, because they are going to come after you. Regardless of the changes we make through this bill to support the incomes of Australians in retirement, it will all come to nought if a Shorten Labor government comes to power.
Pensioners and retirees will be taxed. Seniors will be far worse off under a Labor government. It will be a case of three steps forward under this bill, and a Bondi tram one mile back. There's one thing that we've learnt about Labor: when they run out of their own money, they come after yours, they come after mine, they come after everyone's. If you're a senior, there's one thing as sure as night follows day, and day follows night: they're coming after your hard-earned. It's absolutely disgusting that they would try to rip off and steal the hard-earned of our senior Australians—people who built this country, people who are some of the most vulnerable, people who are on fixed incomes, people who are on low incomes.
I say to the Labor Party: think again, and if you don't think again you are going to be punished at the ballot box. Those 20,000 Tasmanians who receive these funds—
Opposition members interjecting—
are going to come for you, mate; they're going to come for you. They're going to come for every single one of these Labor people. They're so smug, walking around like they've won this already. Well, I've got news for them, and so have the seniors around this country: they're going to punish Labor at the ballot box for disgracing themselves with this policy.
I thank all members for their contributions to this debate, and I'm now pleased to sum up. Let me commence by tabling a replacement explanatory memorandum to correct a minor error. The Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018 implements measures announced in the 2018-19 budget to enhance the living standards of older Australians. The bill provides for three changes to support Australians in retirement, including new means test rules to encourage the development and take-up of lifetime retirement income products, an expansion of the Pension Loans Scheme and an increase and expansion of the pension work bonus. All three changes will commence on 1 July 2019.
The new means test rules for pooled lifetime income streams pave the way for the development of retirement income products that support greater choice and flexibility for Australians in retirement. They apply to all pooled lifetime income products held by social security or veterans affairs income support recipients that are acquired or purchased on or after 1 July 2019. Products purchased before 1 July 2019 will not be affected by these new rules. The rules will not change for account based income streams—the most common retirement income product. Under the income test, the new means test rules will assess 60 per cent of payments from a pooled lifetime income stream as income. Under the assets test, the new means test rules will assess a proportion of the total purchase amount for the pooled lifetime income stream. At the time of purchase, 60 per cent of the purchase amount will be assessed. This will continue for a minimum of five years or until the person reaches the life expectancy of a 65-year-old male, currently the age of 84, whichever is longer. After this point, 30 per cent of the purchase amount will be assessed. In situations where an income stream is sold outside of superannuation, the new rules have some additional provisions to make sure that this is factored into the means test assessment. Stakeholders in the financial product and retirement income industries have been consulted throughout the development of the new means test rules, and the new rules take into account their feedback. The new means test rules are estimated to cost $20.2 million over four years.
Secondly, this bill increases the pension work bonus by $50 to $300 per fortnight and extends the application of the work bonus to income earned from self-employment. The work bonus is an income test concession for pensioners of age pension age and veterans affairs pensioners over qualifying age that encourages pensioners to undertake work to supplement their pension. The work bonus was set at $250 per fortnight when the current scheme was introduced in 2011 and has not been increased since. Increasing the work bonus amount to $300 a fortnight will allow pensioners to retain more of their pension when they receive income from work. Because the work bonus operates in addition to the standard pension income test free area, which is currently $172 per fortnight for a single pensioner, the increase in the work bonus to $300 a fortnight will allow, for example, a single age pensioner with no other income to earn up to $472 a fortnight from employment and still receive the maximum rate of age pension. The work bonus income bank limit will also increase to $7,800 under the changes. Pensioners will be able to build up any unused amount of the $300 fortnightly exemption to a total of $7,800. This amount can be used to exempt future earnings from the pension income test, so the changes will mean a pensioner could earn up to $7,800 a year extra without it affecting his or her pension. Extending the work bonus to the self-employed will improve the consistency and equity of the work bonus. It is fair that self-employed pensioners who earn income from engaging in work should be able to access the work bonus in the same manner as pensioners who are employees. Overall, the changes to the work bonus will increase the payments of about 88,750 social security pensioners and 1,000 allowance recipients from 1 July 2019. Approximately 1,150 people will become eligible for a social security pension for the first time. Approximately 3,000 veterans affairs pensioners will also benefit. The changes to the work bonus are estimated to cost $227.4 million over four years.
The bill also expands the Pension Loans Scheme. The Pension Loans Scheme is a voluntary reverse mortgage type loan available through Centrelink to part-rate pensioners and some self-funded retirees who own real estate in Australia. Under this scheme, a person of age pension age can nominate to receive an amount up to the equivalent of the full rate of the pension, with the payment accruing as a debt secured against real estate owned by the person. The debt accrues compound interest, with safeguards ensuring that the amount of the maximum loan that can accrue is limited. The expansion of the Pension Loans Scheme will mean that the available Pension Loans Scheme fortnightly loan plus pension amount will increase to 150 per cent of the maximum rate of fortnightly age pension, including the pension and energy supplements and rent assistance where applicable. This will allow, for the first time, maximum-rate pensioners with securable real estate in Australia to access the scheme. Current arrangements that prevent some self-funded retirees from participating in the scheme will be removed. The change will also allow existing Pension Loans Scheme recipients to increase their existing pension plus loan amount up to the new threshold of 150 per cent of the maximum fortnightly rate of pension. The changes will give older Australians more choice to draw on the equity in their homes to support their standard of living in retirement. Around 6,000 eligible pensioners of age pension age are expected to take up a loan under the expanded scheme over the next three years. The changes to the Pension Loans Scheme are estimated to cost $11 million over the forward estimates.
The bill also includes technical amendments to confirm that income support recipients of age pension age qualify for the employment nil rate period, which enables pensioners with work to remain connected to the pension system for a 12-week period, allowing them to retain their concession cards and immediately return to the pension if their work ceases.
Overall, this bill will give retirees greater choice and flexibility when it comes to managing their finances in retirement. It will support home-owning retirees to receive more income in the form of a loan, and it will allow older Australians to keep more of their pension when they work. In the best interests of senior Australians, I seek the support of the parliament for the passing of this bill. I commend the bill to the House.
The original question was that this bill be now read a second time. To this, the honourable member for Barton has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is the amendment be agreed to.
Original question agreed to.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.