Australia’s seniors get big tax and super breaks

In a big-spending 2007 election year budget which includes income tax cuts worth $31 billion, the Howard Government has also provided extra financial bonuses for Australia’s senior citizens.

The Federal Treasurer, Peter Costello, presenting the Government’s budget on Tuesday night, described the next morning by newspapers as “smart money” and “clever carrots”, said that the benefits for seniors “recognises the contribution older Australians have made to building our economy”.

Under the Costello budget more than two million seniors will receive a $500 tax-free windfall before June 30 this year in a $1.3 billion election year “reward”. It will apply to age and veteran pensioners on the utilities allowance and seniors’ health card and veterans’ gold cardholders.

In “giving something back” to Australia’s seniors Treasurer Costello said that “these payments will be tax-free and not treated as income when calculating social security payments”.

Older Australians will also benefit from higher tax-free thresholds with single seniors with taxable incomes less than $25,867 and married seniors with incomes of less than $43,360 not having to pay tax. And under a $394 million package people receiving a carer payment will get a one-off lump sum payment of $1,000 while those receiving a carer allowance get $600. Recipients who qualify for both will get the full $1600, payable by June 30.

The Costello budget provides $1.6 billion for aged-care incentives which have already been announced by the Howard Government. It has had to add $92 million extra in ‘transitional funding’ to the “Securing the Future” aged care initiative announced in February, due to an initial miscalculation in funding for low care. The package sets aside $411 million for community care and community-based respite care.

A new needs assessment process will cost $394 million over four years and $99 million over five years will expand eligibility for continence assistance, while $92.9 million will boost medical services to aged care homes by paying GPs more to visit, and also other allied health and dental professionals.

The Costello budget has provided a special bonus for Australian seniors and their superannuation with low income earners who put extra money into their super accounts last financial year – 2005 to 2006 – getting a one-off co-payment of up to $3000. For every dollar that eligible employees invested in their super, the Government will contribute $3 – double the usual $1.50.

The measure will cost $1.1 billion but Treasurer Costello said it was all about transferring Government savings into private savings. “The extra co-contribution recognises the effort these people have already made to save for their retirement. This helps low and middle-income earners,” Mr Costello said.

People on incomes of less than $28,000 a year are eligible for the full co-contribution which reduces gradually up to incomes of $58,000, where it stops. Eligible employees who contribute $1,000 to super are normally entitled to a matching Government contribution of $1,500. This is doubled to $3,000 for the 2005-06 year, and those eligible for a $500 contribution will be entitled to a $1,000 co-contribution.

This one-off co-contribution increase is seen by observers as partly attributed to the tax take on superannuation funds which last year contributed $8.3 billion to Government revenue. Australia’s super funds are enjoying the benefits today of a booming stock market and taxes on super fund earnings were up 14%, or $1.02 billion, for 2006-07.