Many age pensioners felt slugged on January 1 when the Turnbull government tightened the assets test for the pension. The government felt heat from that and made a concession in the budget as a result.
The assets test hasn’t been wound back, but under a budget night change, 92,000 pensioners who lost their part pensions and also lost their Pensioner Concession Card will now get the card back. That means they will once again be entitled to state government rebates on the cost of electricity, gas, drivers’ licenses and council property rates.
“The changes to the assets test were seen to hit the bottom end too hard so I think this is a pretty reasonable thing to do,” said Robert Curley, a director of the Association of Independent Retirees. “As well as the state rebates, access to the card will give them rights to the Commonwealth’s $514 a year compensation for the carbon tax, which is not available for people signing up for the pension now.”
Another change which could have a secret sting in the tail for some pensioners lies in the concession to allow downsizers to move up to $300,000 into their super as a non-concessional payment above existing contributions caps.
That could be an important benefit, particularly for “surviving spouses and separated women faced with financial and health challenges who are downsizing from relatively modest to even more modest housing”, said Martin Fahy, CEO of the Association of Superannuation Funds of Australia.
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the policy was equitable and “not aimed at rich people putting proceeds from the sale of their $3 million harbourside mansion into their super”. Rather it would help middle-income earners “who will be able to sell their property and put in $300,000”, she said.
However, downsizing will affect the pension rights of some people, consultancy Rice Warner warned.
“A couple owning a home and with other assets including superannuation of $350,000 would be eligible for a full age pension of $34,800,” it said in its budget review.
“If they capitalise $600,000 and put it into superannuation [or the bank], they lose the whole pension. While they will start getting a part pension later as they spend their assets, the pain is likely to be too great to endure.”
There could also be unintended consequences arising from the measure allowing people to salary sacrifice up to $30,000 in their super funds for a home deposit. Sarah Saunders, public affairs manager with Industry Super Australia, said returns on these savings would be deemed at a certain level by the government.
If the actual returns from the fund were lower than the deemed returns then the super funds would effectively have to subsidise them, Ms Saunders said.
There also appears to be a funding gap in the government’s plans to scrap the Superannuation Complaints Tribunal (SCT) and replace it with the Australian Financial Complaints Authority, a body that will cover the whole financial sector. The SCT has been funded at $7.2 million a year while the new body will get $4.3 million for its superannuation work.
This gap will need to be made up by levies on the industry if the new body is to give super fund members the same level of services.
The budget also extends to 2020 relief from capital gains tax to allow the merger of super funds as part of a regulatory move to get rid of funds of sub-optimal size.
The $130 billion Future Fund, set up to pay Commonwealth superannuation liabilities, has been quarantined for a few extra years. Originally due to begin paying out in 2021, the date has been put back to at least 2026 to allow it to build up more capital.