There’s never been a better time to be a wealthy retiree enjoying generous tax breaks that past generations didn’t get, a prominent think-tank says.
But it’s at a time when Australia can least afford it, and it has prompted the Grattan Institute to call for a clamp-down on tax incentives for seniors.
The Melbourne-based institute has found the government could gain $1 billion a year by winding back the seniors’ and pensioners’ tax offset and Medicare levy income threshold.
The private health insurance rebate would also be reduced to the same level as younger workers with similar incomes.
Only age pensioners would qualify for the offset, but those with enough private income would pay the tax.
The think-tank says those tax breaks are a relatively new concept which predecessors didn’t get.
Today’s retirees receive much more in government spending even with more income and assets.
The rise of the “taxed-nots” was partly because of increases to age-based tax breaks.
“This older generation is taking way more out of the piggy bank than previous generations because their health costs are much higher,” Grattan chief executive John Daley told AAP.
Mr Daley concedes change will be politically difficult given the higher proportion of older voters.
But such reforms had to be part of the solution given Australia was facing a budget problem.
“Someone’s going to have to pay that back,” he said.
“Younger households are going to have to pay, at some stage, an extra $10,000 in tax every time we run a budget deficit of $40 billion.”