A recent Grattan Institute report has shown that older Australians pay about $1 billion a year less tax than younger Australian with identical incomes.
Previously, it was approximately between one quarter and one third of seniors who paid tax. However this has now decreased to less than half of that – making it around one eighth of seniors still paying tax.
The tax decreases began with the Low Income Aged Persons Rebate, followed by the Senior Australians Tax Offset. After that their superannuation became tax free.
To better understand the situation the report, titled “Age of Entitlement”, compared two couples; “James and Linda” who are over 65, and “Michael and Jenny” who around 40.
Both couples earn the same combined taxable income of $70 000. James and Linda from superannuation and investments and Michael and Jenny from wages. The older couple hold two Commonwealth Seniors’ Health Cards and pays $4049 in tax. The younger couple, who also have a higher Medicare levy, pay $6894.
There have also been calls to alter measures to save the government $1 billion a year. This would include changes to Seniors and Pensioners Tax Offset, Medicare levy income threshold available for seniors, and private health insurance rebates which are only available to older Australians.
These proposed changes are most likely to affect seniors who are wealthy enough to receive no (or a part) pension. The changes would have little effect on the 40 percent of seniors who currently receive a full Age Pension.
The issue isn’t necessarily that the older couple haven’t paid their taxes, it’s the amount which is causing discussions.
The older generation over time would have paid less tax than the generation after them. While they are getting taxed less, their incomes have been increasing and the amount the government spend on seniors in the health sector is also increasing. Essentially what the adds up to is that they are taking more money out and putting less in.
