Social Services Minister Scott Morrison has been seeking crossbench support in the Senate.Source: News Corp Australia
The Greens have backed the federal government’s $2.4 billion pension reforms in a surprise deal that leaves Labor isolated on a policy that tightens the assets test for thousands of retirees.
Social Services Minister Scott Morrison announced the agreement late today after a growing political brawl over the changes, as Labor stunned observers by rejecting the reform.
The outcome means the budget measure is set to pass the Senate whether or not other crossbench senators agree, with the Coalition and the Greens holding 43 out of 76 seats in the upper house.
Mr Morrison said the result showed the government was “getting on with the job” of budget repair.
“As a result of these changes it is estimated more than 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight from January 2017, when these changes take effect,” he said.
“Those who lose access to the part pension as a result of the increase in the taper rate, to the settings that were in place prior to 2007, will be guaranteed access to the Commonwealth Seniors Health Card.”
The passage of the changes will kill off last year’s controversial plan to scale back the indexation of the pension, which set off a firestorm of complaints.
The key compromise is an agreement between the government and the Greens to hold a review of retirement incomes policy — including superannuation tax concessions — as part of the white paper on tax reform.
The government will extend the submission period for the Tax White Paper process to 24th July 2015 so that views on retirement incomes can be part of the process.
“Support for the single largest savings measure in this year’s Budget, following passage of the government’s cornerstone small business measures, demonstrates the Abbott government is successfully getting on with the job of implementing our ‘have a go’ Budget,” Mr Morrison said in a statement.
“The measure will rebalance the Pension Assets Test parameters by increasing the assets test free areas to support pensioners with low levels of assets and increase the taper rate by which a pension is reduced, once the free areas are exceeded.
“This measure replaces the government’s previous measure to limit indexation of all pension related payments to CPI that was contained in the 2014/15 Budget.
“At the same time, the government will extend the submission period for the Tax White Paper process to 24th July 2015. This will facilitate interested parties putting their views to the government on issues relating to retirement incomes,” Minister Morrison said.
“Incorporating this additional consultation in the Tax White Paper process falls within the original scope of the Tax White Paper,” Minister Morrison said.
“Details regarding the extension of the submission period for the Tax White Paper will be announced separately by the Treasurer.
“I commend the Australian Greens, and their new Leader Senator Di Natale, supported by Senator Siewert, for their constructive engagement with the government on this measure.
“I also express the government’s appreciation to Senators Xenophon and Leyonhjelm along with key stakeholders, in particular COTA and ACOSS, for their contribution during the consultative phase.
“The measure will be considered in the Senate after passing the House of Representatives at the earliest opportunity,” Minister Morrison said.
In a statement, the Greens said pension payments would be redirected to those who most needed income support.
“The Greens opposed the Howard government changes to pensions back in 2007. Now we’re restoring the system to ensure that everyone has a decent retirement,” said Greens Leader Richard Di Natale.
“All Australians deserve a system that supports them in retirement, not just the wealthy.
“When I took on the leadership of the Greens I said I was here to get positive outcomes for the community wherever I could, so I’m pleased to be able to deliver on this.
“The government has agreed to give special consideration to retirement incomes in its Tax White Paper, which means we can finally look at superannuation as part of the equation,” said Senator Di Natale.
Greens community affairs spokesman Senator Rachel Siewert said changing the assets thresholds and taper rate will make the pension system fairer.
“More Australians who don’t have the advantage of a healthy super balance will be able to access a full pension when we undo John Howard’s tampering with taper rates,” Senator Siewert said.
“The broad retirement income review we’ve secured will be delivered as part of the Tax Review process. The terms of reference are explicit about involving stakeholders at every stage, to build on the already strong appetite for further change, particularly to the super tax concessions.
“The review will have a focus on pensions, superannuation, taxation and workplace discrimination, to guide the important reforms that Australians need.
“Passage of the assets test will not be linked to the other budget measures in the Pensions Bill, which are still under consideration by the Australian Greens,” said Senator Siewert.
“We are a caring society and all older Australians deserve the best possible retirement. Today, we have ensured a pathway for a decent retirement in Australia”.
Labor blocks reforms
The federal government was forced to deal with the Greens to secure a $2.4 billion saving on the Aged Pension after Labor announced a surprise decision to vote against the reform.
Bill Shorten told his caucus colleagues this morning of the shadow cabinet decision to oppose the government budget measure, one of the biggest spending cuts in the May budget.
While the government plan is generally backed by social service and community groups, Labor will argue against the changes on the grounds they will take money away from too many older workers as they retire in years to come.
Social Services Minister Scott Morrison has been seeking crossbench support in the Senate on the assumption that Labor would fight the changes, with a Senate inquiry due to cast its verdict on the bill on Monday.
Mr Shorten declared the Liberals were “coming after” pensioners as he told caucus Labor would vote against the government’s cuts to 320,000 low-income pensioner households and plans to throw more than 90,000 pensioners off the payment entirely.
“If you’re on a pension, if you will rely on a pension in the future, the Liberals are coming after you,” the Opposition Leader said.
“We will stand by Australians who have worked hard all their lives and paid taxes all their lives and we will offer security to a new generation of Australians currently coming to the end of their working life, planning and saving for their retirement.
“These are not rich people, they are not on high incomes, and they deserve dignity and security in their old age.”
The government changes are primarily aimed at retirees with substantial savings and investments in addition to their family homes, reducing or withdrawing their part-pension by tightening the assets test.
Labor warns that the cuts would hurt about 330,000 low income pensioner households, including 90,000 pensioners who will be cut off the payments entirely.
The party is also citing analysis from Industry Super Australia to claim that half of all people leaving the workforce in the next ten years will be impacted by the pension reforms.
And it is countering the government proposal with its policy of scaling back tax concessions on superannuation for retirees who earn more than $75,000 a year from their funds, saving about $1.4bn a year.
In one case study it cites to back its case, Labor says that a single age pensioner who owns their home and has a super income of less than $25,000 would lose $8,200 of their $11,800 part pension, per year.
As well, an age pensioner couple with their own home and private income of $45,000 a year — suggesting they have $450,000 each in superannuation — would lose their combined part pension of $11,400 per year.
Additional reporting: Rosie Lewis
