ScoMo’s cash boost to age pensioners
ABOUT one million Australians — including more than 630,000 age pensioners — will receive a cash boost of up to $804 a year after the Federal Government bowed to intense pressure to reduce the tax it imposes on their savings and investments.
As interest rates have fallen over the past several years, retirees have seen the income they get from savings plunge.
But the rate that retirees are “deemed” to have earned income from savings and investments has stayed the same.
The government, while singing the advantages of falling interest rates, was being stung that the unchanged deeming rate was a sneaky “retiree tax.”
The Morrison Government has now moved to cut deeming rates — with the adjusted payments to be backdated to July 1 — however, it has stopped short of reducing the deeming rate cut to match interest rate cuts because pensioners with sizeable cash assets are assumed to earn better returns through investments other than savings accounts.
Under the existing calculation, pensioners can earn up to $174 a fortnight before their government payments are reduced with income from financial investments included in the pension income test.
The government uses a deeming rate to work out the rate of return on any other investments, which for singles has been 3.25 per cent for assets over $51,800 and 1.75 per cent for those beneath.
Under the changes, the lower deeming rate will be cut from 1.75 per cent to 1.0 per cent for financial investments up to $51,800 for single pensioners — or $86,200 for pensioner couples.
At the same time, the upper deeming rate will be reduced from 3.25 per cent to 3.0 per cent for balances over that amount. The changes will mean age pensioners whose income is assessed using deeming will receive up to $40.50 a fortnight for couples — or $1053 extra a year.
For singles, this will equate to $31 a fortnight, or $804 a year. Minister for Families and Social Services Senator Anne Ruston said that the cuts would not only benefit age pensioners, but almost 350,000 people receiving other income-tested payments. Seniors Jim and Linda McDougall said an increase in the pension would be welcomed by the community – especially at a time where cash interest rates are only attracting “1 to 1.5 per cent” growth.