Older retirees still remember with gratitude the changes introduced by Howard and Costello exempting super funds from paying tax on their investment earnings in retirement.
When Tony Abbott before the election promised not to cut pension payments, and not to introduce new taxes, many retirees thought their retirement benefits would be safe. However with their very first budget, spending on welfare for the aged has been a primary target to reduce budget debt.
The link above is to a special edition of Super Guide detailing the May 2014 Federal Budget changes. It is a comprehensive guide to those changes related to aged pension and superannuation entitlements
These changes are in addition to changes previously approved for Commonwealth subsidized residential care institutions to be now able to charge residents a negotiated Accommodation Bond based on their assets, on admission to low-care aged-care facilities. The bond is repaid within 14 days of exit from the institution less a retention amount of $331 per month for up to five years. For some the bond may be a few to even several hundred thousand dollars and is an interest-free loan to the provider to fund the cost of upgrading facilities.
This budget is the start and not an end to changes reducing the government’s tax burden. The most radical change is the proposal to lift the pension age from 67 in 2023 to 70 in the year 2035. Other countries have announced lifting the pension age from the low 60’s to the high 60’s but Australia is leading the way with this radical extension of the pension age. It is sufficiently far-off not to cause alarm and is a temptingly simple initiative to reduce government commitments to the elderly. The execution may prove more difficult.
One can’t help but wonder at the political wisdom of this budget, despite the exemplary devotion to rein in the budget debt.