Jenny Macklin (Jagajaga, Australian Labor Party, Minister for Families, Housing, Community Services and Indigenous Affairs) Share this | Hansard source

Firstly, I would like to thank all those who contributed to the debate on the Social Security and Veterans’ Entitlements Amendment (Commonwealth Seniors Health Card) Bill 2009, an important piece of legislation. I think it is important to say at the outset that every single member of the House recognises the very significant contribution that all self-funded retirees have made and, in many cases, continue to make by continuing to work and contribute to their communities.

It is the case that the government recognises the pressure that many self-funded retirees are under as a result of the global financial crisis. There have been a number of changes which we have put in place as a result. I asked Centrelink last November to do a re-evaluation of assets ahead of the normal re-evaluation program, to recognise the pressure that many self-funded retirees were under because of the changes in the stock market. There have been a significant number of reductions in the deeming rates to recognise the reductions in interest rates. I remind all members that last year, as part of the economic stimulus package, we extended the payments that were made to pensioners to those who also receive a Commonwealth seniors health card. Those people received $1,400 each if they were single self-funded retirees on a Commonwealth seniors health card, and $2,100 if they were a couple on a Commonwealth seniors health card. A number of measures have been put in place by the government to support self-funded retirees in what we understand is a difficult time, and that will continue to happen.

I will go to what this bill is really about, rather than some of the extreme statements that have been made. The bill implements a budget measure from last year that amends the adjusted taxable income test for the Commonwealth seniors health card—and this is the important thing—to align the treatment of income received by seniors across different income tests. So it really is a matter of trying to be fair to seniors who are receiving income from different sources to make sure we treat them in a similar way. It really is about fairness and equity for seniors and particularly self-funded retirees. It is also about making sure that in these tough times we support those who are in the most need. That, unfortunately, does not seem to be understood by those opposite.

The relevant shadow minister, the member for Warringah, in his second reading debate speech made it clear that he opposed the bill and the modest savings it will generate for the budget. But in the same speech he actually questioned the affordability of a pension rise, so it seems to us that the opposition, on the one hand, is now opposing a possible pension rise—one that the government, of course, has committed itself to—and, on the other hand, is opposing this modest budget saving. As I said, what we are on about here is ensuring that similar forms of income are counted in the same way for the Commonwealth seniors health card. Of course, that is a card available to seniors who do not qualify for the age pension because their income or assets exceed the relevant test limits. Currently the definition of ‘adjustable taxable income’ used to assess a person’s qualification for the Commonwealth seniors health card—and this is the important thing—does not include income from superannuation that is non-assessable and non-exempt under the Income Tax Assessment Act 1997.

This bill amends the test to create a test that is simpler and fairer by treating income from different sources in similar ways. The inclusion of income from a superannuation income stream with a taxed source—that is, gross superannuation—will treat similar income in a similar way. Under the current rules, income from a defined benefit scheme, such as the Commonwealth Superannuation Scheme for public servants and also some state government schemes, is treated as income when determining eligibility for the card. Those were the rules under the previous government. Those superannuation income streams are treated as income when determining eligibility for the card. But income from some private retail or industry super funds and from account based pensions are not counted as income for the purpose of the Commonwealth seniors health card, so I hope people can see that that is the inherent inequity that we are trying to deal with. It has created inequities as people with substantial incomes from superannuation income streams from a taxed source have this income disregarded for the purpose of assessment for the Commonwealth seniors health card. Individuals who have income that is non-assessable and non-exempt under the Income Tax Assessment Act have, of course, already had the advantage of accumulating their superannuation savings in a concessional tax environment and also benefit from the ongoing tax treatment of their superannuation pension payments after the age of 60.

This is all about treating all income received by seniors, whether received from superannuation or another source, such as employment income, in the same way. The proposal will make sure that the income test is applied to all cardholders consistently. That is all that this bill is about, not all of the other things that people have talked about. Nor does the test currently include income that is currently being salary-sacrificed into a superannuation fund or retirement savings account. The definition of ‘income’ for qualification for the age pension actually already includes income sacrificed into superannuation, and accordingly—and this is an other important equity measure—the changes introduced by this bill will line up the salary sacrifice definition of income for the Commonwealth seniors health card with the existing definition for age pensioners. That does seem to me to be a real issue about fairness and equity in determining eligibility for the Commonwealth seniors health card.

I do understand some of the worries that seniors groups have—that these changes will mean that lump sum withdrawals from superannuation will be counted as income and that this could lead to unfair and what are certainly unintended consequences. We do understand that in certain circumstances cardholders may need to make lump sum withdrawals from their superannuation to pay for things like unexpected medical expenses. I say to those of you who are concerned about this that these lump sum withdrawals may increase an individual’s adjustable taxable income for the test year, so to safeguard against people losing eligibility for their card they can request that their qualification for the seniors health card be determined with reference to an estimate of their income for the current financial year. I think that is important for people to be aware of. This may result in the discounting of the lump sum, where it is shown to be a one-off or not ongoing income. These safeguards do exist within current legislation.

The changes in the bill apply to both veterans entitlements and social security based seniors health cards. The changes are being put to the parliament because we want to make sure that people are treated in a fair and equitable way across different income sources, and they are being done with a number of other changes to support self-funded retirees. We do recognise that there are very significant pressures on self-funded retirees. That is why we have made the changes that we have to the revaluation of assets, to the deeming rates and to making sure that the Economic Security Strategy payments of last year were extended to those on the Commonwealth seniors health card. This bill is all about equity in the treatment of income. I commend the bill to the House.

Question put:

That this bill be now read a second time.

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