Helen Polley (Tasmania, Australian Labor Party) Share this | Hansard source

I rise to speak on the Social Security and Veterans’ Entitlements Amendment (Commonwealth Seniors Health Card) Bill 2009. I believe that this is an important piece of legislation. The Australian social security system does a tremendous job in assisting people from all walks of life during periods of crisis, change and upheaval and often just in the day-to-day necessities. Assistance can be in the form of information and referrals to other services. It can be direct assistance in the form of income support payments, which can help in the cost of raising children, offsetting the expense of child care or helping to pay the rent. It can be in the form of concessions or the healthcare card, which provides reduced cost pharmaceuticals as well as a range of other possible rebates and concessions.

No government would be unaware of the ever-increasing expenses faced by the average Australian. However, this situation becomes more of an issue for those who have finished permanently in the workplace and have a finite income to see them through the remainder of their retirement. It is the older Australians who have often worked all their lives, seen their children through school and into adulthood, bought the house, paid it off and left their workplace—some with a gold watch—looking forward to a retirement filled with gardening, grandchildren and well-earned R&R.

It is therefore the obligation of any social security system to make provisions for senior Australians to ensure that the mounting costs and finite income can be balanced as best they can. This allows older Australians to enjoy their retirement rather than worry about making ends meet. The task for any government is to ensure that the social security system provides well-targeted assistance at the right time to the right groups and that this assistance is fair and consistent in its treatment of people and their circumstances.

The Commonwealth seniors health card is one such measure designed to reduce the burden of the ever-increasing cost of health care for older Australians. The core benefit offered to holders of the Commonwealth seniors health card is a discount on prescription medicines that fall under the Pharmaceutical Benefits Scheme. However, there are several other services that people may benefit from, such as: bulk-billing for visits to the local GP where the GP is a participating doctor for bulk-billing purposes, bearing in mind that the government offers financial incentives for doctors to bulk-bill concession card holders; and reduced cost for out-of-hospital expenses above a concessional threshold through the Medicare safety net.

Additional benefits and services are also offered by state, territory and local governments, as well as some private enterprises. These can include concessions in the areas of health, household running costs, transport, recreation and education. Holders of the Commonwealth seniors health card are also often eligible to receive some additional allowances and certain cash payments through the social security system. These include the seniors concessional allowance. This is a non-taxable payment, made quarterly, to help with the costs of power, vehicle registration and rates. This allowance was increased by the Rudd Labor government in March 2008 and is now $518 a year. There is also a telephone allowance. This is provided to concession card holders with a telephone service connected and has recently been expanded to include additional allowances for those with an internet connection as well. This allowance currently stands at $138.50 per year.

The Rudd Labor government, as part of its Nation Building and Jobs Plan, also recently provided lump sum payments to holders of the Commonwealth seniors health card of $1,400 for singles and $2,100 for couples, on top of a seniors’ bonus of $500 delivered in the 2008 budget. The length and breadth of all services, concessions and allowances available to those who qualify for the card indicate the importance and value of this entitlement to many older Australians—retired or otherwise—and the extent to which this government will go to support them in meeting their costs of living.

To qualify for a Commonwealth seniors health card, a person must be an Australian resident living in Australia, have reached age pension age, being 65 for men and 63½ for women, not be in receipt of an income support payment from either Centrelink or the Department of Veterans’ Affairs, not be qualified to receive the age pension, and have an annual adjustable taxable income of $50,000 for singles, $80,000 for couples or $100,000 for couples separated due to ill-health. This limit is also increased by $639.60 for each dependent child in their care. Adjustable taxable income, under the current definitions contained in the Social Security Act 1991 and the Veterans’ Entitlement Act 1986, includes a person’s taxable income plus any rental property loss, foreign income or employer provided fringe benefits. This definition of adjustable taxable income has, over recent times, become increasingly unable to reflect a person’s true financial circumstances, as well as being more and more inequitable in its application. This definition has also been the impetus behind the proposed amendments to the eligibility criteria for the Commonwealth seniors health care card.

The amendment proposes the inclusion of three new forms of income in the definition of adjustable taxable income for the purposes of the Commonwealth seniors health card. Income from a superannuation stream with a taxed source, including lump sum withdrawals, will be included. For the last 18 months, a superannuation benefit paid from a taxed source has been tax free for those aged 60 years and over. This includes superannuation funds where the contributions and their earnings have already been taxed at the 15 per cent rate. Up until now, these forms of income have not been included in the assessment of adjustable taxable income. However, people who receive income from this source have already benefited from the concessional tax rate that is applied to these funds, which is 15 per cent upon contribution and zero upon receipt of the income stream. It is therefore considered appropriate to consider such forms of income as part of a person’s adjustable taxable income as this has a considerable bearing on the person’s overall financial circumstances. Indeed, it would seem unjust if one person with an income of, say, $50,000 per annum were not eligible for a card, while someone with an income of $45,000, with an additional $20,000 from a superannuation income stream with a taxed source, were eligible, despite having a higher overall income. The inclusion of this income stream will allow income received by seniors to be treated in a similar manner and will ensure that the Commonwealth seniors health card is better targeted at those who need the services the most.

In addition, lump sum withdrawals from superannuation income streams derived from a taxed source will also be included in the definition of adjustable taxable income, once again due to the concessional tax advantages that these amounts have received. Any rollover of moneys between superannuation funds, however, is not considered to be a withdrawal and will therefore not be included in this scenario.

The government is aware that from time to time older Australians may be required to access retirement savings in order to meet large one-off expenses such as replacing a car, making repairs to their homes or paying fees and bonds associated with entering aged-care facilities. There are many legitimate and necessary reasons for making such a lump sum withdrawal and, in keeping with the spirit and the intent of the Commonwealth seniors health card, it would be unjust to automatically include the full amount of such withdrawals as adjusted taxable income. Therefore, the amendment allows for card holders to ask Centrelink to reassess their eligibility by using an estimate of the current financial year’s expected income rather than relying on the previous year’s assessed income, which is skewed by the lump sum withdrawal. Centrelink will then be able to take a holistic look at a person’s financial circumstances, the reason for the lump sum withdrawal and the person’s income in the previous year and make a sensible and fair decision about that person’s ongoing eligibility for the Commonwealth seniors health card.

The second form of income that will be included in the definition of an adjusted taxable income for the purposes of the Commonwealth seniors health card under this amendment is the voluntary sacrificing of salary into superannuation. Presently, income from that voluntary sacrificing of salary into superannuation is excluded from the person’s accessed taxable income, allowing that person to increase their superannuation savings whilst simultaneously lowering the income upon which they pay standard income tax. This is a sensible measure that offers financial incentives to people to save that little bit more for their retirement.

However, even though such salary sacrificing is included in income definitions for the age pension, it is not included at present in the definition of income for the Commonwealth seniors health card. This could be easily rectified by including this form of income in the overall definition, thereby making it consistent across social security and veterans’ affairs legislation in relation to payments and services to seniors. At the same time it would allow people to be treated sensibly and equitably in relation to their eligibility by looking at their financial circumstances and their financial capacity.

In all reality, someone on a good income can salary sacrifice all but $1 of their taxable income to a superannuation fund, thereby paying no income tax and having an adjusted tax income of $1 for the purposes of applying for a seniors health card. Then upon retirement, they have the added advantage of a higher retirement nest egg than otherwise they would have had. It does not seem fair and equitable that this person should be eligible for a Commonwealth seniors health card in addition to the other tax concessions received through their salary sacrificing arrangements, while another person, who does not salary sacrifice into superannuation, may not be eligible. This person’s taxable income may appear as $1 but their financial circumstances are very different in reality. Their financial capacity is actually their full gross taxable income prior to any salary sacrificing, because the sacrificing is purely voluntary. Therefore it is a sensible amendment that is proposed, one that allows like to be compared with like.

The third change to the definition of adjusted taxable income will be the adding back in of net financial investment losses. A net financial investment loss occurs when the allowable tax deductions relating to an investment exceed the gross income of that investment. This can also include borrowing money to purchase shares and using the interest paid on the loan as an allowable deduction for offsetting the income derived from the share dividends.

People are always encouraged to look at new and innovative ways to create wealth if they so choose. It is expected also that during their attempts to create wealth money needs to be spent along the way and losses will be incurred. As a means of encouraging such initiatives, people are given concessions through the taxation system by being able to offset expenses against income. It would therefore seem inequitable to allow a double concession by precluding these losses from assessment of a person’s overall adjusted taxable income for the purposes of the Commonwealth seniors health card.

Already, in many payments and allowances, the losses incurred from rental property ownership are added back into a person’s overall income to ensure people who are given such tax concessions are not benefiting twice for their losses. Extending this to include the net losses from investments allows those without the capacity to buy rental properties, or invest in shares, to be treated the same as those with the capacity. It does not favour one over the other, whilst still retaining those key tax incentives that encourage people to invest.

The Commonwealth seniors health card is an important service offered to Australian seniors to meet the ever-growing costs of health and wellbeing for older Australians. It provides multiple benefits, from cheaper prescriptions to offsetting the cost of out-of-hospital treatments and allowances for phones and electricity costs. It is also sometimes used as a benchmark for determining who is eligible to receive such additional payments as those recently delivered under the Nation Building and Jobs Plan. It is because of the strong benefits this card can deliver that we must ensure it remains targeted at those who truly require that assistance.

Sensible changes to the type of income included in a person’s adjustable taxable income ensure that a realistic understanding of a person’s overall financial capacity and circumstances is achieved and that benefits are distributed evenly and equitably and not doubled up so as to advantage some more than others. These amendments will ensure that those who are entitled to the benefits offered under the card and most in need of these benefits remain entitled. However, those who have different types of income at their disposal must endeavour to rely on those income streams or rearrange their finances accordingly. That way, the system remains fair and those who it is intended to support are indeed supported. It is a common-sense amendment and, as always, common sense should prevail. I commend the bill to the Senate.