Rachel Siewert (WA, Australian Greens) Share this | Hansard source

The government tells us that the amendments proposed in this bill, the Social Security and Veterans’ Entitlements Amendment (Commonwealth Seniors Health Card) Bill 2009, will make the income test for eligibility for the seniors health care card better targeted to older Australians who most need the benefits. The bill overturns changes introduced by the Howard government which allowed certain superannuation payments to be excluded from taxable income assessments. Under this bill, income from a superannuation income stream from a taxed source and income being salary sacrificed into superannuation will now be included as income in the eligibility assessment for the Commonwealth seniors health card.

The passage of this legislation will see the removal of a significant loophole that otherwise creates a situation where some people qualify for the CSHC and others do not despite having the same income. The Greens support the broad principle to increase fairness in the support system for older Australians. However, we are concerned that the amendment fails to address what was a random approach employed in determining thresholds in the first place, thus potentially continuing inequity and hardship for those who are in fact in need of support.

The plight of older Australians on low incomes is an issue that should receive a lot of focus. Fortunately, it has received a lot of focus recently, and the Greens would say that it is about time. It is well recognised that older Australians, particularly those on low fixed incomes but also many self-funded retirees, experience great financial hardship, and will even more so in these difficult economic times. As the Senate Standing Committee on Community Affairs reported last year, those with the capacity for little discretionary spending are most vulnerable to the rises in the cost of living and they are disproportionately affected by increased costs of rent, petrol, household utilities and health care. All the essential costs of living are continuing to rise. Health costs, such as the costs of medical care and particularly pharmaceuticals and dental care, are clearly of great concern to older Australians. Because increasing numbers of older Australians will be experiencing financial hardship and rising cost-of-living pressures in the future, it is particularly important that government benefits such as the seniors health care card are being accessed by those who need them most.

Our population is ageing, and caring for older Australians decently and fairly should be a priority of government. Projections show that by 2042 the proportion of the population aged 65 and over will double to be one in every four people, while growth in the labour market is likely to remain stagnant. Taken together with increased life expectancy, these trends have the potential to slow economic growth and reduce older Australians’ standard of living. That particular projection was written before this year’s global financial crisis took hold and pushed all projections on economic growth out the window.

The Greens have been calling for an increase in the age pension for a number of years and we are pleased to see that both the government and the coalition have picked up on our campaign to provide older Australians with a decent level of income. We await with interest the government’s response to the Harmer review, which we hope will increase the level of the age pension to ensure all older Australians will have a decent quality of life.

However, this bill is not concerned with eligibility for the age pension; it concerns concessional benefits for those older Australians whose income is high enough that they do not need that level of income support yet not so high that they do not warrant some government assistance to help them manage the high cost of health care in particular and other costs of living. The issue at stake is how those income levels are defined and whether the substantial benefits of the seniors health card will go to those who are most in need.

The benefits of the seniors health card are substantial. As I said, health costs are a major expense for older Australians and a cause for major concern and anxiety for many. The CSHC provides access to concessional pharmaceuticals under the Pharmaceutical Benefits Scheme. It also provides, at the discretion of the general practitioner, bulk-billed GP appointments and a reduction in the cost of out-of-hospital medical expenses above the concessional threshold through the Medicare safety net. In addition to health benefits, the card also provides a seniors concession allowance—a non-taxable payment of $128.50 made every three months to help with regular bills such as energy, rates and motor vehicle registration fees that are not available at a concessional rate—and a telephone allowance and also an allowance for internet connection.

To assess this proposal it is worth looking briefly at the history of the seniors health card and in particular the changes introduced by the Howard government which this bill seeks to address. The Commonwealth seniors health card was introduced in 1994 by the Keating Labor government to ensure that retirees who were on a low income but not eligible for a pension would have access to some health benefits. The income test limits then were indexed and were the same as for the age pension. So it was targeted at those older Australians who did not qualify for the age pension because they were asset rich but income poor—primarily farmers—and also those who did not qualify because of insufficient length of residency.

The changes introduced by the Howard government since 1999 have substantially altered the original purpose of the Commonwealth seniors health card, making the benefits available to more people and creating the situation we are now in where there is a potential for people to actively manage their income in such a way that they are able to meet the current income thresholds. The Howard government changes in 1999 significantly increased the threshold from $21,460 to $35,859.20 for singles and to $67,000 for couples. The thresholds were increased again in 2001 to the current level of $50,000 for singles and $80,000 for couples. The Howard government also stopped the eligibility threshold from being indexed, leaving both the timing of changes and the thresholds to be determined by a government decision. The income test was also altered from income assessed under the far more rigorous Social Security Act 1991 to adjusted income assessed under the Income Tax Assessment Act 1997, which serves a very different purpose from the welfare act. This fundamentally changed the purpose of the Commonwealth seniors health card from being a benefit for low-income Australians—and this is very important—to a government benefit available to all older Australians, specifically allowing more self-funded retirees access to the concessions. This is the issue at the heart of this piece of legislation.

The income test change is all the more significant following the changes to the taxability of superannuation made in 2007. Since July 2007, superannuation income from a taxed source—that is, superannuation funds where the tax has already been paid on employer contributions to the fund and on the fund’s earnings—is tax free. Under the adjustable taxable income test which is used to assess eligibility for the seniors health card, this income is not included as part of the applicant’s income. By contrast, people whose superannuation funds did not pay tax on those earnings must pay tax on income from those sources, and this income is included in assessing eligibility for the seniors health card. This creates an inequity between holders of the two types of super accounts. Both may have the same income, both have had their super taxed, yet by disregarding income from super funds with a taxed source the holders of these accounts can have a high income and remain eligible for the seniors health card.

Similarly, under the current provisions, people who have salary sacrificed into a super account also benefit from earning more than other applicants for the seniors health card but remain eligible. In our view, this further undermines the purpose of the seniors health card by allowing those who through good luck or intention have achieved eligibility for the concessions but may not fit the definition of an older Australian who cannot manage financially without government support. I put it to this chamber that in these times of economic stress this is an extremely important point: who will be affected?

In June 2008, there were a total of 278,378 seniors health care card holders, and the government estimated that approximately 22,000 would lose their benefits if this legislation passed. Clearly these figures are no longer applicable in the current circumstances, as the income of self-funded retirees has dropped dramatically over recent months, with the crashing of the share market and poor performance of private superannuation funds as a result. The government maintains it is unable to provide any current data to give a more accurate picture of who will be affected by these changes. The Greens have sought figures in particular on the number of those who are just above the threshold and those whose income will be substantially above the threshold when their superannuation income is included in their adjusted taxable income, but the government tells us that it does not have any accurate data at this stage.

Unfortunately and somewhat ironically, the purpose of these changes announced by the government in last year’s budget has been overtaken by the global financial downturn. Sadly, it is reasonable to conclude that in the current economic context many self-funded retirees currently eligible for the seniors health care card will be eligible for the age pension. An estimated 30,000 people, for whom six months ago the inclusion of their super income would have put them over the threshold, will now meet the new threshold assessment test, even with their taxed super included.

However, the Greens realise that there are many self-funded retirees who are not on high incomes who would, under these changes, lose their eligibility for the seniors health care card because they will be just over the existing threshold. We believe that this group should be protected by raising the taxable income limit to a level that more accurately reflects the current economic climate. Much has changed since 2001, when income limits of $50,000 for singles and $80,000 for couples were set. In keeping with our position that this assistance should go to those most in need, we believe the income thresholds should be raised. The Greens will be moving amendments requesting that the government sets a new income test limit for eligibility for the seniors card for $60,000 for singles and $85,000 for couples. These figures are based on the average weekly earning of $60,450. We believe that this is a fairer and more realistic income limit in the current economic climate. While we support the move to tighten up eligibility for the card, we want to ensure that we do not unfairly penalise older Australians who will genuinely need this assistance.

Notwithstanding our forthcoming amendment, the Greens are concerned about the arbitrary way in which this income level has been set by government in the past, leaving it open to political will or opportunity. To ensure that threshold levels are reflective of the Australian economy and independent of political intention, the Greens have written to the minister, proposing that the government consider linking the seniors health care card income eligibility test to the consumer price index as part of the restructure being considered on the recommendations of the Harmer and Henry reviews. More broadly, the Greens believe that a better outcome would have been achieved if both this bill and the measures addressed in schedule 3 of the Tax Laws Amendment (2009 Measures No. 1) Bill 2009—which I will come to a minute—had been addressed as part of the comprehensive restructure the government is undertaking based on the recommendations of the Harmer and Henry reviews.

At the current time, much is being made of the impact of the economic crisis on self-funded retirees. If their income falls below $80,000, if their superannuation has crashed, they will be eligible for this card—and, in fact, many are becoming eligible. This card is available to people who are facing financial hardship. If the Greens amendments are accepted by the Senate, it will be available to older Australians who are on $85,000. Given the hardships many are facing in the current climate, many Australians would say that is a significant income—when you consider that many people are currently losing their jobs. While the Greens would like us to be able to support everybody, particularly in retirement, we are also aware that at this time we need to also be focusing our scarce resources on those most in need. Therefore, we believe that addressing this loophole is important in ensuring that we have a safety net for our older Australians who need it most.

The Prime Minister has made it very clear that self-funded retirees who fall into the category of needing assistance through income support and the age pension will be facilitated onto the age pension. I understand that an increasing number of people are accessing that. I have been given a figure of 30,000, although I am not sure of its accuracy because the government is still confirming that. So it is wrong to claim that this is unfairly targeting people who have suddenly suffered a significant loss in income, because they are being assisted. We have heard stories of people deliberately salary sacrificing very large amounts of money in order to be able to gain access to the seniors card. For example, two couples on the same income can be treated differently because of loopholes. Of course it is legitimate to use the existing provisions, but to us it is unfair that, of two couples that are on the same income, one couple does not get the seniors health card and one does because they have managed to access the current provisions.

Given that the threshold has not risen since 2001, we believe it is fair to increase it to $60,000 for singles and $85,000 for couples. We are particularly keen to ensure that the threshold for singles reflects the needs of singles. The Senate Standing Committee on Community Affairs looked into the cost of living for older Australians and identified single Australians, principally women, as one sector that were particularly vulnerable. So we are very keen to ensure that that threshold does provide for those people who are struggling. We believe that a fairer level would be $60,000.

That is why, when we come to discuss this in the Committee of the Whole, we will be moving amendments to address that threshold. We are refraining from moving amendments linking it with the CPI because we think it more appropriate that it be dealt with in the context of the Harmer and Henry reviews. That is why we have written to the minister asking for those thresholds to be included in the revision. We thought that was the more appropriate move. If the thresholds are accepted by the Senate, the CPI increase will not kick in for a little while anyway. So there is time for those two reviews to take that into account. In the meantime, we will have increased the threshold to meet people’s needs in 2009. I will talk further on the amendments when we come to the Committee of the Whole stage. We commend those amendments to the chamber in the belief that they will provide a little bit more robustness to the seniors health card.