Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary Assisting the Prime Minister for Social Inclusion) Share this | Hansard source

Senator Scullion, you are the same, with your confected rage yesterday when you were trying to argue and justify a change to the system for the Commonwealth seniors health card, which was introduced by the Howard government and which has continued to produce and compound inequities since that time.

Let’s just get to the reality of what this bill is all about. First of all, it amends the test to create a test that is simpler and fairer by treating income from different sources in a similar way. To me, that seems to be a very fair and equitable thing to do. Under the current rules, income from a defined benefit scheme, such as the Commonwealth Superannuation Scheme for public servants and some state government funds, is treated as income when determining eligibility for the card but income from some private, retail or industry superannuation funds and account based pensions is not counted as income for the purposes of the Commonwealth seniors health card. This has meant inequities over time, as people with substantial incomes from superannuation income streams from a taxed source have had 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 1997 have already had the advantage of accumulating their superannuation savings in a concessional tax environment. They have also benefited from the ongoing tax treatment of their superannuation pension payments after age 60.

By treating all income received by seniors, whether received from superannuation or another source such as employment income, in the same way this proposal will ensure the income test is applied to all cardholders consistently. Currently, the test does not include income of those who are salary sacrificing into either a superannuation fund or a retirement savings account, as Senator Siewert so ably pointed out. The definition of ‘income’ for qualification for the age pension already includes income salary sacrificed into superannuation. Accordingly, the changes introduced in this bill align the salary sacrifice definition of income for the Commonwealth seniors health card with the existing definition for age pensioners. The changes will ensure fairness and equality in determining eligibility for the Commonwealth seniors health card.

It is anticipated, as Senator Nick Xenophon suggested, that the number of cardholders expected to lose access to their card will actually be reduced, due to the global financial crisis. However, for Senator Xenophon’s benefit, if a retiree’s income has dropped due to the global financial crisis to below existing income levels that already exist then they will not be affected by these changes.

However, as indicated privately to both Senator Xenophon and to the Greens, to date the government does not have a final revision of these figures because full-year impacts of the global financial crisis on relevant superannuation incomes are yet to be made public. Therefore, there has been no formal change made to the published estimates. However, work on providing up-to-date figures is progressing.

Some seniors groups have been worried that these changes will mean lump sum withdrawals from superannuation will be counted as income. They are concerned that this could lead to unfair and unintended consequences. The government acknowledges that and understands that, in certain circumstances, cardholders may need to make lump sum withdrawals from their superannuation to pay for unexpected costs, such as medical expenses or modifications to their home to ensure that they can stay in the home.

These lump sum withdrawals may have the effect of increasing an individual’s adjusted taxable income for the test year. 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. This may result in discounting the lump sum where it is shown to be one-off, not ongoing, income. These safeguards exist in current legislation. The changes contained in this bill apply to both veterans’ entitlements and social security based senior health cards.

Question put:

That the bill be now read a second time.