No Pension Until Super Savings Exhausted
The Age
Wednesday August 21, 1996
Canberra.
Retirees and unemployed people aged over 55 will be barred from getting welfare benefits until they use all of their superannuation.
The Federal Government has decided those over 55 who have retired or have poor prospects of returning to work ``should use all the assets at their disposal, including superannuation assets, to provide for themselves before turning to the community for support through the social-security system".
Previously, those over 55 and under pension age had their super savings exempted from means testing for accessing welfare.
Most chose not to start spending super until they reached 65, but some rorting has been reported.
The Government argues it has blocked a major loophole that allowed some people to access very large super benefits and also claim the dole or other welfare.
Although many superannuation organisations have not raised serious objections, some say the decision could reduce national savings by tempting some people to spend their super quickly so that they can claim the dole or mature age allowance.
The change, contained in Tuesday's Budget, takes effect from September next year. After that, over 55s on income support will be given nine months grace before being forced off welfare and on to their superannuation benefits.
The executive director of the Association of Superannuation Funds of Australia, Ms Susan Ryan, said it would stop some double dipping.
But it would force those looking for work and with small amounts of super to spend that first, then move to other welfare benefits before going on the age pension with no personal funds to top up that payment.
The Treasurer, Mr Peter Costello, confirmed yesterday that the Government would deliver $4.5 billion in the Keating Government's promised tax cuts in the form of a super co-contribution.
But he warned that if the Senate forced Budget changes, this might have a flow-on effect.
``There are going to be consequences if the Senate mucks around with this," he said.
``It's like a car coming off the assembly line. But if the Senate said the car only needs three wheels instead of four it may be making only a 25 per cent change to the wheel base but it would not roll properly as a model."
There were also considerable problems involved in delivery, and the Government could offer an alternative savings vehicle to super for the unemployed, home carers or the retired to make it more equitable. It has appointed a committee of actuaries to look at the matter.
Mr Costello also said a 15 per cent surcharge on the super contributions of those on taxable incomes above $85,000 (in addition to an existing 15 per cent contributions tax) was a ``fairness measure".
However, Ms Ryan said that leaving the funds to work out a member's tax liability was highly impractical and created huge compliance costs for funds that had to be passed on.
This meant that even those on low incomes, which were meant to be exempt from any Budget penalty, would now have to pay higher administration costs, she said.
The Opposition spokesman on superannuation, Senator Nick Sherry, said the decision to allow those earning between $450 and $900 a month to opt out of super and take the money as disposable income would reduce national savings by $2.6 billion by 2005.
© 1996 The Age