Australia Urged to Drop Tax Breaks for Retirees
November 21, 2016 Taxation in Australia
New research released by the Australian think-tank the Grattan Institute has called for a wind-back of the tax breaks offered to older Australians.
Currently, senior Australians are eligible to enjoy high levels of rebates on private medical insurance, Seniors and Pensioners Tax Offsets (SAPTO), and a higher Medicare levy income threshold than the one faced by younger taxpayers.
The think-tank called the offsets and tax breaks “unduly generous” and without any economic rationale.
It was noted that the age-based tax policies are becoming increasingly misaligned, due to the rising levels of workforce participation by those aged 65 and over, and also due to the rising levels of incomes enjoyed by pensioners from their investment.
In its report, the Institute recommended that the SAPTO systems be wound back for any individuals who are eligible to receive the Full Age Pension, which is pegged to both age and income levels, meaning that well-off retirees would not receive the unnecessary tax break.
The Medicare levy should also be tweaked to line it up with incomes, as was suggested for the SAPTO.
Lastly, it was suggested that the health insurance rebates should be applied equally irrespective of the age of the recipient.
Implementing all three changes in full could save as much as AUD 1 billion each year in lost tax revenues.