Radical tax and retirement proposal that could affect every Aussie: What you need to know

Daily Mail​

3 days ago

Public servants within Anthony Albanese 's own government have suggested access to the age pension needs to be wound back for wealthy baby boomers because it's too costly.
The Department of Social Services - in an incoming brief to new Social Services Minister Tanya Plibersek - suggested lower-income Australians were paying for the lifestyles of the rich, who were living off the age pension under existing rules exempting the family home from the assets test.
'Low-and-middle income taxpayers are subsidising the retirement incomes of seniors with significant wealth in addition to their homes,' it said.
The departmental brief, prepared independently of the new Labor minister's office, noted couples could still receive the age pension even as they continued to earn six-figure annual incomes from their investments.
'Age pension continues to be payable to couples with income of almost $100,000 a year or assets of almost $1.05million, in addition to their principal home of unlimited value,' it said.
The department said this was unfair compared with the treatment of the unemployed, who had to wait 13 weeks to receive JobSeeker if they had more than $11,500 in the bank.
A spokeswoman for Ms Plibersek said the government had no plans to impose a stricter assets test for the age pension.
'The government appreciates independent, frank and fearless advice from its agencies,' she told Daily Mail Australia.
The Department of Social Services - in an incoming brief to new Social Services Minister Tanya Plibersek (pictured) - suggested lower-income Australians were paying for the lifestyles of the rich, living off the age pension under existing rules exempting the family home from the assets test
'The government has no plans to include the family home in the pension assets test.'
This is despite Treasury forecasting an 'expected increase in the number of age pension recipients as the Australian population ages'.
More than $109billion is set to be spent on aged care in 2025-26 as government spending as a proportion of the economy hits the highest level since 1986 outside of Covid.
Capital gains tax discount
Ahead of the government's Economic Reform Roundtable next month, Westpac chief economist Luci Ellis has suggested scrapping the 50 per cent capital gains tax discount, introduced in 1999, because it fuelled property market speculation and made houses unaffordable.
'There is a lot of prior work pointing out the incentives to speculate in property created by discounted CGT,' she told Daily Mail Australia.
'The issue is that discounting CGT, as currently, means that people would rather have capital gains than cash income from an investment.
'So it means people are better off from a tax perspective buying an existing property than investing in a business or some other productivity-enhancing investment.'
Ms Ellis, a former assistant governor at the Reserve Bank of Australia, has proposed replacing the 50 per cent capital gains tax discount with indexation fixed at 2.5 per cent, or the mid-point of the RBA's two to three per cent inflation target.
'This is easier to calculate and doesn't require people to know the history of inflation to calculate their tax liability,' she said.
'My proposal to instead charge full marginal tax rate on CGT will eliminate the incentive to favour capital-gains-producing investments over productivity-boosting ones.'
Ms Ellis' call to axe the 50 per cent capital gains tax discount, on behalf of Westpac Economics, is shared by grassroots group Labor for Housing and the Greens.
She put that view last week to teal MP Allegra Spender's tax roundtable in Canberra, but Labor had ruled out that option in Opposition after losing the 2016 and 2019 elections with that policy.
Her call on the capital gains tax is not the view of the Westpac Banking Group, which is this week putting in a separate submission to the government's Economic Reform Roundtable.
With only deficits forecast in coming years, the Department of Social Services noted funding welfare for the elderly would be a financial challenge, with the proportion of Australians older than 65 increasing by 31 per cent since 2000.
Almost two-thirds, or 65 per cent, of people aged 65 and over receive income support payments, with 92 per cent of them getting the age pension.
Australians can access the age pension at 67.
'Australia's demographics are evolving and will have broader implications for fiscal and social policy and demands for services,' the department said.
'Life expectancy is rising, and fertility rates are declining, reducing the working age population and influencing family composition and structures.'
The department also suggested Australia would continue relying on high immigration so there was tax revenue from a working age population to support older Australians.
'Overseas migration is expected to continue to support population growth, offsetting demographic and economic challenges to some extent, as higher immigration correlates with higher tax revenue and increases in working-age population,' it said.
Unaffordable housing was likely to see younger generations become increasingly reliant on their parents for housing.
'Concerns of intergenerational inequalities are growing, and young people's circumstances are falling short of their expectations,' the Department of Social Services said.
'As more rely on family for financial support and/or housing well into adulthood, they experience delayed milestones including education, employment, family, and home ownership.
'Many also struggle with compounding and competing responsibilities of paid employment and unpaid care.
'This has implications on household incomes, workforce participation, gender equality, and may have greater social, economic, and intergenerational ramifications.'