Budget predicted to deliver good news for pensioners
With the government acknowledging that pensioners have missed out on an uplift in pension rates where indexation would have normally kicked in, there are strong indications that the government may intervene in this area, says BT.
With the federal budget fast approaching, BT head of literacy and advocacy Bryan Ashenden said there have been plenty of rumours around what measures will be announced.
“While everyone is probably taking a keener interest this year given the COVID-19 pandemic and expected significant deficit to be announced, perhaps it’s age pensioners and other income support recipients who are most interested,” Mr Ashenden said.
Mr Ashenden explained that this week would have normally seen an uplift in pension rates, with indexation normally kicking in automatically on 20 September.
“However, given the negative rates of CPI that we have experienced in recent times, the indexation formula returned a result of no increase. Many pensioners struggle to make ends meet with the age pension and, despite the official CPI numbers, may not have seen the price for their ‘basket of goods’ fall,” he said.
“The government has acknowledged this and given strong indications that some form of intervention will occur.”
The most likely outcome at this stage, he said, appears to be that pensioners will receive a one-off payment, similar to those already received over the last six months as part of the stimulus measures.
“The question still remains whether other income support recipients, such as those on JobSeeker, will also receive some benefit. While possible, it is important to remember that JobSeeker recipients will continue to receive the coronavirus supplement until the end of 2020,” he noted.
Mr Ashenden said it would also be reasonable to assume that there will be personal income tax relief provided, with strong indications the tax savings due to commence from 1 July 2022 will be brought forward.
“The questions remain, though: to what extent and brought forward to what date? If the government wishes to get Australians spending more to help stimulate the economy, then delaying these changes until 1 July 2021 will delay this potential benefit,” he said.
“If they were brought forward to 1 January 2021, it would introduce a range of difficulties to administer for this current income tax year, with two different rates of tax applying for different periods, and the potential for tax arbitrage to be used to attempt to delay the recognition of income until 2021.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
