Comment
GST changes: the good and the bad news
The Democrats went in hard in meetings with the Prime Minister and Treasurer to get a fairer tax package for Australians on low and fixed incomes, many of whom are older people. Overall the new package is a marked improvement on the original but some questions remain as to whether it is good enough to protect older Australians from the effects of the GST. VERONICA SHEEN, the Council on the Ageing’s national policy officer, explains the good and the bad of three of the main changes.
The pension to be increased
The new offer consists of an ongoing increase of two per cent in the pension, instead of 1.5 per cent in the original offer. Many older people will be confused by reports that they will get a four per cent increase in the pension. They do get four per cent but this is, in effect, an advance payment paid only on 1 July 2000. Over time, the four per cent is ‘adjusted’ so that the effective increase on top of the cost of living adjustment is two per cent.
The question is whether this increase is enough to cover all the additional costs that the GST will involve. For example, older people spend a higher proportion of their income on utilities and services than the average, so will be more affected that the rest of the community.
Food to be GST free
Many older people will benefit from the exemption of fresh and basic food from the GST. This means that fresh food and vegetables, eggs, milk, cheese, bread and meat will be without a GST, as will basic items such as pasta, rice and canned soup.
However, COTA is concerned about some groups of older people whose main sustenance comes from prepared and take away foods. For example, 40 per cent of women and 18 per cent of men over 65 live alone. It is precisely the older person living alone who is more likely to be buying the quarter or half chicken (with GST) rather than the whole roast (without GST). It is very unlikely that they will be buying an uncooked chicken and roasting it for themselves, which would be without a GST.
The fresh/basic food exemption seems to offer most benefit to households of two people or more and least benefit to single person households.
Self-funded retirees supplement to go to over 55s
The Democrats also won improvements in the compensation for self-funded retirees. The self-funded retirees supplementary bonus is an untaxed bonus now available to people aged 55 and over on 1 July 2000 but not in receipt of a pension who are nevertheless retired and fully self-supporting. It is worth a maximum of $2000 per person phased out between $20,000 and $30,000 of taxable income as a one-off payment. The original proposal set the eligibility age for this bonus at the age pension eligibility age. While COTA welcomes the change to allow all self-funded retirees over 55 to get the supplement, we still do not know whether this compensation will be enough.
In summary: the new package is certainly better than the first package but questions remain. Has the Government accurately measured the cost of living impact of the GST on older people? And will the compensation and the pension increase be enough?
COTA intends to keep a close eye on developments and will be doing more research on the impacts of tax reform on older Australians.
