E&OE TRANSCRIPT
Topic: Australia’s Pension Scheme
DAVID BEVAN, HOST: Good morning Amanda Rishworth.
MINISTER FOR SOCIAL SERVICES, AMANDA RISHWORTH: Good morning. Great to be with you.
DAVID BEVAN: Well, thank you very much for making time for us. We appreciate it. Amanda Rishworth, you're Minister for Social Services. Can you see the attractiveness in the New Zealand model? And is it something that you would eventually like to take us to or do you think, nah, it's a load of old rubbish, don't worry about it?
AMANDA RISHWORTH: Firstly I would say, you don't have to take it from me. Australia's income system by the OECD was ranked 5th out of 47 pension systems and New Zealand system was ranked 17th. The reason for that is a couple of things. They are very different pension systems and income retirement systems. In Australia, we don't just have the pension that is the important safety net but we also have compulsory superannuation, which really is an important part of our income retirement system. And that's why you see a pension that's means tested because it complements compulsory superannuation. They don't have a compulsory superannuation in New Zealand. They have some savings accounts, but basically everyone gets just a flat rate. Now, the difference also includes that flat rate, the universal sort of pension, is taxed from the very first dollar in New Zealand. And for our pension system, we not only have the tax free threshold, but we also have the pensioner tax offset. So, we're not taxing the pension, which would be those particularly that rely solely on the pension, we're not taxing them. So, there are so many differences – that it is very hard to compare. And I would say based on the OECD, our system is a better income system. Now you did talk about work, and there has been, I've seen some commentary, from academics that the reason why we're seeing more New Zealanders work is actually not because they want to be incentivised to work is they just don't have enough retirement income and so they're being forced to work past pension age. So, I don't want to see a system like that in Australia and so therefore I would say that they are very different systems. We're not going to go and get rid of compulsory superannuation. The two things interact and you can't look at them exclusively.
DAVID BEVAN: Okay, so it's not comparing apples with apples. And the system has many different components to it. And I appreciate what you're saying. You don't want to set up a system where people are forced in their old age, against their will to go out and work. We don't want that. But you do have a system which doesn't provide incentives to go out and work. And that is because effectively you are taxing the person. Once they start to earn an income, very quickly after they pass a threshold, because their pension is affected, their pension is reduced. So, whether you say, well, we're not taxing them, well, you're not giving them as much money in their pension. So, it's like a tax. Can you see how all right, it is not apples and apples, but if you break it down into its components, we've got a part of our system which doesn't incentivise people to go out and do what they might want to do?
AMANDA RISHWORTH: Well, that's because we means test the pension. Ultimately we means test the pension because it complements superannuation. I mean, if you adopted the New Zealand model, everyone would get a pension. It would be taxed from the first dollar and then potentially someone with a superannuation balance of millions of dollars would still get that pension. But that's the challenge. So, we means test the pension for a reason. It's the safety net. But of course, when it looks at work income, we have got a system that treats work income differently to other sources of income, for that means testing purposes. So, we did bring in increases to the work bonus, which allows people to earn more income from working before their pension is reduced.
DAVID BEVAN: Can I just interrupt you there so that people get an idea of the sorts of money we're talking about? How much can a person on an age pension earn before their pension is affected?
AMANDA RISHWORTH: So, before their pension is affected, there's two components and in total, it's $504 a fortnight. But for a pensioner that doesn't work a couple of fortnights, that amount actually accumulates. And so, for example, if a pensioner doesn't work for three months, that $300 work bonus in particular, that they would have otherwise been able to earn without affecting their pension, accumulates. And so they can work the next three months more than that, $504 a fortnight, to actually not have their pension affected. And that suits a lot of people.
DAVID BEVAN: And is there a guy sitting in an office somewhere with short-sleeved shirts and a cardigan trying to work out how much you have earned and how much you haven't earned in order to police the system?
AMANDA RISHWORTH: No...
DAVID BEVAN: [Interrupts] How is it policed?
AMANDA RISHWORTH: By software at the moment – single touch payroll – which 95 per cent of employers have, that pre-fills and provides that information through the ATO to Centrelink. There is an obligation on a pensioner that may have worked, and that's all automatically worked out, what their work bonus was etc. But it is required that the person goes in and confirms that's the amount into their MyGov account that they've actually earned to ensure that other sources of income, because we're not just talking about work income, it might be if someone has a rental property and they're getting rent from that or other sources of income, they have to report that as well. But in terms of how much they earned in a fortnight, for 95 per cent of businesses, that's automatically pre-filled to Centrelink. It is incumbent on the pensioner, though, to go and confirm through the MyGov that that is what they earned to make sure there isn't any mistake.
DAVID BEVAN: All right, what are you thinking about this? Do you think Amanda Rishworth makes a very good point? The whole thing is very nuanced overall. It's a better system. If you start tinkering with it, you're going to end up with unexpected results or are you buying what the Institute of Public affairs are saying? And that is, there is a real disincentive here. If you're a pensioner and you go out in your own time and earn money, you shouldn't have your pension affected. Lesley has called from Everard Park. Hello, Lesley.
CALLER, LESLEY: Good morning. I'd like to speak to Minister Rishworth. Yes, Lesley Bardini. I'm a 69 year old ex-registered nurse living in South Australia and I would like to really tell you that it's very difficult living on the pension. I do not have any superannuation because I became very unwell at the age of 62 and I had to spend all my superannuation to keep me going and pay my mortgages until I arrived at the pension age of 66. So, I am working as a support worker now, and that is relieving carers. Carers that need a break, that are living at home, so respite. Now, if I work too much, I lose my pension. I've got a dog and a car. It's virtually impossible for me. I have no other forms of…I have no superannuation, I have no houses, I have nothing. That's all I have. So, I understand there should be a means test, but I think if the means test comes out that you've got no super and you've got nothing else, that you should be able to earn more.
DAVID BEVAN: Amanda Rishworth, what do you say to Lesley?
AMANDA RISHWORTH: I'd like to say, thank you Lesley, for the work that you do. Like I said, if we adopted the New Zealand model, Lesley’s pension would be taxed immediately from the first dollar that she earned. I can't imagine that pensioners would want us to be taxing them from the first dollar that they earn. There is obviously tax arrangements in place that make sure that those that rely solely on the age pension don't get. So, once again, I take her point about wanting to earn more without having affected her pension. We've always got to try and find the right threshold. But I don't accept that the New Zealand model would necessarily lead to better outcomes for Lesley.
DAVID BEVAN: But you're telling Lesley that she has got a great pension scheme.
AMANDA RISHWORTH: No, I’m…
DAVID BEVAN: [Interrupts]… You said it was 5th out of 47, according to the OECD.
AMANDA RISHWORTH: You asked me whether I should import the New Zealand model or have Australia's retirement system. That was the choice that you said. Of course. We're always looking at how…
DAVID BEVAN: [Interrupts]… Okay, we accept that there's a lot of nuance between the different systems and let's break it down, because we can do more than one thing. It's not an either or. Amanda Rishworth, are you interested in adopting more of the New Zealand incentives so that people like Lesley can actually put food on the table?
AMANDA RISHWORTH: So, I think there are two questions here. Do I want to tax pensioners from the first dollar they earn?
DAVID BEVAN: Nobody asked you to do that.
AMANDA RISHWORTH: But that's the New Zealand…that's the incentive in the New Zealand scheme that you're talking about.
DAVID BEVAN: Are you saying you have to tax them from the first dollar?
AMANDA RISHWORTH: If you're saying could you take things from the New Zealand scheme. But we'll get to actually the core of the question, should people be able to earn more? Because Lesley said also that she was means tested and that she agreed with means testing. The New Zealand model doesn't have means testing. So, if we pass the New Zealand model to one side and say should Lesley be able to earn more before her pension is affected? Look, we've made some changes already in the last Parliament to allow for pensioners to earn more through work income. Obviously we're always looking at how we can improve the scheme but it's not importing the incentives from the New Zealand model that will achieve that. Our Work Bonus is important and as I said, we're always looking at how we can improve it. We've had an increase, for example in rent assistance. So, anyone that is on a pension can get rent assistance as well. We've increased the ability to get the Commonwealth Seniors Healthcare Card. So, I'm always looking at ways to improve the pension.
DAVID BEVAN: Amanda Rishworth, your Government's been banging on over the last couple of days about the gender pay gap and about women who are not paid super salaries by big corporations and yet you have somebody like Lesley ringing in saying I'm a 69 year old ex-nurse. I was forced to use up the super that I had gathered because of my health and I got to, what was it, 66? And she managed to reach the pension age. Now she's going out and caring for people in respite, but when she does, her pension is affected. I mean, shouldn't you be more worried about the Lesleys of this world rather than whether high flying women get paid the same as somebody else? I just question your priorities in the last couple of years.
AMANDA RISHWORTH: I reject that either, or suggestion because of course if women are paid more during their working life they will retire with more superannuation. So, I completely reject that I have to choose between how we support…
DAVID BEVAN: [Interrupts]…I'm just wondering what you're doing for Lesley?
AMANDA RISHWORTH: I just explained we had the largest rent assistance increase in 30 years that we put in the last budget that flows through to pensioners that need extra support. So, I'm not saying that we won't constantly look at how we improve it, but to suggest we haven't done anything is incorrect. We improved the Work Bonus to allow pensioners more flexibility in how they do their work. And as I said, I appreciate, Lesley, but to make it one woman against another woman and about how we don't go for continual improvement in women's wages and women's retirement is not a fair comparison. And I'm not going to make a choice between how we support women in this country.
DAVID BEVAN: Okay, Lesley, are you happy with that?
LESLEY: No, I'm not. I just want you to know, look, I understand that women should get more money and I'm not fighting that at all. But if you’re means tested and you have no super and Centrelink know that, I think that you should be able to work as I am working now or trying to work because I am taxed. I'm taxed as soon as I earn money. I am taxed because I go to the taxation place. I go to, what is it - HR Block? And I get taxed every year. So, it's not that I'm not getting taxed and I'm paying more tax than anybody else. I just find it extraordinary.
DAVID BEVAN: Lesley, thank you very much for your call. Let's go to Ron from Adelaide. Hello, Ron.
CALLER, RON: G'day.
DAVID BEVAN: What are you thinking?
RON: Well, I'll give you some actual numbers that might help people understand a bit. I have a private superannuation scheme that's more than $18,200. So, everything that I earn over that private pension scheme amount is taxed.
DAVID BEVAN: Can I just interrupt you? It sounds like you're talking to us from a wind tunnel. Can we just put you on hold and we'll get back to you so that we can get a clear line so we can hear everything that you want to say. Thanks very much. Ron. Patricia from Hove. Hello, Patricia.
CALLER, PATRICIA: Hi, how are you?
DAVID BEVAN: Good. What are you thinking?
PATRICIA: Basically, we're a couple who have just qualified for the Age Pension. We waited a couple of years after we were eligible. My partner's 72, I'm 68 and I have to say we've had fabulous service from Centrelink and Services Australia staff. It's taken since mid-last year to actually get approved. We've been approved this week. My question to the Minister is twofold. One is we both work part-time and we do believe we're disadvantaged in the amount we can earn. It is a minuscule amount. I know they've increased it and I appreciate that. Still not enough. The other question I have is that my partner and I have been together 26 years and we keep our finances separate. Centrelink and being on the age pension has required that we combine our finances and that is because my partner earns more than I do, they get more money. Centrelink, each fortnight, will give us a set amount and they split it in half regardless of the fact that I earn less and need more pension. And so women are forced to actually be financially dependent. Now, in our situation, it works. But in terms of where there's domestic violence, coercive control and financial control, I'm really concerned that forcing particularly women to have to go onto a joint system they've never had and have their partner have to hand over money every fortnight or every week because they simply give them more money than they're actually entitled to as an individual.
DAVID BEVAN: Okay, Patricia, thank you for your call. Amanda Rishworth?
AMANDA RISHWORTH: Thank you and thanks Patricia, for raising that issue. It is actually a really serious issue where coercive control can be used. And that's why we've recently provided clear directions to Centrelink where if there is evidence of a domestic violence situation, then the person, the victim-survivor, can be deemed not in a couple, even if they're living under the same roof. So, we have obviously considered those circumstances where there’s coercive control. That's a recent change that has been made where you don't have to be deemed in a couple for those financial purposes if there is any evidence of domestic and family violence, because what Patricia raised is a really important point.
DAVID BEVAN: Patricia, thank you for your call. Let's go to Phil from Adelaide. Hello, Phil. Good morning, Phil. Oh, you're up, Phil.
CALLER, PHIL: Thank you. One for the Minister. On all social security payments there is a certain dead zone that happens once you can earn a little bit and your cash position at the end of the week is going forwards. But then for a few hundred dollars you go backwards and that's because the tax kicks in. But the claw back is made on your gross pay and doesn't take any employment costs into account, where obviously your net pay is after tax and you've had to pay for petrol or other transport or other employment costs, which you will obviously get back in June or July. But if you need that cash today, you can't do the extra hours.
DAVID BEVAN: Amanda Rishworth?
AMANDA RISHWORTH: That's a good point. I would say that for age pensioners, there is the pensioner tax offset in addition to the income free area and it's different for different income support payments. If you're on something for JobSeeker or those types of payments, it is a different threshold. And so I'm happy to look at certain examples, some of the things that we've been doing to try and smooth that transition, particularly from JobSeeker onto something else, has been through doubling the nil rate. So, even if you earn a bit more and you're not entitled to JobSeeker, you can keep your healthcare card and other benefits for longer.
DAVID BEVAN: I appreciate that. A lot of these things grow out of good intentions. That is, you want people who are better off to look after themselves. There's a limited amount of money, so you give it to the people who need it most. That's what means testing is all about. But it just grows like topsy-turvy, doesn't it? I mean, you're talking about Phil's examples of security payments and tax offices and all sorts of things. Isn't there some value in a streamlined system so that once you've got your age pension, you reach a certain age, if you want to go out and work, we'll just tax you at that rate. It's streamlined. We don't have to employ so many public servants to police this, we don't have to buy the software to police this and it’s just easier.
AMANDA RISHWORTH: Well, that would go to a universal pension, everyone getting a pension and as I said before, there are some people with very large superannuation that are getting income that is not from working and the confusion would be how do you treat that income? And I think there's a fairness question and so I think giving everyone a pension, no matter how much super they've got, no matter how much income they're getting from super, how much income they're getting from work and from other places isn't the fairest system.
DAVID BEVAN: No, because you don't want Lesley ripping the system off, do you?
AMANDA RISHWORTH: No, it's not about Lesley.
DAVID BEVAN: I reckon it is about Lesley, actually, I think it's all about Lesley.
AMANDA RISHWORTH: This is not about Lesley’s situation. I've taken that on board and as I said, we've looked at it. And her point she made is she doesn't have superannuation…
DAVID BEVAN: [interrupts] But if she got sick…
AMANDA RISHWORTH: Yes of course and I'm very sympathetic to that. But you're suggesting someone with a very large superannuation…
DAVID BEVAN: [Interrupts]…No, I'm not suggesting that at all. I'm talking about Lesley.
AMANDA RISHWORTH: But that's what you said about you set a standard and you set a limit and therefore you get an age pension no matter what your income. That's not fair.
DAVID BEVAN: Because I understand your means testing argument, but the money that you would save by not having to police it further up the food chain would mean that you would save money. It could end up being a net zero sum game in terms of raising money for the government and the Lesley’s of this world would be better off.
AMANDA RISHWORTH: I wouldn't say that if we were paying everyone, no matter what their personal circumstances, a pension, would lead to that outcome. It's just not the case that someone with three or four million in their superannuation…
DAVID BEVAN: [Interrupts] Well, maybe you need to tweak the thresholds then?
AMANDA RISHWORTH: We are always looking at ways to improve it. For a situation like Lesley’s, of course, that's why we changed the Work Bonus, that's why we increased rent assistance. So, of course, situations like Lesley’s, absolutely, we need to always be reforming and looking at how we improve the system. But removing means testing and just paying everyone an amount like in New Zealand, I don't think is fair or the answer.
DAVID BEVAN: Amanda Rishworth, you've been very generous with your time. Thank you very much. We know you've got to get back into the House.
AMANDA RISHWORTH: No worries. Thank you