ACOSS backs call to rein in tax breaks for wealthy seniors as unaffordable and unfair

21 November 2016

Australian Council of Social Service CEO Cassandra Goldie has welcomed a new report which backs ACOSS’s long standing call to tackle special tax breaks for wealthier older people as a ‘budgetary time-bomb’.

The Grattan Institute today released the report, ‘Age of entitlement: age-based tax breaks’, which calls for the most overly-generous tax breaks for higher income people over 64 to be wound back. The findings of the report echo the view of ACOSS that the Seniors and Pensioners Tax Offset (SAPTO) is unaffordable and unsustainable.

The report confirms that just one in six (16%) of people aged over 64 pay any income tax, despite many of them being wealthy enough to pay at rates more in line with the rest of the population.

Under the SAPTO, the tax-free threshold for people over 64 kicks in at $58,000 for couples, compared to $41,000 for couples of working age, a 41% difference. For singles, the gap rises to 60%, with retirees reaching the threshold at $32,000, rather than $21,000 for those still in the workforce.  This tax break for higher income retirees was introduced in 2000 and increased during the boom era, and has been costing the budget billions ever since. ACOSS opposed it at the time as unaffordable and has been proven right.

Even if the Government’s proposed cap of $1.6 million on super fund balances attracting tax breaks is passed, a retired couple with those assets in super could still receive a tax-free annual income of an extraordinary $138,000 under the present system.  This is another example of a poorly designed tax break that is no longer ‘fit for purpose’.

The previous Government argued the SAPTO would encourage paid workforce participation and saving for retirement, but the Grattan Report finds no evidence for this. All this tax break does is increase inequality.

“There is no valid reason to give people a higher tax threshold based on age alone,” ACOSS CEO Cassandra Goldie said.

“We call on the Government to restrict the SAPTO rebate to people who those qualify for government benefits, and to remove the higher Medicare Levy threshold for Seniors. These changes would save $850 million that could be well spent on health and aged care services.

ACOSS response to the Government’s superannuation reform proposals

“We support the Government’s efforts to rein in wasteful tax breaks for the very wealthy, especially lower contribution caps and the $1.6 million limit on super balances that attract tax breaks after retirement and welcome the proposal to keep the rebate for contributions for low income earners.

“We also support changes proposed by Labor which would further improve the sustainability of super by lowering  the ‘non-concessional contributions cap’ from $100,000 to $75,000, and reducing the income level at which the higher contributions tax rate of 30% cuts in (from $250,000 to $200,000).

“But we oppose proposals such as new deductions for contributions and the so called ‘catch up contributions’ that will cost $12 billion over the next decade and mainly benefit people in the highest tax brackets, mainly high income-earning males.”

“Super tax breaks come with a $30 billion per year price tag, more than the Government spends on the Age Pension.  “Until we bring this figure down to a more sustainable level, we are sitting on a budget time bomb. It will be very hard to continue to offer decent health and services to an ageing population.”

“The Government’s modest super reforms show that there is a better way to restore the Budget than cutting the incomes of individuals and families in poverty.

“Room should be made in the Budget through tackling tax concessions no longer fit for purpose. We strongly reject the Government’s continued attempts to find savings by cutting the incomes of people of all ages who have the least, especially when the Government stubbornly refuses to consider reforming housing tax breaks that are costing the budget billions and fuelling housing prices.

“ACOSS has proposed a number of reforms that would deliver a fair, sustainable superannuation system, including recommendations to:

  • Simplify concessions for superannuation contributions
  • Tax superannuation fund earnings more consistently to pay for health and aged care services
  • Restrict SAPTO to social security pensioners
  • Increase the preservation age so that it corresponds to the age pension access age by 2017.*

*source: ACOSS Budget Priorities Statement 2016-17,

Media Contacts:

Alan Walmsley, ACOSS – 0419 626 155