Treasurer Josh Frydenberg has warned aged pensioners not to expect the Morrison government will slash the deeming rate as low as offical interest rates.
But he has confirmed the Prime Minister is preparing to take action amid claims the Morrison government’s current income test rules are ripping off seniors by $1 billion.
Mr Frydenberg confirmed the changes to the deeming rate were imminent today as he urged workers to hit the shops and spend their $1080 tax cuts to stimulate the economy.
The deeming rate is part of the income test for the pension and part pension.
Currently, it assumes pensioners are securing an investment return of 3.25 per cent and has remained unchanged for several years. Under the rules when seniors hit the income test they have reductions to their pension payments.
Continuing falls in offical interest rates have highlighted the gap between what pensioners are securing from bank deposits and what they are actually getting.
But Mr Frydenberg said the deeming rate also needed to reflect that some aged pensioners are getting higher rates of returns on investments than bank deposits.
“It’s not a straight line equation. It’s not about looking at what the interest rates have done and then reducing the deeming rate by the same amount,” he said.
They’re not necessarily exactly the same, because it applies to a broader suite of assets.
“We are looking at it very closely and we are looking at it soon,” he said.
National Seniors advocate Ian Henschke has called for a new, independent umpire to ensure the process is taken out of the hands of politicians but Mr Frydenberg said that wasn’t an option the government is pursuing.
“We believe we have a proper process in place,” he said.
At a press conference with the Australian Tax Office commissioner Chris Jordan, Mr Frydenberg also urged 10 million workers set to secure a tax cut of up to $1080 to hit the shops.
“It’s not up to the government to tell Australians how to spend their money, but I am confident this money will be used at the local shop,” Mr Frydenberg said.
But as the Labor Party continues to urge the government to bring forward tax cuts and spend more on infrastructure, Mr Frydenberg said he wasn’t about to jeopardise the surplus.
“It’s important to understand that if it wasn’t for the Howard-Costello government’s success in paying down Labor’s debt, Australia wouldn’t have had the flexibility to spend through that economic downturn when it hit in the GFC,” Mr Frydenberg said.
“What we need to do is pay down that debt, as appropriate and as we’re able to do
“We believe in that fundamental value that the next generation should not pick up the tab for the current generation.”
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