Scott Morrison has all but confirmed the government will tighten eligibility to the part-pension in next week’s budget and scrap an unpopular proposal to cut indexation for all pensioners.
The government is planning changes to the pension assets test and taper rates, which affect wealthier retirees’ access to the part-pension. Income and assets above certain amounts reduce the pension at a defined rate known as the “taper rate”.
The social services minister said existing arrangements allowed a couple with assets of $1.15m plus a family home to still receive a part-pension. The budget situation was “extremely different” from 2007 when the Howard government increased the generosity of taper rates. Those changes “added to the cost of the pension by about $1bn a year”, he said.
Welfare groups and some crossbench senators have long called for a focus on wealthier retirees’ access to the part-pension as an alternative to the government’s 2014 proposal to scale back the size of increases to the age pension.
The Australian newspaper reported on Tuesday the government was looking at reducing the part-pension for about 200,000 people and up to 80,000 might no longer be eligible for it.
But Morrison noted in an ABC interview the previously planned indexation changes – which hit a roadblock in the Senate – would have affected many more people.
“Some 4 million Australians are affected by the indexation of pensions and if you’re going to not proceed with that then obviously you need to go forward with something,” he said on Tuesday. “The government is leaning forward into the task of the budget just as we always have been.”
Morrison, who has previously signalled his openness to changes to the pension assets test, repeated his previous pledge that the family home would not be included in that test. “The sorts of things that have been talked about now for months are about assets in addition to the family home,” he said.
The minister would not reveal the new thresholds.
“What’s important, though, is that we’ve been in a discussion now for months and months and I’ve said all along that if a measure was to come off the table – like CPI indexation of the pension – then new measures would have to go on and they’re exactly the discussions we’ve been in.
“The issues of eligibility have been widely canvassed with stakeholders and my own backbench colleagues and the crossbenchers as well and I think that’s been been a very constructive and engaging process.”
The government is due to hold a budget cabinet meeting on Thursday. The proposal in the 2014 budget to change the indexation of pensions from 2017 caused the Coalition significant political pain.
Labor signalled on Tuesday that it would not drop its political attack on the government over pensions.
The opposition leader, Bill Shorten, said he would hold Tony Abbott to his pre-election promise of “no change to pensions”.
“He’s up to his old tricks again. Tony Abbott and [treasurer] Joe Hockey have learnt nothing from the last budget,” Shorten said.
“It is time for them … to stop being the worst enemy pensioners have ever had and stop breaking promises.”
When asked directly whether Labor would support changes to the asset test or taper rates, Shorten said the reported proposals were “thought bubbles” and he would not respond to “thought bubbles” or “half baked ideas”.
“If he’s got a detailed proposal he needs to put it on the table rather than having pensioners and the opposition and everyone else try and second guess what is in the mind of Tony Abbott and Joe Hockey,” Shorten said.
The opposition’s families spokeswoman, Jenny Macklin, said the government should adopt Labor’s alternative proposal to rein in superannuation tax concessions.
“We want … to have less generous tax concessions for those people with very large superannuation accounts, so that is what we think is the fairest approach,” she said.
Michael O’Neill, of Nationals Seniors, welcomed the direction of the Coalition’s shift, but said the government needed to clearly communicate its plans to avoid causing anxiety to people who might be affected.
O’Neill said there could be issued with the phasing-in of the changes, because people who had made arrangements based one set of rules would need time to adjust.
“We certainly do believe the [2014 budget] indexation model was very unfair in terms of the breath of its impact, so any move away from that is welcomed,” he said.
Ian Yates, chief executive of the Council on the Ageing (Cota) Australia, said his organisation had strongly opposed the indexation policy and would prefer to discuss options of the type now being floated by the government.
But Yates said Cota wanted the government to launch a full review of the retirement incomes systems to properly consider any unintended consequences of policy changes.
“My concern is if you take one piece of policy off the shelf and swap it for another one that has consequences that may not be fully understood,” he said.
Superannuation tax concessions should be part of the retirement income review, Yates said.
The government has played down the prospect of imminent changes to super concessions and attacked Labor for proposing such measures last month.
Labor has argued its superannuation policy - which includes a 15% tax on earnings of more than $75,000 during the retirement phase - is fair and would deliver about $14bn to the budget over 10 years.
But Morrison said on Tuesday that he saw the Labor proposal as inconsistent with the Coalition’s new plan to adjust part-pension eligibility.
“If we’re going to look at eligibility of the pension, one thing I don’t think you can fairly do is then take the sledgehammer to superannuants’ incomes, which is what Labor is proposing to do,” Morrison said.
