One million Aussies to get $800 bonus
One million older Australians have scored an $800 annual bonus, effective immediately, after the Federal Government bowed to political pressure to reduce tax on savings and investments.
The Minister for Families and Social Services, Senator Anne Rushton, told the Today show the bonus would be backdated to July 1, reaping the benefit for more than 600,000 pensioners.
The Government will boost pensioner payments by cutting the deeming rate, which affects earnings on shares and interest rates.
Prime Minister Scott Morrison's government has come under fire since its May election win as interest rates have fallen yet again and the rate at which pensioners are "deemed" to earn income has remain fixed.
Asked on the Today show why it took so long to act on the rate, Senator Rushton said deeming rates was one of the first things she looked at after the election.
"The current economic conditions and the current market conditions for financial investments showed it is appropriate for us to be cutting them to reflect what is actually going on in the marketplace at the moment," she said.
"The cost of living has never been higher."
She said deeming rates made the lives of pensioners "easier and more streamlined".
"Because of deeming rates, pensioners were not … required to constantly report to social security or to Centrelink every time they might have received a dividend or a payment from a share or an asset they held.
"Instead of asking them to do that and constantly having the uncertainty of what your payment is likely to be every fortnight, we deem what that return is likely to be on the basis of an estimate of what's going on in the market at the time."
However, the Government has stopped short of reducing the deeming rate to match interest rates because pensioners with sizeable assets were assumed to get better returns through investments other than savings accounts.
Asked why she was not reducing the rate to match interest rates, Senator Ruston said pensioners and others relied on several different income streams.
"One of the things … that's been out there in the public is that the overnight cash rate that the RBA (sets) is but one of the elements that are considered when you deal with the returns that you are likely to receive on financial assets," she said.
"It is not the only one.
"We look at a whole basket of different assets that people might be holding their financial assets in and come up with an estimation that we believe accurately reflects what the people would be able to get in the marketplace today."
Senator Rushton said she expected the flow on effect of the cash bonus might include increased spending among older Australians.
She said the outlay by the Government would not jeopardise its promise to deliver a surplus this year.
Aged pensioners whose income is assessed using the deeming rate will receive up to $31 extra a fortnight or $804 a year and couples will receive $40.50, or $1053 annually.